What Will the Next Era of Marketplaces Look Like?

I believe the next era of marketplaces is going to look very different than the marketplaces we’ve seen so far.

It used to be the case that marketplaces could add a ton of value just by aggregating any and all supply and demand. The onus was on the users to filter using the available information in the marketplace to choose what they wanted or needed.

This model has worked well for a ton of product and service categories and marketplace companies.

But now, there’s an increasing need for more “managed” marketplaces — platforms that take on more work, not less (e.g., interviewing and vetting suppliers, automatically setting prices, etc.) — to intermediate the delivery of the product or service.

The managed marketplace model is critical to unlocking categories involving high-stakes or high price transactions (such as therapy, home
buying, fine art, travel experiences), as well as those impacting users’
lives and health in other ways.

In childcare, for instance, people don’t want to just see a list of all possible caregivers — they want to know with certainty that the providers they’re hiring are trustworthy and qualified.

Last week’s WSJ piece on Care.com illustrated the tragic shortcomings of an unmanaged marketplace model: https://www.wsj.com/articles/care-com-puts-onus-on-families-to-check-caregivers-backgroundswith-sometimes-tragic-outcomes-11552088138

This week, the company announced it is overhauling its supplier onboarding process, including verifying licenses and credentials and checking criminal databases — adding a layer of management onto a previously open marketplace: Care.com Overhauls Vetting of Sitters, Listings

Managed marketplaces are an important evolution in marketplaces. The low-hanging opportunities in marketplaces have been picked, and the next wave of startups are innovating on the underlying marketplace model to tackle more complex goods/services that have remained offline.

In the future, marketplaces may not even feel like marketplaces to the end user. Because they connect all the dots behind the scenes–and provide such a high level of standardization and quality–people feel like they’re interacting with a high-quality, concierge-level service.

Examples range from daycare (e.g. Wonderschool) to skincare (e.g. Heyday). On the surface, Heyday looks like a chain of facial shops — a physical retail and services business. But underneath, it’s building a personalized skincare platform, matching different women to the exact right products for their skin, driven by the company’s growing corpus of data on what ingredients have worked well for various skin types, sourced from their physical business.

What are other interesting innovations in marketplaces? Interested in hearing more examples!

Originally published as “The next generation of marketplaces may not even look like marketplaces"