Simplify either the supply or demand side of the business, then focus on the one that’s more complex.

Jon Brody, CEO and co-founder, Ladder.io

Jon Brody, CEO and co-founder, Ladder.io

Q: “Which came first: the chicken or the egg?”
A: “Something biologically similar to a chicken that mutated to adapt to its environment”

Want to know how e-commerce marketplaces survive and grow to become giants? They adopt this mindset. Start with a leaner, less resource-intensive version of your vision, and adapt as you gather data concerning the parts of the model that are working (or those that aren’t).

Every e-commerce retailer eventually faces a “chicken or egg” dilemma: Does the retailer focus on sellers—that is the brands it sells—or buyers first? Focusing on just one can leave you in growth limbo, and focusing on both can be prohibitively expensive.

Damned if you do, damned if you don’t?

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No.

The secret is that there are effective ways to do both at the same time.

Attracting Buyers and Sellers

Product Hunt, a website that allows consumers to discover “the next big thing in tech,” started as an email list for Silicon Valley influencers to share notes on up-and-coming startups. Founder Ryan Hoover hustled hard to engage with every influencer via social media and email (and also at events) to build that side of the marketplace.

With a lean version, you can test your e-commerce platform against the market without breaking the bank.

Starting small and making the list invite-only allowed Hoover to control scaling and focus on quality before the site ever launched. Within two weeks, he had recruited 30 contributors and more than 170 subscribers.

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Here are some tips to help you execute this type of strategy within your own e-commerce business:

  1. Build leaner.There’s always a cheaper way to do it. You shouldn’t even be allowed to build the second version until you’ve used both Unbounceand Zapier for the first version.

Unbounce helps you create a landing page to capture emails from people interested in your product, while Zapier pushes information from one app to another. Using both, you can automatically store information in a Google spreadsheet, for example, and then send a personalized outreach email via Gmail.

These and similar tools let you “build leaner” — in other words, they let you create a minimum viable version of your product or platform idea without having to code or pay for expensive development time. With a lean version, you can test your e-commerce platform against the market without breaking the bank.

  1. Launch a “no stack” startup.Another option is to skip building a platform entirely and leverage another company to solve one or both sides.

After Shopify’s recent integration with Amazon, for instance, anyone can start an e-commerce company. You can manage your whole catalog across all channels in one convenient place, and Shopify even syncs your inventory.

You can essentially build an entire e-commerce platform without ever having to write a line of code. Just integrate your inventory and marketing into a Shopify store page, and you’re ready to sell across the web — from your store to Amazon and beyond.

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Relying on distribution partners isn’t new, but the ability to start an online business for next to nothing is completely novel and disruptive.

  1. Focus on the risky side.Make one side of the business either free or inexpensive to build and maintain. That way, you can focus on the side that’s hardest or riskiest to scale.

Need an example of what I mean? Here’s how I did it at my previous startup:

When we launched FullGlass — a subscription-based service connecting users to New York City bars that offer a free drink for every drink purchased — we attracted more than 70 venues, built an audience, and had a firm understanding of our customer acquisition cost before ever writing a line of code. This gave us needed leverage to raise the seed and build our mobile app.

Let me ask you this: Would you give away a single free drink to someone you knew would buy multiple drinks afterward? Of course! And venues understand this as well as anyone. They aren’t on the hook for installation costs, so there’s no downside (even if a company is unable to deliver new customers). For us, selling venues on the idea of additional (free!) foot traffic and drink sales was easy, and it allowed us to focus on the more difficult subscriber-acquisition side of the marketplace.

When scaling an e-commerce business, you often have no choice but to focus on both the chicken and the egg. But if you build inexpensively and make one side a no-brainer option, you can focus your efforts on the more challenging side.

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Ladder.io is a provider of marketing technology and consulting services.

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