Silk Road: Lessons in Building an Online Marketplace (and How Not To)

Silk Road: Lessons in Building an Online Marketplace (and How Not To)

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There’s no denying that Silk Road is a lesson in carefully selecting the products and services that a marketplace can offer – and in the case of alleged mastermind Ross Ulbrich, an underworld type eBay, that serviced a worldwide network of dealers and users, was clearly not the way to go.

Black markets have been around for a long time but one thing’s for sure, no one out was yet to think up the hair-brained idea of creating a product offering of drugs; listings for hacking in social accounts; fake drivers’ licenses and fake passports which even included reviews and commentary.

Related: Got a Million Dollar Idea? Then Enter the Sanlam / Business Partners Entrepreneur of the Year®

But there’s something that Ulbrich got right when he created his (albeit illegal) online marketplace. Here’s what makes an online marketplace a success:

1. Curate unique product offerings

Winning marketplaces tend to disrupt industries that are generally dominated by powerful middlemen. These marketplaces match supply and demand, while attracting new suppliers and customers to the market.

Online learning platform, Udemy, is a good example of this. This company made it possible for people to access a large number of short form video classes, enhancing their skills more easily than attending a physical class.

 

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2. Creating large value for suppliers

To create a winning marketplace you need to provide more than just access to potential customers. Disruptive marketplaces support suppliers and buyers to create a large value add for everyone.

Design marketplace, Minted takes care of printing, framing, shipping and customer service — effectively navigating the entire business operation cycle so that the artists don’t have to take up their important designing time with operational concerns

3. Stimulating  quality competition

Online marketplaces often bring new participants into an ecosystem and stimulate more competition and higher service standards from existing players, all of which ultimately benefit the consumer.

Of course it’s plain stupidity to create a marketplace selling illegal items, but with the right combinations of buyers, sellers and products your marketplace could become the next best disruptor.

 

Catherine Bristow
Catherine Bristow is the online editor and content marketing manager for Entrepreneur Magazine. She brings to the mix a BJourn from Rhodes University, Honours in Psychology as well as a certificate in Accounting and Commercial Law.