Whether it’s the increased connectivity the internet provides us, an increasing impatience amongst consumers, or a strong desire to do away with older business and industry models, there’s no denying- or stopping- the rise of marketplace startups. Like the best startups, they aren’t focused on creating a need,but rather alerting consumers by bringing a solution to a problem or need they didn’t know they realized. Several decades ago, who would’ve challenged giant corporate models? Sure, some dreamers or entrepreneurs may have envisioned a world in which buyers and sellers were connected in seamless fashion that was free of the complications that a conventional setting was bound to have. But it hasn’t been until recently that we don’t think twice about ordering a meal via Grubhub or forgoing the struggle to hail a taxi by ordering an Uber or Lyft.
Forbes Contributor Drew Hendricks recognizes this, going so far as to claim that marketplace companies are doing away with entire industries. By this he means that marketplace business, by connecting buyers and sellers, are able to reach consumer bases in fashions that traditional industries could hope to do. A great example of this is Airbnb. It seems that there are two camps among travelers: those who like to stay in hotels, and those who greatly prefer to live the life of locals by staying with a friend, relative, or other amiable connection. However, most people don’t have a network of folks wherever they travel, and so hotels- with all their limitations and fees- win by default. However, Airbnb comes along, offering those who don’t prefer the hotel experience with the option of staying in someone’s room (or entire home or apartment) at fair prices. Though it has had it’s share of controversy, it’s plain to see that Airbnb, a marketplace business, tapped into an eager consumer niche that hotels will be hard-pressed to regain.
And it’s not just consumers who are enjoying marketplace businesses- investors are swarming too. The upside for investors is not only that these startups are not only easily scalable, but because they connect existing buyers and sellers, they are relatively asset and overhead light.
Hendricks takes a look at some of these startups, and takes an in-depth look at how they’re revolutionizing their respective industries.
Homejoy: A startup that aims to bring professional cleaning services to renters or homeowners who would normally not hire a cleaning service, Homejoy has developed an intuitive platform and user-friendly platform for finding someone to professionally clean your home. The big upside to this business is that it eliminates the old process of screening and hiring a single cleaning professional, and they work around your schedule. Even though they are connecting industry-certified cleaners, all new hires with the company undergo an extensive, hands-on professional cleaning training program, allowing everyone from customer support to engineering the ability to step in if extra hands are needed. They are also able to charge much less than traditional cleaning agencies.
Traction: This is more of a reverse from the traditional marketplace business model, but it provides the same kind of customer-professional relationship. Basically it allows brands and advertisers to outsource their marketing departments. This takes a huge load off of them, cost-wise. Traction provides access to an extensive network of experienced and knowledgeable media buyers, bloggers, and content and social media marketers and managers. This kind of diversity allows for a wide range of options when it comes to campaign implementation. So far, they’ve got some big players, such as Sony and CBS, already on board for these services.
Instacart: Devoted to solving the needs of the the on demand grocery buyer. Though it operates in a handful of cities, they are expanding and hope to increase the number of urban areas they service by about 36 percent by the end of next year. While many grocery suppliers and supermarkets such as Walmart, Costco, and Giant have home delivery services, Instacart gives consumers a leg up by allowing them to select combinations of goods that may otherwise be unattainable. Simply put, shopping at Walmart means that you’re out of luck if they don’t have a particular food or good you want. Instacart takes the order and connects the consumer to a shopper who does that shopping for you, even if it means visits from several stores.
There’s one similarity running between all of these startups : on-demand services. It will be interesting to see how traditional businesses keep pace, or if they will change their model altogether. Are these marketplace business startups taking off because of consumer impatience or consumer realization of inefficiencies tied into traditional structures? Share your thoughts below!