Marketplace disintermediation typically affects services marketplaces and occurs when a customer who has found a supplier via your platform, takes communication and payment off the platform by contacting the supplier directly. The same thing can happen in reverse, where one of your supplies asks the customer who has contacted them to reach out directly rather than on your platform. Depending on the business model for your services marketplace, disintermediation may present a major threat to your bottom line.
Example 1: A customer looking for a photographer finds one on your photography marketplace. The customer contacts the photographer via your platform asking to see more examples of their work. The photographer responds by sharing a link to their Instagram page. The conversation between customer and photographer continues over Instagram and does not return to your site. Payment is made directly.
Example 2: Your dog walker marketplace takes 15% of the hourly rate from the supplier as a commission. When a supplier receives an enquiry for her services on your platform she encourages the customer to contact her on Whatsapp and to pay her directly so she can avoid paying you a commission.
Example 3: The customer has booked and paid for a tradesperson via your site to fix a leaky tap at their house. Once the work is done, the tradesperson tells the customer in future to call them directly rather than booking them again on your site.
It is important to keep in mind that when disintermediation occurs, as the marketplace owner you are not only missing out on potential platform revenue, but you have also invested time and money in driving traffic to your platform through brand-building, SEO and paid traffic. Not to mention, the countless hours and money you have invested in building the platform.
While disintermediation is a potential threat to all marketplace businesses, there are steps you can take to limit and avoid the threat it presents. The best way to achieve this is by ensuring your platform provides value and peace of mind to both customers and suppliers.
The number one thing you can do to avoid disintermediation is to ensure your marketplace provides value to both customers and suppliers by creating an excellent user experience. To accomplish this, your marketplace will need to be the preferred way of doing business for users on both sides of your marketplace.
The first step to achieve this is to ensure your platform provides an easy, smooth and intuitive user experience. A fun and simple experience will gain trust and keep customers and suppliers on your platform. If your platform is confusing, has unnecessary friction or makes it difficult for either party to achieve their objective then they will seek simpler ways of doing things, including taking their business off your platform.
It can be tempting to create a marketplace that is purely transactional: for customers, a place to discover and book suppliers, and for suppliers, one of the many places they can list their services hoping to be booked. In order to keep your users engaged and to ultimately keep business on your platform, you should focus on ways you can create additional value for both parties beyond the initial service or product.
For suppliers, a way to provide this extra value might be through tools or additional services they get for being on your platform. Examples include performance reports or dashboards detailing their monthly enquiries and sales or tax invoices they could download to make things easier for them at tax time.
Done well, these additional services might not only keep suppliers from taking business off your platform, it might result in your platform becoming the number one place they want to do business.
For your customers, try to think of ways to make booking via your platform a better alternative than taking their business away from you. A great example of this comes from our photographer marketplace, The Shoot. Though we were never able to fully implement it, one strategy we worked towards was creating a mechanism for photographers to upload the images as proofs from the photoshoot to our platform. Customers would then be able to select the final images they wanted, request any edits, and even pay for additional images beyond what they had originally requested.
By informing the customer of services like this ahead of their booking, you’ll strongly encourage them to not attempt disintermediation.
Incentivising your suppliers to keep bookings on your platform is a powerful way to avoid disintermediation. With the right incentives in place, your suppliers will do everything they can to encourage customers to book them on your platform.
One strategy to achieve this would be to reward your most booked suppliers for a given period or area by featuring them on your homepages or landing pages, or by ranking them toward the top of search results pages. Additionally, you could add “most popular” or “most booked" badges to supplier profiles. These 2 simple strategies will make your most loyal suppliers more visible to customers and in turn, more likely to receive further bookings.
Another strategy that would both incentivise suppliers to keep bookings on that platform as well as increase the likelihood customers will make a booking is to enable supplier reviews.
By ensuring that reviews are linked to supplier profiles and that only customers who have booked that supplier can leave a review, you’ll increase the likelihood that your suppliers will take bookings through your platform rather than off the platform. Additionally, allowing customers to see how others have reviewed a particular supplier will give them additional peace of mind when making their booking via your marketplace.
If your website is accepting payments from customers when they book a supplier, then you are acting as an intermediary between buyer and seller. As such, both parties will need to trust you to ensure payment is both collected from the customer and paid to the supplier at the appropriate times. Clearly communicating to both parties how payments work and when they can expect payments to be made will give them both peace of mind, and limit the chances of them dealing with each other directly.
Additionally, as you’ll be handling customer and supplier data, it is important that you not only have security measures in place that would be expected of any online business today, but that you also communicate this fact to both customer and supplier to help them feel at ease when handing over their data.
A closed marketplace is one whereby customers are unable to see who the supplier they’re booking is until after the booking is made and are therefore unable to communicate with them or look them up online prior to payment.
Typically, a closed marketplace is suitable when the customer doesn’t care who their supplier is and expects the outcome of the service they are booking to be the same regardless. Uber is a great example of a closed marketplace. As a customer you’re unable to choose your driver, and you expect the outcome, getting from A to B, to be the same no matter who picks you up. Conversely, the supplier, in Uber’s case the driver, can only contact you after your booking is made via the platform.
A closed marketplace makes sense when the expected outcome of the service being booked is the same no matter who the supplier is, however, for business where the talent or expertise of the supplier is important to the customer, or where the service or products being offered differ greatly, then an open/semi open marketplace will make more sense for you. In these cases customers will demand options and the ability to compare those options. Often, it will be essential for the customer to discuss the job directly with the supplier before booking.
Disintermediation poses a potential threat to all marketplaces but by taking the right steps to ensure that both your customers and suppliers can find value and peace of mind in your product, you will decrease the likelihood of it occurring.
With over eight years of product experience, Fiona designs beautiful, yet easy-to-use marketplace websites. What makes her unique? Well, she's an ex-marketplace founder and has previously worked for a Venture Capital firm so she has experienced life on both sides of the deal! Fiona is based in Oxfordshire, UK and has clients all over the world.Work with me