Online markets cut risks for customers

Every business operates within a marketplace. FILE PHOTO | NMG 

By MBUGUA NJIHIA
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Every business operates within a marketplace. Lower costs of connectivity at home via last mile providers or mobile via the telcos, has seen the transformation of
many industry marketplace dynamics.

The most common manifestation of this transformation has been in the rollout of platforms that simply connect buyers and sellers and stop at that. This flavour worked well for its time and was a big step forward from what was an offline process with a lot of opaqueness. However, the laissez-faire nature of operations of what I shall refer to as marketplace 1.0, seeded issues that fundamentally degraded the overall value proposition for both buyer and seller.

On the buyer side, suddenly there is an influx of substandard goods or service providers coupled with logistical nightmares drawing negative customer reviews that often ride on viral word of mouth effects, quickly degrading trust for not just one but all players in the space.

On the supply side, revenue assurance is a headache first from the preference of the market for a pay on delivery model which can see buyer’s remorse result in returns in the case of e-commerce or a slide back into negotiation mode for services, coupled with hyper-competition from visibility and placement given by the platform for all sellers as a default.

These challenges have caused stagnation in the adoption and growth of these marketplaces and their persistence could quickly lead to the dead pool, as there ceases to be a compelling business case when juxtaposed against the new risks.

Enter now the managed marketplace where, as opposed to simply playing the role of a dumb pipe, platforms are looking at a more active role in the supply chain with the key agenda of de-risking both sides with certain guarantees and controls in place.

We can see this implemented in the following ways: in the mobility sector where ride-hailing has seen growing investor interest, some on-demand motorcycle operations in West Africa are providing riders with company-owned and branded motorcycles as opposed to a ‘bring your own bike’ model; in mass transit, operators are additionally taking care of staffing, vehicle maintenance and even access to inventory finance; in e-commerce players are investing heavily in in-house last-mile fulfilment operations and in services.