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Making Markets

February 26 2021
Written by Julia Klein

Amazon. Airbnb. Uber. Etsy. Over the past decade, marketplaces have transformed the way we live our lives: from how we buy to how we create, from where we go to how we get there. It’s rare for you or I to go a single day without interacting with a marketplace. Given the pervasiveness of marketplaces, the most surprising fact about them is, perhaps, their untapped potential. The next generation of marketplaces is poised to expand beyond traditional consumer use cases, to address market failures across a new host of transaction types and industries.

Omnipresent in fast-moving, consumer-focused sectors, marketplace models are now emerging in B2B spaces and disrupting traditionally “old school” industries. While consumers are accustomed to transacting seamlessly via online marketplaces in their daily lives, this ease of transaction is often missing at work. A host of new businesses are addressing this problem.

Within the medical field, Torch and Medinas are providing doctors and dentists with the equipment and supplies they need more efficiently and cost effectively.  Biotechnology leader, Ginkgo Bioworks is harnessing the power of marketplaces to design new organisms, by connecting top scientific minds with genetic engineering tools. Real Estate, an industry first transformed by online listing companies Zillow and Redfin, is now undergoing a second wave of innovation. New marketplaces are making it easier to access both residential (Morty) and commercial (Cadre) properties. Even notoriously slow-moving industrials & manufacturing are reaping the benefits of marketplaces. Workrise, a labor market for skilled trades, Moov, an interactive platform for used manufacturing equipment, and Truefill, a new way to purchase fuel are just a few of the startups changing the face of the sector.

While new marketplaces in “old school” sectors are transformative, they can also be particularly difficult to launch. Challenges can arise in attracting both sides of a market that has historically operated offline. For example, convincing farmers and food buyers to utilize a new marketplace for buying and selling wholesale food products can be a tall order. To address this issue, next-generation marketplaces are getting creative. Many are embedding SaaS or other useful tools on one side of the marketplace to attract and retain hesitant market participants. Wholesale food marketplace Silo offers a suite of cloud-based tools and reporting, while grocer-focused Afreshadds value through AI-powered forecasting.

Marketplaces are also finding new ways to monetize. B2B focused marketplaces are taking advantage of larger transaction values by supplementing traditional transaction fees with financing, logistics, factoring or other alternative revenue sources.

Another traditionally offline segment – the services sector – is also being transformed by marketplaces. Historically, services businesses have not been ideal marketplace candidates due to high search and vetting costs to establish trust before purchase and the need for in-person delivery. “Uber for doctors” was an interesting idea in theory, but difficult to execute in practice.

Technology has now reached a point, however, where online interactions are “good enough” to support these relationship-based purchases. AI models help refine service provider selection, blockchain technology supports the creation of contracts, and slack and zoom allow for personal, real-time communications. These new capabilities make services marketplaces possible. The pandemic makes them imperative.

Education (MasterClass), fitness (Obe), health & wellness (Pager), and therapy (Talkspace) are just a few of the services moving to online marketplace models. Even business services are undergoing this shift. Catalant offers a marketplace of experts that competes with traditional consultancies such as McKinsey or Deloitte.

If you are interested in diving deeper into new and exciting marketplace models join me at the Next Generation Marketplaces innovation forum at The Montgomery Summit 2021 presented by March Capital on March 3rd and 4th.  The session will include top marketplace entrepreneurs and investors and will be moderated by Harvard Business School professor and marketplace guru, Scott Kominers (this post is named after his class!). Register here: https://cvent.me/mqWNGX. If you have any questions, please contact info@montgomerysummit.com.

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