How Do I Keep Customers on My Marketplace?

A founder building a marketplace asked for my thoughts on the risk of people connecting on the marketplace and taking transactions offline. If transactions are done outside the marketplace, his company doesn’t see revenue from the connection it facilitated.

Marketplace founders can’t stop this from happening. There will always be people who’ll do whatever is necessary to avoid paying the marketplace. You can create features and build processes to stop this behavior, but you won’t eliminate it.

The best way to mitigate it is to create so much value for both parties that they don’t want to transact outside the marketplace. And if they do, they risk losing much more than they gain in fee savings. A good example is helping supply-side participants (i.e., merchants) build their entire business around the connections made on your marketplace and making tools available that allow them to scale in ways they otherwise couldn’t.

Conversely, merchants who have thriving businesses and established tools outside the marketplace will explore the marketplace to acquire new customers and aim to take them offline.

Put differently, the best defense is to focus on maximizing value!