“Peering into the Future of Marketplace Companies” written by YapStone.
We don’t want to age ourselves or anything, but doesn’t seems like it’s been years since anyone took a taxi to the airport, flew to a business meeting and then stayed at a regular hotel? In a very short time, marketplace companies have exploded onto the scene and changed the way we do nearly everything. The word “Uber” is now seemingly interchangeable “taxi” and according to Entrepreneur, one in five Americans have worked in the sharing economy.
Then there’s the online help. If we don’t feel like doing housework, running errands, preparing dinner, or even creating a sales presentation, we can call on Taskrabbit,
Munchery or Upwork. We can even lean on our peers for an extra cash injection when we’re in need – and nothing seems strange about it. The sharing economy has become the new normal. PwC reports that the five key sharing economy sectors are: Ride Sharing, Crowdfunding, P2P Accommodation, Online Staffing, and Music/Video Streaming.
By 2025, it is estimated that marketplace companies could account for $335 billion of revenue globally. You don’t have to be a betting person to realize that smart money is firmly placed on these marketplace companies to succeed. And as traditional companies try to re-invent, re-load and re-build, the simple truth is that they are now struggling to compete in their own industries.
With many intrinsic advantages, like scale and potential, marketplace companies are still subject to the same external challenges and pressures as any company. So while their future growth and success is easier to predict, it still remains to be seen how they exactly they will evolve.
So, as marketplaces come of age, let’s take a look at the future of these companies.
Marketplaces Go Niche
Now that the sharing economy model has taken root in all types of industries, from leisure and travel to work and finance, we can expect to see it proliferate and test the waters into more niche industries that offer potential for disruption, growth and scale. As we are now seeing, more and more entrepreneurs will be leveraging the marketplace business model to become the next “uber of…X.” Inevitably, more marketplaces will come and go due to consumer need or demand yet the next marketplace success story is inevitable. Whether it comes in the apparel, healthcare, financial services, government or a completely new industry, we will soon see.
Marketplaces Go B2B
As marketplace companies that were primarily focused on B2C find success, they will look for additional revenue streams through their existing products or services and expand into B2B services. And as they prove they can deliver a better experience at a lower cost, we’ll start to see a rise in B2B (corporate) buy-in.
Business travel is a major sector seeing increasing buy-in to marketplace companies. An ExpertFlyer.com survey of 1,500 business travelers revealed that 25 percent now use ride-sharing services upon reaching their destination, rather than taxis. In addition, companies looking to give their clients an authentic welcome will no longer have to pick them up in a standard sedan. They can customize the experience by renting a “unique” vehicle with Turo.
When it comes to finding top freelance talent, more and more businesses are ditching the traditional recruiting model and turning to Upwork. Not only internet-based startups, but major players including Panasonic, Pinterest and Unilever. According to the Financial Times, one major international pharmaceutical company set up a private recruitment cloud with the company. They now get access to previously vetted, top-rated freelancers, without having to carry out additional background checks — saving them over $2.5m a year on employment agencies.
To add to the B2B equation, existing companies with the infrastructure already in place will begin to add a marketplace functionality to their own suite of services. In example, major construction contractors who own and maintain multi-million dollar inventory and can now rent their expensive equipment through an equipment rental platform, Dozr, and turn what was once, “down time” into “real time usage and profits.”
Marketplaces Go To The Boomers
While foregoing a hotel to rent a home or sleep on a stranger’s couch or even get into a Prius with a complete stranger feels perfectly normal to Millennials, the Baby Boomer generation has been a bit slower on the uptake. We can attribute it to basic generational behavior, old school mentality or the great digital divide. Yet, it’s all changing now. The Baby Boomers are also 75 million strong (same as Millennials) and are warming to the ideas that their grand kids are pitching. They also have more economic power and discretionary income than the coveted Millennials. The trend seems so obvious and marketplace companies aren’t just “coming of age,” they are now going to be built for “age.” That’s right, marketplaces just for Mom and Dad, Grandma and Grandpa are here.
A survey by Burson-Marsteller showed that 28% of over-50s have now used a sharing economy service. This figure is certain to rise, especially as marketplace companies expand into greater specialties and well-known names begin to buy-out the fresh-faces on the scene.
Traditional companies will also continue to seek ways of remaining relevant to their customers, which will be the additional hook needed for older generation adoption. A great example of this is the Amex/Uber partnership, where Amex Rewards points are now integrated with Uber rides. The Thanksgiving promotion offering Amex customers two free Uber rides home from major airports was so popular, that the companies extended it for the entire 2016 holiday period.
Marketplaces Go Together
With low barriers to entry and financing still available to entrepreneurs who want to be the next “Uber of X,” the marketplace model will continue to spawn new companies and new services.
What we have learned to date is that consumers tend to be very loyal to a marketplace and don’t have room in their digital life for two (aka Uber v. Lyft). Just look at the trend in grocery shopping, or electronic purchases – 96% of participants surveyed by KRS say they buy their groceries from one place, rather than separate grocery stores.
The same is true online. People simply don’t have the time to visit seven different sites to organize their lives. They want a one-stop shop, like Amazon Prime, for everything. That’s going to lead to the appearance of more marketplace startups and eventually, the leading marketplaces will begin to acquire and consolidate.
Marketplaces Go Mobile
With 97% of Millennials upwardly mobile, more and more marketplace services are consumed on mobile devices. We’ve reached a tipping point according to Smart Insights, where mobile media time in the U.S. is now significantly higher (51%), compared to desktop (42%). Mobile experiences for marketplaces are already priority one and mobile first will remain the strategy in the coming years.
Marketplaces Go Legal
Often labeled as “industry disruptors,” marketplace companies do not always have a completely smooth ride to success. As they achieve scale and continue to change the way we do things, new legislation will need to be passed. Whether it’s stricter background checks for drivers in ride sharing companies like Lyft, or greater regulation of independent Etsy sellers, marketplace companies will have to embrace and solve for more legal scrutiny and oversight. To that end, we will start to see marketplaces build teams and expertise to develop partnerships with federal, state and local governments and participate in the laws/regulations that are needed to support their business models.
In the future, marketplace companies will also build long term partnerships with traditional industries and companies. Take the Fintech industry. Companies like YapStone have contributed to the disruption of financial services, yet still rely on the infrastructure of major financial service institutions. In turn, the two entities will partner together to improve technology, offerings and services.
And the same is true with industries across the board – rather than competing head-to-head, traditional companies and marketplaces will realize they offer services that complement one another’s. Which means that, as the initial disruption begins to settle, we will all find a way of working together.