This blog post is my take on why building a marketplace for second-hand is nearly impossible today with Craigslist blocking the way for others.
Disclaimer: I tried to compete against Craigslist with Shook, an auction marketplace for second-hand (that later turned into listings marketplace) and failed, these are my thoughts.
Before reading this I highly suggest reading this blog post on building marketplaces in general. I’m about
to talk about building an online second-hand marketplace.
Craigslist are today’s leaders in online listings and their service is free of charge. By doing so, they’re actually forcing everybody else to play by their rules. When we started Shook,
we wanted to charge an %8 fee of a transaction (a completed sale). We soon started getting feedback from potential users asking “why should I use Shook if Craigslist is free?”.
It soon became clear that a lot of people did not want to pay a fee for what they could get for free, even if our service was better.
By doing this, Craigslist are making it even harder for companies to innovate the second-hand space.
In the article mentioned above, they explain that usually marketplace builders start with fulfilling the supply (sellers & items) before bringing in demand (buyers).
However, in second-hand, it’s much harder. Here are a few reasons:
- Items are disposable. Once they are sold (on your marketplace or on Craigslist) they’re gone. Even if they don’t get sold, after a while there’s a chance the seller just threw it away.
- Limited inventory. Even Shook’s biggest fan can only sell items he owns and does not need anymore. In comparison to Etsy, where one seller can create hundreds of items, sellers on Shook are ‘worth’ less.
- Sellers are random. They can’t be defined demographically and they don’t surf any specific website. This makes it much harder to target.
People Are Fine
When we started, our assumption was that people were not happy with Craigslist because of all the fraud and scam going on there.
It may be true that people are not happy, but today I’d argue that they are fine with things as they are. They get what they wanted in the first place – selling their item.
Second-hand sellers are random people who seek to turn something they have into money and their best chances of doing so are on Craigslist.
They may not love it, but it works for them. To beat Craigslist, your value should be more than just a better experience.
That’s my take on the second-hand space. Leave me a comment and let me know what you think.