For an online marketplace, what is the best way to prevent leakages?

Leakage is the result of buyer and seller agreeing to exchange payment information outside of the marketplace. In these cases, if the marketplace’s business model includes a percentage of each transaction, the marketplace experiences leakage – loses money.

Here are the top 5 ways to prevent leakages in an online marketplace:

  1. Maintaining the “best” users – Don’t let just anyone sell on your platform. Form and follow a vetting process on all registration attempts – requiring references, implementing review/rating policies (crowdsource quality)…
  2. Offer insurance and guarantees – Freelance platforms like Fiverr and Upwork do this very well. These platforms hold escrow of the project fees, do not release the funds until the customer approves the job, and therefore protects you from getting burned.
  3. Be definite when punishing users who break the T/C’s, and let other sellers know about it – The other way to help ensure those selling on your platform do not go direct is to kick them off indefinitely when they do go direct. I would go as far as notifying the other experts (use a nag screen when they log in) of the incident and the repercussions. A step further would be adding a machine learning content delivery system to the site and emails so you can serve dynamic unique content to each user as they browse (check out boomtrain or getblueshift.com).
  4. Engagement campaigns using relevant retargeting – Track what your customers buy, what content they view, who engages with what type of profile tags… using an event-data and messaging provider like Clevertap or AgileCRM so you can supply relevant messaging back to your users based on their interactions with your content and steps in the funnel.
  5. Be the largest – If you have the most ______, users will always come back to you before going elsewhere. Constantly recruit/market to add new users to your platform. Keep your vetting systems in place, and only show the reviewed profiles to cold traffic, but have all of your profiles be searchable on a directory page.

But it’s important to clarify whom you mean by “customers” – Marketplaces have two+ customer types. Depending on your business model, you may actually monetize both in separate ways (i.e charging one a fee, and running ads at the other), or simply monetize the transaction. Traditional P2P marketplaces offer a medium where a safe (and sometimes even insured) transaction can take please with ease. In return for providing this platform and intro, you take a share of each the transaction (either flat fee or percentage). So in this case, your “customers” are both user types. You require both parties to make money.

Marketplaces like Thumbtack are getting more creative with the way they charge and turning their suppliers into their customers by charging them a fee to reply to their potential customers quote requests through the platform. In this case, their customers are the service people. But they still require both sides to make their money (a bid solicitation step is necessary).

Regardless of your business model, if you are in fact a “marketplace”, and not the seller or customer yourself, then you will need to retain both user types.

In the end, a niche platform with the most professional and engaged users will not have a difficult time controlling leakage.

I hope this helps.

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