Like all aspects of building an online marketplace, vendor management can appear deceptively simple. On the surface, it may look like a simple case of inviting and onboarding sellers to do business on your platform. In reality, how you select and screen sellers can make or break your marketplace. Your curation process should be able to handle a number of variables:
Are you attracting bona fide sellers or fraudsters? Are your sellers offering quality products or sub-par knock-offs? Are sellers offering what buyers want? Do sellers have enough stock and are they delivering on time?
Great products and services delivered at the right time and price build trust in your marketplace platform. Trust drives sales and growth. Without the right sellers that will not happen.
Marketplace seller curation as part of an overall quality control process is therefore critical to your platform’s growth strategy.
To understand the evolution of marketplace curation we need to go back into the mists of time when the first marketplaces crawled from the digital swamp. In 1995 eBay opened its platform to anyone who wanted to auction off a collectible item. By 2000 this had evolved into almost unrestricted sales of any item under the moon. Anyone could sell nearly anything. One guy even tried to sell his own kidney on the site!
eBay’s wide-open limited-rules approach drove massive traffic to their site. However, this put them at increased risk of alienating buyers who got defrauded, getting sued for endangerment (e.g. unsafe products), or being on the wrong side of the law (e.g. counterfeit goods) or even public sentiment (e.g. offensive slogans on clothing items).
To avoid damage to their brand, eBay’s listing policies started including an ever-expanding list of prohibited and restricted items, as well as rules to govern issues like misrepresentation. A clever move was to implement feedback ratings and a ‘report item’ feature, which empowered users to help them police the platform.
In a further effort to curb bad actors and help novice sellers learn the ropes, eBay also introduced seller limits that put a cap on the number of items a seller may sell per month. These limits are reviewed every month and increased based on a seller’s sales volumes and customer feedback. This incremental process minimises the damage done by fraudulent and low quality listings, while offering bona fide sellers sufficient scope as they grow. .
eBay also added some carrot to its stick to coax sellers into being more customer focused. Sellers are now graded into three levels (top rated, above standard, and below standard) based on longevity, adherence to guidelines, sales performance, and customer metrics (e.g. out of stock -, items not received -, incorrect item -, and late shipment rates). Top rated sellers qualify for additional benefits such as discounted transaction fees. Conversely, sellers that fall below the minimum performance standards are sanctioned with restrictions on their account.
A number of useful insights can be gleaned from eBay’s seller curation journey. For starters, they managed phenomenal growth early on, despite minimal vetting of sellers, due to their horizontal business model. This would be very hard to replicate today in a world that is dominated by general marketplace giants like Amazon, Mercado Libre, and of course eBay itself.
However, that does not mean you should not use low-friction curation for your marketplace MVP. eBay’s explosive initial growth is a good example of first testing product-market fit before putting up quality control hurdles for sellers.
Low-friction curation that occurs after sign-up can also help you to quickly build up a large selection of products or services. This will in turn attract more buyers and lower seller acquisition costs. Just make sure you time the implementation of additional curation measures right, otherwise your brand may suffer irreparable damage.
As its platform matured eBay put in place preemptive (seller limits, guidelines) as well as reactive (seller levels, feedback ratings, item flagging) curation measures to minimise risk and increase quality. This metric-based user-focused approach is much more scalable and cost-effective than running an internal team that manually curates sellers.
Although eBay increased rules and restrictions over the years, it kept the platform open to newcomers via a low-friction post-signup curation process. Getting started as a seller remains quick and painless; simply sign up with your basic details (name, address, email and contact number) and link to a PayPal account for payouts. In-depth identity and business verification only takes place once specific sales thresholds are reached.
If your marketplace focuses on high-volume, low-value products (FMCG) you can get away with light seller curation while looking for product-market fit. In contrast, marketplaces that sell high-value luxury items run the risk of permanent brand damage if they follow that same route.
So let’s look at a new marketplace startup with a very different approach to seller curation. Affordable Art Fair (AAF) launched their online marketplace in 2018 to complement their popular international art fairs, which have been thriving for 20 years. Since AAF’s mission is to make contemporary art accessible to everyone, they need to make sure their curation process promotes a diversity of styles and prices that will appeal to a wide range of buyers, without compromising quality.
AAF therefore uses a stringent seller curation process to make sure its value proposition is maintained. Firstly, sellers can’t simply sign up, they have to apply for inclusion on the platform. Applications have to meet certain minimum criteria: prospective sellers have to offer original work by living artists at prices under £6,000. An expert panel then reviews the application to make sure the seller’s art will add value to the platform.
We mentioned earlier that selecting the right sellers contributes to trust in your marketplace platform. Obviously buying a pair of £5 socks online doesn’t require the same level of trust as buying a relatively expensive artwork without physical proximity.
To complicate matters further, art is not just a luxury product, it is also highly subjective. Whereas star ratings or reviews will suffice for socks, art buyers need to place a lot of trust in the curators of the platform.
For that reason, AAF uses a variety of features to create a sense of curated inclusivity and transparency.This includes expert advice for buyers, hyper-granular search, clear pricing, and detailed art and artist descriptions.
Sharing-economy marketplaces where a uniform experience is required to maintain user trust, go even further control-wise. Uber, for example, chooses which service provider a customer gets to ensure consistent service and pricing levels.
The takeaway for other marketplace startups is that specialised verticals will often require a more controlled approach to curation. This presents challenges for scalability, seller acquisition costs, product diversity, and competitive pricing.
Increased curation has played an important role in marketplace disruption. Airbnb’s usurping of Craiglist accommodation listings is a famous example (read our case study). By providing renters with a curated experience Airbnb was able to provide more value than Craiglist. As competition increases between platforms curation’s disruptive role will only grow.
We’ve already mentioned trust. Ensuring consistent product quality and service levels promotes loyalty among buyers. Expect higher retention and referral rates.
Minimise fraud. Thorough vetting of sellers not only minimises losses, but also protects your brand.
Increase revenue. High-quality curated products and services allow marketplaces to increase their take rate (fees, commissions, etc).
Improve UX. Curation practices, such as making sure that sellers have items in stock, promote a better user experience.
Protect your brand. Airbnb and Uber have had to improve their screening methods to address safety concerns. The same applies to specialised medical verticals that require licenced health practitioners.
Have a look at your market and business model before deciding on a curation strategy. As we’ve seen, your industry vertical, platform stage and the competitive landscape all play a role in seller curation.
Startups that still have to prove product-market fit should find out whether handpicking vendors or attracting them via marketing will get them there quicker. Use an MVP to test your assumptions before implementing a resource-heavy approach.
Also use an MVP to test whether curation should happen pre – or post sign-up. Options for pre-signup curation include KYC identity verification which can be done by a payment gateway like Stripe. Post-signup curation can take the form of a review system, star ratings, and trusted or verified sellers. An example is Uber’s removal of drivers that have below three-star ratings.
Automated restrictions such as sales thresholds and user features such as flagging of shady listings can take some pressure off marketplace resources.
Determine which products or services sellers should offer by tracking the conversion rates of listings in different categories.
Test whether your seller curation approach is working by tracking net promoter scores, referral, return and retention rates.
Improve seller quality by providing training and support in the form of online tutorials, checklists, guidelines, and community forums. Data can also be used to support sellers – Amazon uses it to advise its marketplace sellers on stock levels and product types. Logistics is another area where you can support sellers – FanPass provides shipping labels so that sellers can ship faster.
Talk to your sellers. Find out what works for them and where they experience friction or challenges by phoning or surveying top sellers.
Back your curation process up with guarantees such as a money back guarantee. This can be a useful safety net when you follow a light curation approach.
Hopefully this post made it clear that marketplace curation (including seller selection, screening and management) should be aligned with your business model and evolve as your platform grows.
Online marketplace experts like CobbleWeb can help you design and test a seller curation approach that avoids common place pitfalls and fast-track trust building and sales. Get in touch for a free consultation.
Originally published August 14, 2020, updated September 4, 2020