Area Notes: Market Techniques with Deb Liu (Half 1)

After which have a look at the concentric circles. A few of these concentric circles won’t ever overlap. Etsy will most likely by no means promote automotive elements. 

Connie: How do you determine, although, what’s the subsequent concentric circle to sort out? As a result of Etsy began with handmade issues, however now there’s a bunch of stuff on there that’s not handmade, really. Numerous cross-border stuff. Individuals say a variety of the Chinese language cross-border Amazon sellers at the moment are all on Etsy. Whether or not that’s true or not, I’m undecided, however the level being: If you’re constructing a market, how do you determine what’s the subsequent class to go after and when to do it?

Deb: First, what’s the most comparable class to what you’re doing? So Amazon did books as a result of there’s ISBN—it was very structured, very simple to search for, classes have been already there. However the subsequent factor they did was CDs, as a result of music revealed by giant publishers had a really comparable categorization system. You already know, one of the latest issues they’ve been making an attempt to do for a very long time is mushy items—mainly, clothes. Which could be very, very laborious when you will have a really structured system. And so actually the place you begin will take you longer and longer to get out to the perimeters.

I feel the factor about Etsy is, what they did was they attracted a sort of purchaser and now they’re making an attempt to determine what classes meet that sort of purchaser. I’m an Etsy purchaser. I really purchase these alpaca fur bears that my daughter collects on there. And , a variety of them are made in Peru and imported into America. They usually’re handmade by artisans, however these will not be the sellers. The sellers are literally third events. My daughter collects them and so they’re stunning. However as a purchaser of handmade items, this class is like an extension of one thing that I’d purchase, as a result of I’ve purchased a variety of different handmade issues. And so the query has to turn out to be: How true do you keep to your core? After which: Wherein subsequent concentric circle are you keen to go? And actually assembly your patrons the place they’re. What are the issues that they’re on the lookout for? 

However I do suppose they must be actually cautious as a result of it may possibly really feel prefer it has the inauthenticity of manufactured items. You already know, these bears are nonetheless handmade, however they’re simply not made by the vendor. That’s one factor. However then in the event that they’re manufactured in mass manufacturing, they’re gonna really feel actually inauthentic to me as a purchaser. And so I feel they’re strolling a extremely high quality line of progress in addition to authenticity. 

Connie: And in order you’ve studied all these giant current marketplaces—and also you’ve constructed a few of them and labored at a few of them your self—what are the massive belongings you suppose they did proper that individuals won’t concentrate on and a few missteps that you just suppose might need triggered them to go off observe?

Deb: Nicely, I feel what eBay did that was actually particular was having individuals belief one another on-line to ship cash within the mail. That simply appeared so loopy on the time. However I bear in mind I used to be an early eBay vendor and other people would simply mail me cash orders. It’s like mailing money within the mail to a different particular person. Individuals would ship me checks, which had all their info on it. But it surely was that belief system that they constructed, the popularity system was one thing the place: You possibly can ship cash to another person, and so they’re gonna ship you a factor within the mail. That simply appears so loopy, and but their popularity system was in a position to construct that connection between individuals. I feel PayPal augmented that, there was a layer so that you didn’t really feel such as you needed to analysis belief. So that really accelerated the expansion. I feel what modified for eBay was that the popularity system really grew to become a double-edged sword.

A part of it was that each worker of eBay knew that you just didn’t need to purchase from any individual that had a 4.8 star or much less. As a result of with a purpose to give somebody detrimental suggestions as a vendor, you mainly needed to burn your purchaser account. You needed to be keen to by no means come again, as a result of the vendor was going to do one thing known as retaliatory detrimental suggestions, which was to offer you detrimental suggestions as a purchaser.

And so the system was set as much as shield sellers and to harm patrons in some detrimental approach, which wasn’t identified to the corporate for a very long time. And a part of that actually harm the popularity. As a result of now any individual who’s a 4.6 vendor—which you’d suppose is superb on the earth—abruptly grew to become a extremely detrimental expertise. And but individuals didn’t know easy methods to complain. They might complain quietly to PayPal. They might get their a refund. However then they might by no means really publish a detrimental star as a result of they have been afraid to burn their account. And so that you’re creating incentives on each side. And it’s necessary how you consider these incentives. So I wrote an article actually excited about rankings and critiques intimately.

On a variety of websites, it’s a mutual interplay. So on some websites, like Airbnb, for instance, you each give one another suggestions, however that suggestions is revealed on the identical time. That approach, you’ll be able to’t see the suggestions earlier than you write your evaluation. There’s no retaliation. 

One other technique to do it: eBay simply doesn’t permit patrons to get detrimental suggestions from sellers. As a result of patrons accomplished their a part of the transaction by paying and by making the acquisition. And they also modified their coverage sooner or later. However the level is absolutely pondering laborious concerning the popularity and belief system could make or break you over time.

Connie: What a few market like Amazon? What are some issues that you just suppose that they’ve finished notably effectively?

Deb: Nicely, what they did splendidly was that once they didn’t have the stock, they supplemented it. They have been really a first-party vendor, after which they examined auctions and it didn’t work. After which abruptly they mentioned, what? We’re going to have this “purchase field,” and a third-party market and simply see what occurs. And abruptly it opened up a complete new avenue to usher in an extended tail of product that they might by no means have had and warehoused in their very own stock. And so it actually introduced choice to the fore and it allowed individuals to compete for the purchase field.

And so that you’re competing on high quality of service, plus you’re competing on worth. And they also use each dimensions. Mainly, you’ll don’t have any gross sales when you’re not within the purchase field. And so what they did was they gamified two sellers. 

And so I feel every market actually wants to consider: What are you incenting? Are you incenting good conduct, or simply making an attempt to stop dangerous conduct? And people issues matter lots over time. 

Connie: And the way early ought to founders be excited about this? Is that this core to how the entire product is ready up from day one?

Deb: It ought to be completely core to how the product is ready up. So one of many largest challenges you see in marketplaces is: there’s vendor fraud, there’s purchaser fraud, and there’s collusion fraud. And each market wants to consider all of these issues on the identical time. If you happen to don’t construct that in from the beginning, you may actually lose the thread and it might value you some huge cash.

Connie: Yeah, that is smart. What recommendation do you give to people who find themselves within the progress stage? The place they really have an incredible product, there’s good liquidity, however they’re not hitting the expansion targets that they’re on the lookout for. How do you counsel marketplaces on progress?

Deb: Nicely, I feel generally it’s simple to say: Let’s simply open new classes. Proper? The query is, are you really deepening your relationship each single day together with your patrons? And so actually wanting laborious on the retention curves, the J curves, and seeing when you’re retaining them. And is your product getting higher on daily basis? For Fb Marketplaceour first metric wasn’t transactions—as a result of we couldn’t measure them—it was how typically individuals have been coming [to the site]. It was weekly to month-to-month actives. As a result of as a classifieds market, it’s about frequency. Individuals don’t purchase something until they arrive. They usually don’t come when you’re not prime of thoughts. And so actually it was about: How will we get them there? After which as soon as we acquired them there, can we get them to message individuals? After which as soon as we get them to message individuals, can we get sellers to mark issues as bought?

And so it was actually a single step. However then over time, we really noticed site visitors going up, so individuals got here again extra typically. In the event that they made a transaction satisfactorily, they might come again extra typically over time. And so then we might get the J curves. And I feel a variety of marketplaces are like: Let’s simply have a look at uncooked tonnage of transactions.

Connie: Yeah. Most marketplaces give attention to metrics which might be all numbers. It’s all {dollars}. It’s not the variety of customers or frequency of visits or any of that.

Deb: However when you really search “leaky bucket” and eBay, there was an article written about this. Sooner or later you turn out to be a leaky bucket, and you then burn by complete nations of patrons. And that turns into an enormous downside. And I feel they’re making an attempt to repair that now. However I feel one of many huge points that marketplaces have is: You possibly can all the time convey extra individuals by the door with sufficient {dollars}. The query is, are you able to deepen your relationship with them? What’s your precise 30 day, 90 day, 180 day retention?

Connie: What are some issues that you just did at Fb Market to get patrons to spend extra time, verify it extra often, or have higher retention? Something you’ll be able to share there?

Deb: Nicely, in a market the place the products are utterly dynamic…So, for instance, you’re unlikely to go to Airbnb when you’re not touring, proper? You simply don’t go and browse and see what’s obtainable. However in a browse market, it’s actually necessary to convey individuals in. So we gave individuals causes to come back in. Each time you loaded {the marketplace} tab, the highest of the tab was utterly totally different. It had totally different objects on it, so it by no means felt static. Then we added this factor known as “prime picks.”

Connie: So even when there was nothing new, you’d shuffle it?

Deb: Yeah. We’d simply shuffle it. So we have been continuously reshuffling as a result of we needed individuals to have a sense of: there’s one thing new right here on daily basis. And so actually understanding what you occupy and the place you might be issues lots to truly the way you construct the expertise.

Connie: And in that browse state of affairs—as a result of a variety of marketplaces are typically a bit extra shopping—how do you determine easy methods to steadiness the acquainted versus the brand new? You already know, perhaps there’s sellers that they’ve already bought from earlier than, or perhaps there’s a restaurant they all the time order on DoorDash. How do you floor that versus exhibiting the web new eating places that they haven’t seen earlier than?

Deb: Nicely, I feel the perfect factor is: actually perceive individuals’s behaviors. There’s a group of people that actually solely purchase one factor. After I go to DoorDash, for instance: I’ve this favourite Mexican restaurant that’s throughout the road from PayPal. And once we order from there, we order like 10 burritos and eat it for, like, a number of days. And so, they’ll present somebody like me that.

However then once I’m in a unique location, they need to counsel each single factor that’s potential on the market. After we journey, I need to uncover new issues. I like Vietnamese meals, so my children are like, let’s discover the native Vietnamese meals and eat banh mi. And so, it ought to present me a number of issues that I’ve regarded for earlier than once I’m in a unique place. And so actually pondering laborious about: what’s the job to be finished for this particular person for the time being that they arrive, and the way can I really take all the data I’ve on their earlier visits and produce all of it collectively? 

Connie:  I actually love that concept of focusing not simply on the {dollars}—the highest line {dollars}, the GMV that’s going by, the take charges.  I imply, that every one issues. However to your level, if the patrons aren’t shopping, you will have fewer and fewer probabilities to get them to transform to a transaction. So even simply determining on a regular basis site visitors is a extremely necessary metric that marketplaces ought to consider.

Deb: It’s site visitors, nevertheless it’s conversion on site visitors. However the different factor you mentioned was, it’s not simply site visitors versus GMV. Are you excited about GMV or are you excited about transactions?

And so there was a time, and this was again when Flipkart was rising like loopy, that they actually chased GMV. And they also bought a ton of cellphones as a result of it was a excessive GMV merchandise. Amazon, then again, was like: what number of transactions? I’d somewhat you purchase a $2 tube of toothpaste right here than one thing price $200. It was all about frequency of use, as a result of now you’re actually depending on it.

Connie: And that drives issues like Prime, which unlocks a bunch of different stuff.

Deb: Proper. And so the entire level is, their strategy was actually totally different. If you happen to’re chasing GMV, you need to promote high-GMV progress classes. If you happen to’re chasing transactions—which is: individuals come again and purchase $2 tooth of toothpaste—then your conduct and what you current to individuals is absolutely totally different.

Connie: That is wonderful suggestions, I feel, for lots of founders to give attention to: common site visitors and retention, not simply GMV. Very, essential.

I additionally need to discuss a unique side that I feel makes you an incredible function mannequin for lots of parents in tech, which is that you just’re additionally an writer. You might be additionally actually huge on mentorship. You’re the creator of not only a book, but in addition a newsletter that a variety of readers—particularly females—are consuming to learn to achieve success in tech. Discuss a bit bit about the way you moonlight as a profession coach. You’ve mentored a whole bunch of individuals. What sort of profession recommendation do you give these fortunate mentees of yours? And what’s one thing tactical that you may share with our viewers?

Deb: Nicely, , lately I wrote this text: Tell them what you want. And I do know it sounds actually loopy, however so many individuals name me to do these 15 minute teaching classes. And it’s normally strangers—they textual content me, I name them. 

And somebody’s like, “Nicely, I need to get promoted, however I don’t understand how.” I’m like, “Nicely, what occurred if you advised your supervisor you need to get promoted?” And it’s…silence. And I say, how do you anticipate to get promoted when you don’t inform any individual? And I understand that generally we get in our personal approach. We all know what we’re speculated to do.

And my job is to not inform individuals what to do, however to unlock in them what they should know. As a result of a variety of these individuals know they need to have finished that earlier than calling me. And I’m like, why don’t you name me again after you speak to your supervisor? However the level is, I feel generally we simply assume that issues are speculated to work a sure approach, as a result of it’s snug for us.

However I inform individuals: If you happen to don’t hear “no” sufficient, you’re most likely not asking sufficient. 

Connie: How typically ought to we be listening to no?

Deb: Nicely, I learn a variety of tales about founders. They’re like, “I went to 30 VCs.” However you simply want one or two individuals to say “sure.”And the entire level is, if listening to “no” is one thing that you just’re allergic to, you’re by no means going to have the ability to increase cash. How do you get your first associate? You’re going to be the underdog for a very long time. And the reply is perhaps: not now. And you then say: “Thanks. I do know this isn’t best for you now. Let’s speak in six months.”

However I feel generally we get in our personal heads. We fear a lot about what different individuals take into consideration us. As an alternative, deal with it as a numbers recreation. I bear in mind speaking to at least one founder and he or she simply had an inventory of all of the individuals who had turned her down. However there was one who mentioned sure. I mentioned, how did you cope with that a lot rejection? And she or he mentioned, “I spotted that my aim was to not get everybody to say sure, however to get the proper one to say sure.”