Fiix is the Uber for auto repair. We send expert, licensed technicians to your home to fix your car within 3 hours (hence the name “Fiix”). The truth is, 80% of jobs performed in a repair shop can actually be completed in your driveway with the proper tools and equipment. And by cutting out the middleman of a repair shop, we’re able to pay our mechanics 3x the amount they would make working at a shop while at the same time allow our customers to pay 30% less than what the dealership charges. And so far, our customers and mechanics love the experience! 98% of reviews left by our customers are 5 star reviews!
Despite all this, running a business with a marketplace model is a constant learning experience. And over the course of Fiix’s lifetime, we’ve learned a lot of lessons that can apply to every marketplace out there.
3 things people should know about effectively running a marketplace
- Leakage is a large reason why marketplaces fail. As a marketplace, you are the middleman that is connecting the supply side with the demand side. And if the 2 sides see that it’s more valuable and easier to connect directly than to use you as a middleman, then there is incentive for the two sides to cut out the middleman. As a result, spending money to acquire the customer goes to waste, especially if you’re not profitable off the first transaction. The solution here is to provide a clear incentive, (e.g. earning extra money, prizes, less effort and work, higher utilization of time, etc.) where it does not make sense for the 2 to connect directly.
- In a marketplace, it’s really important to pay attention to your unit economics and your retention early on. A lot of marketplaces are not profitable off the first transaction, so they rely on the customer to perform multiple transactions before they break even on that customer. This is why investors often ask marketplace companies what their “Payback Period” is. However, if you have poor retention and the customer doesn’t end up using you enough, then you’ll never be profitable from acquiring that customer and you’ll never make money.
- There needs to be clear incentives for both the supply side and the demand side to use you in the first place. The supply and demand side needs to find 10x value from using you rather than the alternative. For example, with us, our supply side (mechanics) earn 3x the amount of money using us, and the demand side (customers) save time and money, and get the transparency and experience they deserve by using us.
One thing we learned about running a marketplace that we didn’t know before
That a lot of marketplaces fail due to poor unit economics. When it comes to unit economics, we’ve found that it’s often easy to exclude hidden costs in the breakdown which then skews your numbers and paints a misleading picture. For example, excluding the customer support costs associated with booking an individual service underestimates how much you end up spending to acquire the customer and can lead you to have unprofitable unit economics.
Do we focus on demand or supply first? How do we bootstrap one in absence of the other?
It’s a back and forth game, and a “chicken and egg” problem. Initially, we tested demand first by putting out free ad postings to test if customers really wanted the service. Then, we acquired a very small amount of supply to fulfill a small amount of demand. Then as demand started to pick up, we would increase supply accordingly. However now, we try to always keep supply ahead of demand so that we can ensure we have very quick response times.
At Fiix, we act as your first point of contact for anything related to your car. If you have any problems, you can simply request an instant quote or talk to a live mechanic on our website and we’ll help make sure your car is taken care of. At the same time, all of our payments are processed through Stripe which has made the creation of a marketplace so much more seamless. Now that the payment transaction complexity of the marketplace has been removed, it allows us to provide a much more simplistic, effortless experience to the end customer and mechanic.