In 2022, Etsy had 88.3 million active buyers, over 35 million repeat buyers, and 7.6 million habitual buyers. Etsy’s funnel is skewed toward enabling active buyers to become habitual buyers, which is critical for long-term sustained growth in a two-sided digitalmarketplace.
Why is it so hard to build a platform?
A platform business model is one of the most complex to build because it’s tough to manufacture so-called network effects from scratch. Indeed, when launching a platform, there are two core issues:
1. it’s the chicken and egg problem of distribution. In short, where do you start in kicking off the network?
2. it’s the ability, over time, to reinforce, strengthen and speed up the network so that from a bunch of active users, you get buyers, repeat buyers, and habitual buyers.
Etsy’s chicken and egg problem
When it comes to the chicken and egg problem, this is the core issue of any platform trying to kick off its network effects.
In Etsy’s specific case, since it’s a two-sided marketplace with sellers and buyers, the question is whether to start or prioritize supply over demand.
Of course, when kicking off a platform, you want to take care of both supply and demand. But, you want to make sure what’s the priority in the short-term.
For instance, in Etsy’s case, the priority initially was to ensure enough sellers listing unique items on the platform.
Over time, these listings turned into traffic, which turned into sales.
Etsy’s accelerating funnel
For a digitalplatform to build long-term success, it’s critical to enable users to become buyers.
Buyers to become repeat buyers.
And repeat buyers to become habitual buyers.
This is where engineering, marketing, and distribution come together to create a growthfunnel, where the platform is structured to ensure that sellers keep listing unique items.
Active buyers become repeat buyers and habitual buyers.
At community levels, these were some of the initiatives that worked: – Continued improvement of messaging between buyers & sellers. – Continued to expand the use of seller and buyer videos on Etsy. – Purchase Protection. – Improved delivery transparency in non-U.S. markets. – Stepped-up Handmade Policy enforcement. – Improved clarity for returns.
But there is also a tech component that was key to this success.
Etsy has been massively investing in its internal search infrastructure in recent years.
Etsy revamped its internal search to make it a visual (images and videos as primary avenues to shopping) recommendation engine (customized experience for buyers based on previous journeys); Etsy has restructured itself into a recommendation engine for its buyers!
Key takeaways
Platform business models are hard to build because of the initial chicken-and-egg problem and the inability to transform traffic into buyers.
Etsy has a flywheel to ensure that unique listings turn into organic traffic, which drives active buyers.
In turn, customized experiences, seller services, and trust enhancement help the platform transform active buyers into repeat and habitual buyers!
eBay’s core business is a platform business model that makes money from transaction fees through its marketplaces. In short, eBay primarily makes money by charging fees on successfully closed transactions. For instance, in 2021, on an $87 billion worth of gross merchandise value sold on eBay, the company generated $9.77 billion in transaction revenues at an 11.19% take rate (fee).
In 2021, eBay’s take rate was 11.19%. It means that eBay takes a cut of over 11% for each transaction happening through the platform. For instance, in 2021, on a total of over $87 billion in gross merchandise value on top of the platform, the company generated almost ten billion in transaction revenues.
eBay bidding is a way for buyers to bid on a product whose sale price is decided by auction. The bidding process itself is automated, with eBay acting on the buyer’s behalf.
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.
In 2022, Etsy had 88.3 million active buyers, over 35 million repeat buyers, and 7.6 million habitual buyers. Etsy’s funnel is skewed toward enabling active buyers to become habitual buyers, which is critical for long-term sustained growth in a two-sided digitalmarketplace.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
