The Competition Insider: How to Win Against the Siren Song of the Marketplace

We've all experienced the allure of convenient marketplace sites. Everything from friends suggesting we list our crafts on Etsy, to listing a spare room as an AirBnB, to earning extra cash driving for Uber. We've all received the message that we could make easy money on sites like these.

As business owners, you might have considered listing your services on Upwork, Fiverr, or Angi (formerly Angie's List). Or maybe you've considered one of the many other sites/apps trying to provide a marketplace as a service. Over my ten years in business, I've had many clients see these sites as a source of easy business. (Including my own early dalliance with the Rover dog care app.) I've also seen how rarely that comes to fruition. Today we'll dive into how I see these types of sites. Be warned, you might find yourself rethinking your assumptions about competition in business!

Assumptions About Competition

We're told competition in the marketplace results in better products and lower prices. When the alternative to competition is a monopoly, this is definitely true. For those of us self-employed, we provide unique boutique services. We're in no danger of becoming a monopoly. Without the risk of a monopoly, what’s the value of competition?

Even corporations don't need to doggedly pursue competition. For example, take the book: Blue Ocean Strategy. The authors advocate for large corporations to shrug off the notion of high-competition sectors (red oceans). They recommend innovating untapped sectors (blue oceans) where competition is low or non-existent. This is a provocative suggestion for corporations, but a vital one for self-employed businesses! We cannot compete with the big dogs, so don't. You're never going to be the fastest or the cheapest or the one available at all hours of day or night. Leave those solutions for corporations. For solo ventures, you've got the most valuable differentiator: YOU.

Furthermore, you don't really need to compete with other little guys. Again, you're you, and they are them. You might be providing the same service, but is it done precisely the way you do it? Customers can only get that from you.

Put this all together and maybe you don't need to be in competition. In fact, maybe you should not seek competition!

Low-Hanging Fruit vs Competition

Let's return to those marketplace websites and apps. Yes, marketplaces are great because they advertise and attract many clients, but that's not the only factor. There are real weaknesses and threats to your business built into those marketplaces. These include elements of direct competition, unique nuances to the platform, and a system that operates with its own goals. I'm going to dig into these and you'll see why you shouldn't set your eyes on those as the solution to all your problems.

In Your Face Competition

Every marketplace serves to attract customers. This means they also attract everyone else who provides a similar service. This gives the other businesses the opportunity to see what you're doing and copy it. Could they do this on the wider internet? Yes. But it sure is easy when you're in the same marketplace! Copying isn't as big a concern as the fact that the customer can see you and your competitors side by side. This comparison shopping often boils down to price. Many customers would prefer the best quality or the provider who's the best fit for them. But these are harder to quantify than price. With all the options in the marketplace, they have to narrow it down somehow. And price is an easy way to do this.

This incentivizes businesses to race to the lowest price. The marketplace and consumers don't care if it’s sustainable. This also lends itself to a common getting-started strategy for these marketplaces. Businesses start by pricing their service absurdly low (think $1.) This attracts the first few clients and gets good in-system reviews and a track record. Once established, you can raise your rates. Clients who are comfortable with bargain basement pricing are often a headache. Not to mention, all that work you did for $1? You won't get a direct return on that. It's a sunk cost that doesn't exist outside these marketplaces.

Unique Rules to the Game

Each marketplace sets its own system of how to be most attractive to the consumer. They decide what text boxes and images you're able to use and where those go on your listing page. More importantly, they decide how you show up in search results. The analog in real-world marketplaces would be a farmer's market with one point of entry. This would mean that the prime location is the booths closest to the entrance. Booths at the front will do the most business because folks don't have to look too hard or walk too far. People are likely to leave without scouring the whole marketplace, so you want to be at the front. In a digital context, being at the top of search results is like being near the entrance of the farmer's market. If you're in the back/bottom of the search results few folks are going to make it to your listing.

There's always a way to get to the top of a search result. And the method to do so is different for each searching system. For example, if you search the same term on Google and within Etsy you will get different results. Here’s what I got when I searched for “attractive notebooks” on each site:

These are the search results I got in google when I searched “attractive notebooks on etsy”

These are the search results I got in Etsy when I searched “attractive notebooks.” None of these results are the same as the google search!

It's an investment of your time and energy to learn how to get to the top of any search system. This limits the amount of marketplaces you can realistically put effort into. Navigating these systems robs your time and energy from other priorities, like how to serve your clients the best. It also means you're sinking your promotional energy into a Sisyphean project. (I’ll get more into that below!) There are more intrinsically fulfilling promotional options out there.

Every marketplace makes it easy to craft your listing. How to get to the top of search results they make much more opaque since they'd like you to pay to be at the top. They make a significant amount of their money from advertising. There are ways to organically (e.g. without paying for ads) show up higher in search results. For every marketplace, there are plenty of 3rd parties who blog tips and tricks. They'll tell you about how they've gotten to the top of search results. These blogs can be a rich resource for your learning. And your mileage will vary. A lot of the most successful folks got in early and had success when they were one of few in their field on the platform. With more vendors and more people using their advice, it's likely to be less effective.

A Shakey Foundation

Let's say you figured out their search engine and get at the top of the results. You manage to cut through the comparison shopping enough to make sales. Things are going well! ...what happens when the marketplace changes its terms or its search algorithm?

Your business is dependent on how the marketplace runs its business. A business can't operate without being dependent on others. Even other companies. For example, every business is similarly dependent on its website platform. Squarespace hosts my website, so if they raise their rates, I have a choice. I can accept those rates or I can switch to a new website platform. I don't want to pay the increased fee. I don't want to recreate my website with a new company. But I'm going to have to do one of these due to a decision I didn't make.

Similar to switching websites, you could switch to a different marketplace. But websites are different than marketplaces. The value in the marketplace is that it brings in many customers who are looking for your service. It's possible that you could find a marketplace that better serves your niche. But you also might not. Your customers might stay with the marketplace. The only protection against this is to cultivate your own following. And this is what you'd be doing if you didn't pursue a marketplace.

There are also indirect or invisible changes. Marketplaces make frequent changes to their search algorithm. All search engines try to return better results. The revisions are reasonable in attempting to achieve this goal. But how are we defining "better" results?

General search engines like Google want to get the searcher the best answer they can. And, if possible, get a paid click if they can. Google doesn't always know if your click resulted in a purchase, and they don't really care. They got the ad revenue and returned a result that landed a successful click. Their mission is accomplished.

Search engines in marketplaces seek to drive the most revenue for the marketplace. Marketplaces make money when you sell, but that's not the main or major source of revenue. Many have a monthly service fee they charge you, and they make money off of ads. Getting the consumer to click on an ad and buy makes them the most money. If the consumer clicks on an organic listing, you don't pay much, and the marketplace doesn't get paid much. All the transactions have hard data behind them since they all happen within their marketplace. The marketplace sees what's working, what's not, and what makes them the most money for them. They have better data than they even show you. The marketplace doesn't exist to help you. In fact, they have no real motivation to show organic listings. But they do because it matters to how they're perceived by the consumer. At the end of the day, you're dependent on the marketplace to bring you clients and the marketplace does not care about it. This is far from a fruitful relationship in my book!

What's Competition Good For?

Marketplaces are just one place where competition runs high. Business is often conceived of as adversarial, as if competition must occur. While you can approach it that way, I find it more fruitful if viewed as community building. When small businesses band together towards a common goal we can succeed. We can provide better services and a better society than the status quo. Large corporations aren’t designed or incentivized to do this. So free yourself from competition and dependency on large corporations. Join us in creating a more liberated society!