How to select the ideal trading model for your marketplace | Aran Malhi, Enterprise Account Executive
One of the most significant decisions facing businesses when looking to set up a digital platform is what trading model to use in order underpin the whole thing. Although at first it can seem a complex decision, with businesses needing to balance an almost impossible array of competing factors, there are some questions businesses can ask themselves in order to streamline the process and guide them to the correct choice.
Firstly, businesses must consider the nature of the product they are trying to sell. If it is a divisible product with a fixed supply, then a capacity auction model would be the appropriate selection in order to ensure market clearance and an equitable price discovery process. If the product has many complex attributes that can determine price, a structured negotiation model might be more appropriate to ensure all attributes are accounted for. Finally, if demand significantly outstrips supply for the product, a sealed bid model might work best, to make the most of market conditions. The final consideration would be pricing exchanges—is it likely to stay a fixed price or does the price vary regularly or even daily? This might push some marketplaces toward a dynamic pricing model instead of a simple fixed price marketplace model.
In addition, whilst launching with a simple English forward or fixed price marketplace model might be great for your business in 2024, but will it continue to be? Even within a single business type, some articles might fetch a better market price or support ongoing market uncertainty in a different trading model, liked sealed tender, or negotiations. Partnering with a tech provider that can suggest the optimised trading model for your marketplace as it grows and evolves, based on data science, will be a key future proof strategy.
How to ask the right questions during a selection process to trust the systems you select
Once a trading model for the platform is selected it is then essential that businesses are asking potential vendors the right questions to ensure their needs are effectively met. First amongst these considerations should be can the vendor adequately support the necessary transaction volume for your business, especially at peak times. If your business has latency requirements or minimum thresholds for number of listings at any one time it is vital that your chosen vendor has capacity to deal with this. However, not only must they be able to satisfy your requirements in the present, it is also important to keep one eye on the future and assess whether they have head room to support your businesses as it scales and grows moving forward.
Secondly, it is important to ensure that the vendor can necessarily capture a product’s complex attributes. Insufficiently conveying a product’s specifications lead to poor customer user experience, and interfaces that are able to both capture complex attributes and offer a smooth buyer/seller opportunity should be prioritised to ensure maximum revenue. can have a knock-on effect on price and cause your business to miss out on value. If a vendor’s platform does not have enough flexibility to accurately capture your product e, then they are not appropriate partners for your business.
Finally, any prospective technology provider must be able to seamlessly fit into your overarching technology ecosystem and handle the necessary integrations. Every business has its own idiosyncratic systems that are vital to its operational efficiency. Any technology provider must have the ability to integrate smoothly with these systems in a way that optimises processes and avoids operational breakdown.
How to create a business case/P&L that supports both initial investment and long-term growth and profitability
As the B2B enterprise software buying landscape changes, as many as 15 individuals across the organisation may have an impact on the end decision. This may not just include whether the technology is fit for purpose from a CTO and tech team’s perspective, but may also likely require CFO or board signoff, in which case, a watertight business case will be required. Selecting a provider who has relevant benchmarks to set revenue expectation as well as create different models for different styles of trading or for different verticals allows flexibility in creating both a short and long term technical roadmap with a solid profitability model behind it.
How to innovate—should you be a disruptor or market leader in your vertical or geography?
Being a market leader bears both benefits and risks, which is why partnering with an established technology partner leads to greater success for B2B marketplace launches. The onboarding and support required to shift current suppliers or buyers into a “new world” requires experienced hands, and accelerating the growth post launch are important considerations. Few individuals globally have experience in running B2B marketplaces, so being able to lean on a stable provider is a key element when a business determines they’re ready to lead as a disruptor.
Don’t let technology concerns overwhelm your in-house team. Instead, choose to partner with an experienced technology provider to consult and deliver on your strategic priorities for achieving your company's growth ambitions.
You must strategise for your future – not just wait for technology-related fires to flare up. Talk to a NovaFori expert today to discuss your company’s long-term growth strategy.
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