Are online shops a fad?
There is an estimated 12-24 million ecommerce sites around the world of which, only roughly 650,000 generate more than $1,000 per year. While this may be an approximation, it does put in perspective how competitive the industry has become.
Some digital experts, on the other hand, see an opportunity. Arcadier, a Singapore-based company has developed a platform that lets businesses easily set up a marketplace online for a monthly fee.
Why? Because Kenneth Low, Arcadier co-founder and Chief Commercial Officer, is certain that exchanges from one person to the other, whether it be in marketplaces or offline, is something embedded in human DNA. His company is simply facilitating it online.
Fight for the single merchant
A textbook case to build a successful business is to find a problem and provide a solution as either a product or service. This was exactly how Arcadier founders came up with the idea to build a software platform for multi-seller marketplaces. It helps bootstrapping entrepreneurs develop their own ecommerce venture without any coding knowledge.
Arcadier started out in 2013 when the founders built customized marketplaces on a project basis. After working several years in PayPal during the eBay era, Kenneth and the other co-founder of Arcadier Dinuke Ranasinghe saw an opportunity for the provision of a marketplace platform enabling entrepreneurs to build their “Uber for X” models.
Arcadier received inquiries from startup entrepreneurs, but a quotation scared off too many of them – no one had the minimum $50,000 to build an application. Kenneth says to build a minimum viable product for an online marketplace can cost around $500,000.
“We realised there was a whole market that was underserved. There were many software providers for building single merchant online shops cheaply and affordably, such as Shopify, PrestaShop or Magento and the big boys would go to Demandware and Hybris, but there was no commoditized product for cash-strapped entrepreneurs,” explains Kenneth.
“We couldn’t believe it. We were thinking, “Surely, Shopify would have done this!?,”” says Kenneth.
He explains that the back-end is much more complex setting up an online marketplace than for a single seller shop as it requires features such as multi-seller listing, inventory management for each of the sellers and split payment settlement.
Because existing players were all fixated on capturing the attention of single merchants, no one had invested in a platform for building marketplaces.
The hyper-localized hyper-niches
Kenneth believes an online marketplace can create a win-win for sellers and customers, but Arcadier is not about helping others build the next Lazada or eBay, there can only be so many such global marketplace companies.
Instead, the trend is shifting towards hyper-localized and hyper-niche marketplaces, such as an Airbnb equivalent for female travelers in Asia or Christian travelers in Jakarta.
“Owners of these niche marketplaces never dream of being the next big thing, but they understand enough of the local market to know how it can work for them,” says Kenneth.
Over 2,000 marketplaces spanning 45 countries and over 150 cities have been created using Arcadier’s platform.
Even without much spending on marketing, signups increase at 60% compounded growth rate month-on-month.
Arcadier operates on a software-as-a-service (SaaS) model charging its customers a monthly fee that can range from $0 to $399 per month – the free version is limited to 250 transactions per month. As the number of transactions increase, so does the platform subscription fee, but there are no transaction fees.
The platform is appealing as there are marketplace templates for selling goods (equivalent to eBay), booking professional services (similar to ServisHero), renting spaces (similar to Airbnb) and equipment.
In the recent years, Arcadier has gained a few competitors, a company in Finland called Sharetribe, another in Silicon Valley called Near Me, and one two others, but Arcadier is leading in terms of sign-ups, asserts Kenneth.
While Arcadier is Singapore-based, 21% of all sign-ups are from US, 11% from the United Kingdom and 9% from Australia.
It also has users from India, Canada, Brazil, France, and Spain.
“Our value proposition is to be the global leader in multi-vendor technology and our mission is to make sure we provide this technology to anyone, especially those who don’t understand tech,” says Kenneth. The tricky part is to make this technology simple to use, highly scalable and highly configurable, but Arcadier has got it covered.
Signup takes 5 minutes and the administrator’s user interface is very easy to set up the marketplace layout, what information is required from sellers, choosing languages and currencies of the marketplace, payments methods, etc.
The power of B2B
Kenneth gets passionate when speaking about how the trend of sharing economy is driving the growth of online marketplaces and not that much contributing to the single–merchant shops.
“Since the days of Agora in Rome and Grand Bazaar in Istanbul, marketplaces have always been the way people discovered things. A single merchant store isn’t sustainable – this trend is only now happening online,” argues Arcadier’s co-founder.
“Whatever you can think of, people build marketplaces for it. Marketplace for trading horses among owners, booking freelance DJs or belly dancers, these are some of the examples of what has been built using our platform,” says Kenneth.
He is also convinced that Southeast Asia in the long run will be the bedrock of ecommerce growth.
“The environment of trade is disorganized in countries like Thailand, Indonesia, Malaysia and the Philippines, which offers many opportunities for disruption.”
But the sleeping ASEAN giant has additional challenges of its own. Kenneth, a native Singaporean, counts language, regulatory systems and payment acceptance as the three biggest impediments to adoption of ecommerce and trading.
What does he believe makes a good marketplace?
Having seen a fair share of online marketplaces created, Ken shares his best practices.
- Own at least one side of the market
Online marketplaces always have the chicken and egg issue – buyers attract sellers and sellers attract buyers. If you don’t own at least one side of the equation, you should not be starting an online marketplace.
Entrepreneurs tend to think technology is the biggest hurdle for marketplaces while the biggest challenge is actually finding buyers and sellers.
- Know the market which you plan to serve
Not all B2B marketplaces are the same. Some industries require merchants (or sellers) to provide a letter of credit, some need vetting of merchants. So, be sure to know the existing workflow of the industry that you’re in.
Don’t use technology to change market participant behavior because that is impossible and you will fail. Make sure your technology works with the existing behavior, just automate it differently.
- Be patient
Building an online marketplace is not a sprint, it is a marathon. Don’t build a marketplace and wait for customers to come. You have to actively market it – know your customer acquisition channels and constantly manage them.
- Integrate with key service providers, not all
Many clients ask for an integration with all fulfillment, payment and other service providers, but that isn’t necessary. What you need is to find the key service providers in your vertical and integrate your systems with them. If it is SAP for accounting or aCommerce for fulfilment, integrate it.
- Solve the trust issue
Trust between sellers and buyers is a fundamentally important part of building a successful online marketplace. Accept you will never fully solve grey market issue when some sellers and buyers decide to make the transaction offline and cut out the middleman’s (your) charge.
Customers still trade on eBay because they have buyer protection i.e. Airbnb has insurance for homeowners. Trust can be strengthened in the form of guarantees or you can use escrow services when funds are held by a third party until seller and buyer report a successful transaction. In any case, do think about how to encourage trust in your marketplace.
By: Aija Krutaine
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