SaaS-Enabled Marketplaces (PT II)

By Lauren Lee and Luke Skertich

In Part I, we walked through the six key considerations to set up a successful SaaS-enabled marketplace. In Part II, we will describe the downstream effects of what success feels like, in what we call the Reliance Network Effect.

Let’s set context with a B2B example. Many marketplaces ultimately succeed by taking away a cost center. To do so, one must identify the biggest cost contributors, circle SKUs that address specific needs, and aggregate suppliers that can servethe need, where you can flex buying power. In return, the marketplace provides better utility — procurement, price, consolidated deliveries, operating system— to embed high switching costs. Discovery can be a wedge but it is often the SaaS bringing in supply, and then driving demand that works best.

With that, we define the Reliance Network Effect as follows:

Better pricing from the marketplace means it is easier to onboard demand. As you onboard more demand, pricing and logistical benefits compound, so you are more likely to recommend the product. As demand grows, the marketplace drives higher volumes to suppliers and it becomes easier to onboard additional supply. Rinse and repeat.

Figure 1. The Reliance Network Effect

To jump start the effect, it might take a chunky buying group, distributor, supplier, etc. that can help force behavior on others. In the context of Provi (alcohol distribution), in Texas they won the largest distributor and signed on a large restaurant group, which created a right to win supply for them throughout the state. Ultimately, taking away procurement for the demand side as a large cost center does not necessarily lead to better pricing but consistently leads to better economics and utility for your customer.

It’s crucial to acknowledge that these principles serve as guideposts rather than strict rules. The result of this framework is the Reliance Network Effect and its cascading impacts on pricing, utility, and sustained growth.

Figure 2. How to look for the Reliance Network Effect

We’ll leave you with this. When building a SaaS-enabled marketplace, consider the following to ensure success:

·      Define your primary customer

·      Create an efficient platform to drive value

·      Decide on what SKU concentration is right for your model

·      Determine your geo playbook & depth of supply needed

·      Establish a repeatable playbook for user acquisition

·      Refine the go-to-market strategy to scale

Begin with strength, then construct resilience! Don’t be a stranger, reach out…

Lauren Lee:

Luke Skertich: