Apply the lean startup methodology, iteratively creating your marketplace.
– Nobody says, “Oh, I wish I could find someone who would borrow my vacuum cleaner”, says Daan Weddepohl, the CEO of Peerby.
According to Weddepohl, the same goes for garden scissors, moving trolleys, disco balls, and underwater cameras. When buying these items, the intention is not to share them with strangers. Peerby gives people an excuse to ring the doorbells of neighbours and borrow their items.
– I think people really enjoy meeting each other. There are multiple moments of magic in the experience, like posting a request and then having a total stranger offering something to you fast and for free, tells Weddepohl.
When he uses the platform himself, he is still amazed that people are actually willing to help him out.
– It is such a nice feeling to be able to connect with your neighbors and see that strangers are actually really nice people. You want to contradict someone’s expectations, and I guess that creates a little bit of magic.
Understand when you need to focus on demand
Peerby’s supply is people. It is the first platform that starts with a request and creates supply by asking around.
On classic marketplaces, finding supply often means faking it or buying it.
– When Zappos started, they put shoes from local shops on their website. If people bought them, they had to go to the shoe store and actually buy them.
If supplying stuff is an active need, Weddepohl argues that you can target the intent.
– If you actively want to get rid of your old couch, there is a clear intent there. So if you search for ways to get rid of your couch, it would make sense to create a website that would be found through Google search. To aggregate traffic to your site, you can put up Google AdWords to capture people with a certain intent.
Peerby is different. They understood that they needed to focus on the demand instead.
– Sharing a vacuum cleaner is not an intent. You need non-intent channels, like Facebook, where you can put ads on the side to attract the right people. People do not go to Facebook because they want to solve a problem. The same goes for flyers and posters. The first thing we did was to go to a neighborhood and spread flyers to actually get people on board. If you are telling a compelling story, there is a greater chance that people will spread the word about it.
Build your marketplace iteratively
Too many entrepreneurs begin with a marketplace idea that they think people are interested in. They then spend months and years building a platform without ever showing the marketplace to prospective providers or buyers.
To figure out if there is enough demand or supply, Weddepohl encourages entrepreneurs to adopt the lean startup methodology, iteratively building the marketplace to meet the needs of early members.
– You do not even have to create a marketplace. You can already validate whether it is going to work by just testing one side of the market, and maybe not even selling the actual product. When an order comes in, you can say that you ran out of the product that day. If you are able to get 100 orders, at least you have an indication that it could be something.
Failing fast and failing cheap saves you a lot of time and resources.
– So many start by putting tens of thousands of euros in building a platform, and then discover that nobody wants to use it. There is a better way to do things.
To overcome the challenge associated with low transaction volumes on peer-to-peer marketplaces, Weddepohl advises entrepreneurs to think through the potential, impact, and expense of your marketplace.
– The potential is a formula: how often do people need it and what is the percentage of these people that would actually use the marketplace per month. The impact is about how many people you can reach. The expense is the price of the product. If you multiply these variables for your marketplace, you can find the right number for when you reach liquidity in your marketplace.
To boost supply and demand in your marketplace, entrepreneurs must let go of limited thinking.
– People create artificial limits for their marketplaces. If there is not enough product in one niche, you can expand your number of niches. Maybe your marketplace could be a worldwide thing—so why not try it worldwide.
Validate your hypotheses
A central lean startup principle is to create a minimum viable product, a version of the new service that allows you to collect the maximum amount of validated learning with minimum effort. In accordance with this principle, Peerby is running all kinds of experiments to test fundamental business hypotheses.
– Currently, we are trying to figure out how to monetize a marketplace that is based on borrowing for free. My basic idea is that if you are offering value, people are going to be willing to pay for it somehow.
At least someone is.
– There is not one solution for everyone, but it is important to let go of all the assumptions about how things will work. You just do not know before you try them out.
Currently, Peerby is experimenting in Amsterdam, running different business models in every neighborhood.
– One thing we have introduced in a neighborhood is delivery—picking things up and bringing them to people for a fee. Although the platform itself is free right now, the model is not complete yet. We have said that we always want the basic platform to be free, but that is quite challenging. The most important thing, however, is to retain the soul of the platform, creating a community that cares about each other and cares about the planet.
Talk to your members
To understand how the members are experiencing the platform, Peerby conducts customer interviews on a regular basis. An important aspect is to understand what drives people to your particular marketplace.
– There are probably very different drivers for your supply and demand side. Our supply side cares a lot about the social and environmental impact, about sharing and connecting. For the demand side, on the other hand, it is more a bonus. They have a practical problem that they need to solve, and think sharing is a great way to solve it.
Together, they form the community of Peerby, a community that consists of members, not users.
– We try to address them in that way, and make people feel that they are part of a community.
Again, it is about telling a story that binds people together.
– We make them want to be a part of it.