A business is a system of processes. I don’t know where I first heard that or if I dreamed it up but I love saying it because it captures the reality of business that troubles many people when they think about getting into business. Many people have dared to start a business because they have access to a product, are highly skilled and can deliver a service or have legal rights that others do not possess. All well and good until they find out that boring mundane and downright tedious activities such as customer service, negotiation skills, administration, sales and other equally frustrating activities (no offence to those who enjoy them) are the keys to business success. There’s a great business opportunity to provide the solution for innovators and inventors and that is to offer a platform for their goods and services.

Platform as a service

Those activities that I alluded to earlier, the systems that are built around a product to create a business we will refer to as infrastructure. You can provide a platform that has the infrastructure for people to buy and sell products. Perhaps the most exciting thing about this business is there are so many opportunities and possibilities. New items or second-hand goods can work. You could even create a niche platform that deals a particular category such as cosmetics or electronic items.

To Niche or Not to Niche?

There are advantages to niching but those do not automatically make niching a great choice. A lot will depend on your market, the public and how good you are at reaching them. Your job is split into two specific tasks; get sellers on the platform and get buyers on the platform. Niche markets are smaller but if your platform provides a solution that is important to people niche customers can be very strong and dedicated. Your platform may be appreciated for the lack of noise. Generalists tend to only have a few busy categories, the trouble may come in marketing for many categories effectively. Then there are consumer behaviours to consider. Access is still a problem in Zimbabwe whether on the internet or physically and a one-stop-shop may be the best approach.

Setting up a website

If you’re going to offer the platform the best way to do it, all things considered, is to have it on a website. Of course, an argument can be made for a mobile app and a very good one but even that will derive its data from a website or web-based database. You want a good competent design, one that encourages people to browse and I urge you to pay attention to small details. Your first instinct may be to flood the page with products but a little research into eCommerce website successes will tell you that less is more. You will need a system that allows sellers to upload products and a guideline for what information is required. The more uniform the product information is across products and categories the easier a time users will have finding products. You may want to retain the right to review and approve product listings before they are published. This administrative headache is necessary to keep an eye on what is being sold on the platform. You can choose to integrate payments into the system though this could increase your administrative responsibilities. It depends on how you set up your revenue model but you could provide a service that holds money in trust until the product is delivered and then payout to the seller. This would put customers at ease but may put sellers on guard.

Revenue model

There are a few ways you can approach the revenue aspect of this business. You can charge a posting fee to those selling, you can charge membership or access fee to those buying, you can charge a commission on items sold and/or attract advertising revenue. Charging membership is not a good idea in the liberated world of the internet in 2020, this will put up an access wall to users and diminish the utility of your platform. An access fee is useful if you want to keep certain people out. An access fee works but it depends on the item you are providing. The access fee is great because you do not get involved in further administrative duties, you simply facilitate a meeting. The same goes for the posting fee, it makes things simple as you get your revenue upfront and with little discussion or involvement. Commissions are a little more complex as they introduce a fiduciary duty and a possible administrative nightmare. People can meet on your platform and conclude the sale off of it. What works for most platforms is a freemium based approach to a posting fee. Free to post, pay extra to get your post featured and placed on top of searches. This is akin to advertising.

Before you pick a revenue model just remember to consult your market first. While the seller pays posting fee or freemium idea looks great it depends on where the power is in the industry or market. Some industries make a good case for buyers paying the fee. Some make a good case for an access fee. Be informed by the needs of the market not the simplicity of the solution.

One thing

If you were to ask what the one key to success is in a platform business I would say getting people on there. Buyers like a platform with more variety, in both price and options. Sellers like a platform with more buyers. Therefore that should be your primary focus. Both groups attract each other but if you wait for one group to come first you will have a chicken and egg conundrum, which comes first? Actively pursue both groups.

I am a fan of niche markets because they offer the ability to cater to the smallest of customer needs. For example, a platform based on cellphones alone could require those selling to post details that matter most to cellphones buyers such as camera, battery life, screen size. However, niches can be very small, continuing with the cell phone example the purchase of a phone by an individual is not a frequent occurrence. So think deeply about your market choice.