Web marketplaces are growing rapidly, but the operators of these multi-merchant shopping portals must recruit and retain both sellers and buyers. Those are two very distinct challenges.

Jeff Nolan, chief marketing officer, Kahuna

Jeff Nolan, chief marketing officer, Kahuna

Marketplaces are expected to account for an astounding 40 percent of the global online retail market by 2020—and that’s not just mega-names like Amazon, Rakuten and Alibaba. These days, even niche retail marketplaces and those in verticals like food delivery and real estate are reporting annual revenues upwards of $100 million. But despite the astounding growth of disruptive marketplaces in recent years, these businesses still face very traditional challenges when it comes to retention. In fact, the challenges of marketplaces are compounded by the fact that their retention efforts must be split between two worlds: buyers and sellers.

A recent survey of marketplace executives, undertaken by Altimeter and Kahuna, found that buyer retention was the second most common customer-facing challenge to marketplace growth. This comes right behind competitive differentiation, which is critical for attracting, acquiring and retaining the sellers upon which thriving marketplaces depend. Sellers commonly disengage from marketplaces due to insufficient competitive differentiation (46 percent), insufficient sales (33 percent) and marketplace service fees (31 percent). Without a healthy based of loyal, engaged buyers and sellers, marketplaces cannot survive.

Marketplaces need to be focusing their efforts on the buyers and sellers who are most likely to churn.

To remain healthy and continue to grow into the future, today’s marketplaces must address the following three fundamental challenges when it comes to their ability to retain buyers and sellers on their platforms.

Identifying People Most Likely to Churn


Keeping customers happy and engaged is oftentimes thought to be less expensive than attracting new customers. However, given the dual nature of marketplace customers—distinct groups of buyers and sellers—marketplace retention efforts are necessarily done in different workflows and by different teams. Retention efforts for sellers tend to rely heavily on advertising, social media and content. For buyers as well as sellers, marketplaces report that social media and loyalty programs prove most effective for retention.

But here’s the problem: With marketplace retention efforts spread necessarily thin, a one-size-fits-all retention strategy simply doesn’t make sense. To improve retention rates, marketplaces need to be focusing their efforts on the buyers and sellers who are most likely to churn. By becoming more targeted in this way, marketplaces can personalize communications in a way that addresses the most likely reason a given buyer or seller might decide to disengage, thereby drawing them back into the marketplace at a crucial time in their customer journey.

To better target the customers most likely to churn, marketplaces need a quantitative understanding of the buyers and sellers who disengage with their platforms. Such an understanding can inform a probabilistic model that identifies at-risk relationships before such disengagements occur. Targeted outreach tactics can then be deployed to address likely pain points and reaffirm the relationships.

Establishing Effective Onboarding


A key element in strong retention is effective onboarding. Marketplace executives know that effective onboarding means more than just securing a signup. It means ensuring productive customer journeys and getting new members, both buyers and sellers, to a key point of action as fast as possible.

Oftentimes, marketplaces are simplistic in identifying these key customer journey moments for effective onboarding. They assume getting a buyer to their first purchase and a seller to their first sale is the key goal that will cement a customer relationship, but it’s often not that simple.

For example, take Curb, the taxi-hailing app relied on by hundreds of thousands of passengers in New York City and other major cities. Taxi usage in NYC is dominated by the usage pattern of walking to the curb and catching a cab. Therefore, the Curb app features two distinct passenger journeys (no pun intended): hailing a cab via the app, and a separate journey for ride payment after riding in a cab that the passenger hailed from the street. These passenger journeys implicitly involve adding a payment method in the app, which is itself a vital onboarding loop.


Marketplaces need to evaluate their onboarding strategies and assumptions and then call upon customer data to connect the dots between current onboarding strategies and real-world retention rates. They very well might find that a shift in target onboarding actions is in order.

Understanding Marketplace Health

Finally, marketplaces today need to move beyond measuring basic results and instead establish the ability to gauge their overall health at any given moment. It’s easy to become laser-focused on certain data and focus on metrics that make executives feel good—like high sales figures and overall revenue growth. But marketplaces are complicated organisms. Overall sustainability can’t be measured by sales alone. Rather, a more nuanced approach—one that accounts for customer retention and loyalty, buyer-seller ratios and other key measures of balance—is key to ensuring a marketplace is on target for long-term growth.

Today’s marketplaces are reshaping retail and are set to define next-generation experiences for consumers. At the same time, they need to be positioning themselves for success by enhancing their understanding of consumers and their ability to build healthy, sustainable buyer and seller communities. Doing so requires them to dig deeper into their data to gain an intimate understanding of their customers and what it will take to secure their loyalty for the long haul.


Kahuna provides services designed to help marketplace operators market to sellers and buyers.