Andrew: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy, where I interview entrepreneurs about how they built their businesses and sometimes I interview them twice, which is kind of what’s happening today. I just did this phenomenal interview with Jason Wyatt, who you’re about to meet. We lost the whole interview and we’re recording again.
The premise of the interview is this. I kind of thought that when it came to online shopping, the major guys just kind of got all the business, the Amazons of the world, the Walmarts to some degree, etc. What I found as I researched today’s guest is there are these pockets of marketplaces, people who have their tribe at a certain site who go there on a regular basis and want to buy from that site and the marketplaces on those sites actually are thriving, growing. Today’s guest is one of the entrepreneurs who helped build this kind of business.
His name is Jason Wyatt. He is the founder of Marketplacer. They bring tribes together to shop in new ways. They own a couple of sites you’ll find out about within this interview, where they do content and commerce through these marketplaces. They’ve also created a platform where other businesses can use their software, their know-how to create their own marketplaces. Finally, they also do analytics and insights for marketplaces.
We’ll found out how he built this business all thanks to two great sponsors. The first will help you hire your next great developer. It’s called Toptal and the second will help you close more sales. It’s called Pipedrive.
Okay. Jason, I’m so worried we’re going to lose this. Thanks for doing this interview a second time. What time is it where you are right now?
Jason: It was 7:00. The positive thing about all this is it’s now 8:00. It’s not as early as the first interview, so I might be a little bit more awake.
Andrew: We can do it twice as well. Before you started this marketplace business about 10 years ago, you were working for General Motors. What’s one thing you learned from working for such a big auto maker?
Jason: The really good thing about the big businesses is they’ve got some great processes they’re developed over, in some cases, 50 years. So I think of one thing that I took out of General Motors is it’s that lean manufacturing mentality. It’s around when you’re creating a small startup, which we were a really small startup, how do you create it in an efficient way where you haven’t got this ton of wastage kicking in?
So we adopted some — we didn’t adopt all of them — but we adopted some of the really good bits of lean manufacturing in our startup and eliminated some of those wastage items that walk their way through the business.
Andrew: What’s an example, one thing that you don’t do that’s wasteful that other entrepreneurs, other startups do?
Jason: It’s really a case by case. So there are a couple of things that lean gave us that was really helpful and that was around getting a really good cost structure from day one and analyzing the cost structure. So every business says they analyze the cost structure. But how do you really analyze the cost structure? So when we started, it was very different to today. So you didn’t have an AWS or an Azure who had just nailed server and hosting back then.
So we were incredibly efficient in the very early days when it was incredibly expensive to get server infrastructure up and running around that server infrastructure. We were incredibly efficient around our development processes and around our pipeline to get into development processes. So we were really disciplined about what we build, when we build, and a benefit that it was going to have for the customers.
We didn’t build things for the sake of buildings things. We spent time before it got into debt to really understand the needs of the customers from both a seller and purchaser and then really factored those things and what they were going to deliver to the end as an end result before we were in them.
Andrew: I’m kind of surprised that you would go into such a big company. I’ve heard about your background, where you as a kid, you were working at an ice cream shop and you said, “This is not the full potential I can reach at my age.” How old were you at the time?
Jason: I think I was illegal actually. I was 13 and a half.
Andrew: 13. What was the thing you noticed when you looked around for something else to do?
Jason: I started scooping ice cream because everybody loves ice cream, and I wanted to make everybody’s lives a bit happier. I probably put on a few too many kilos doing it, but it was great fun. It was clearly hard work. You’re getting paid minimum wage scooping ice creams. I was a really mad, avid tennis player at the time. I said, “Every week I see all these people breaking tennis racket strings. There’s a need for somebody to come and make it easy to get their rackets fixed.”
There was no one locally, so I borrowed $500 off my dad, which is quite a lot of money back then when you’re 13 and I said, “Dad, can I start a tennis racket stringing business?” I charged $150 to string people’s rackets, stringing between 10 and 15 a night at $40 a racket. It took me 22 minutes to do it. I was making a fair amount of money at the age of 13 and a half. But it was a ripping little business.
Andrew: $40 a racket for stringing it is your profit? You were doing 10 of them, so about $400 a night?
Jason: Yeah, when I was pretty keen to roll it through.
Andrew: That’s a lot of money for a teenager. What did you do with all the money?
Jason: I saved up and bought my first car, to be honest.
Andrew: What was the car?
Jason: Actually, it was a General Motors car, but you don’t have the brand of General Motors in the United States. It was a Holden Commodore. It was a surf wagon. So good to go, first thing I could do when I turned 18, which is the legal driving age in Australia, I could go surfing myself and explore the world.
Andrew: I’m looking at photos of the car. That’s a cool car.
Jason: It was good. It was fun.
Andrew: Wasn’t it? Yeah.
Jason: Surf wagon. The car is all about what the girls like, right? That was the whole bit.
Andrew: It’s not or it is?
Jason: It definitely is.
Andrew: Yeah, it definitely is. I see that.
Jason: It wasn’t so good for the girls, but it was great for the surfing.
Andrew: I’m so surprised, dude, that you then would go on to GM. Why did you go on to corporate — I was going to say corporate America — but corporate Australia. Why did you go into the corporate world?
Jason: So I think this is the story for some entrepreneurs, maybe not all of them, but I was pretty good at school. I got good grades. Then I naturally just got into accounting or commerce. I did a major of commerce in Australia. I got good marks in there. I didn’t do a whole lot of work, but I managed to scrape my way through. And then KPMG picked me up and said, “You come and be a chartered accountant. Your career is set. Your security is set. There’s a destiny of a good income, safe family, all those things.”
It worked. It was true. It was just it was boring as hell. I hated working in the past. What you find, especially back then is accountants in an accountancy, you worked in the past and you couldn’t be part of creating something in the future.
Andrew: I never thought of it like that. Yeah. You’re trying to figure out how much money we made last year, how much money we spent last month. You’re not trying to figure out how do we do more next year.
Jason: Yeah. I think some accounting has evolved into getting much more into the forecasting and things like that, but I wasn’t creating products or creating technology or changing the way people buy things. That’s really where my mind was at. A, I definitely wanted to be an entrepreneur. I wanted to lead people. And B, I wanted to do something with my life. I didn’t care whether I failed at it because I had nothing to lose back then. I think it’s difficult once you’ve got kids and wives and all those types of things, I think it’s a whole lot harder. We had nothing to lose. I had a good job to fall back on to. We gave it a crack and launched.
Andrew: So 2006, you and your buddy from back when you guys were kids from five years old, you sit, you talk and you say, “Hey, you know what, the world needs a classified site for bikes.” Why did the world need a classified site for bikes? What about Craigslist, eBay, Amazon? Couldn’t people just go to any one of these sites and just buy a bike or their local bike store if that’s what they want to do?
Jason: Yeah. So, what we found is that — when we just looked at it, there were more bikes sold in the Australia market back then than cars. So there were roughly 1.1 bikes sold and there were only 900,000 cars sold. And then if we looked at the average order value of a bike and it was really in [inaudible 00:09:07] is the average order value was going up and up and up. So some guys and girls in Australia were spending $15,000 to $20,000 on a bike. Then there was nowhere to sell it effectively. Then there were over 800 brands of bikes, of which there were really only 10 brands available on the traditional auction sites.
So there was nowhere to find, buy, and sell a bike. That’s where we came up with the idea of BikeExchange, a little stock exchange for bikes. Everyone always thought we’d come up with the name so you can exchange a bike, which has been a challenge that we’ve had to overcome. But what we’ve been able to do is create the world’s largest bike marketplace in nine countries with millions and millions of visitors a month with close to 600,000 cycling dedicated products for sale and amazing advice and service that goes with it.
Andrew: Okay. Now that I think about it, I realized earlier today that I never did buy a bike from Amazon. I keep looking at it thinking, “I’m going to get a great bike deal,” but they always have these cheapo bikes, and at this point I’m not ready for a cheapo bike from Amazon. I’ll get like a really busted up bike that I can drive in a really bad neighborhood of San Francisco and that I pick up for $50 off of Craigslist, or I’ll want a really high end bike and that I want to go into the store. I want to get fitted. I want to make sure it actually feels right. They’ll even let me ride it around the block if I give them my ID, and that’s the experience I want for the higher-end bike.
So that’s what you thought other people were looking for. In fact, I assumed before we talked that you were allowing individuals to sell to each other, but the way you populated your marketplace in the beginning was asking who to sell on your marketplace. It wasn’t individuals.
Jason: No. It wasn’t like individuals could, but that’s not where we got the scale from. The reality is a bike store they’re smaller businesses and they’re not experts in marketing. They’re not experts in content management. So what we saw was that there a need to actually get exposure to these small bike stores and drive people both in store and online.
So what we did is we created good processes and systems and a good community where we made it easy for bike shops to sell to consumers who want to find their products. And if you think about some of those large marketplaces like Amazon, a) they didn’t exist in the Australian market back then, but then b) it’s really hard to service a passionate, driven, tribal-based community like cycling to that depth. It’s really hard to be everything to everybody.
What we found, if we could be something to somebody and give them great advice, give them great reviews, give them service around how to choose a bike, what are the tips in how to ride a bike, but then also going to get all the brands, all the makes, all the models, all the accessories and everywhere where you can buy them from. We found there was a real need for it and consumers came to it in droves.
Andrew: That’s how you brought in the consumers. But the interesting thing to me is — I guess they’re both interesting, both sides of the marketplace. I would think, “How do I get the most individuals into my marketplace?” You thought, “How do I get the most bikes in my marketplace?” The way to do that was to partner with bike shops, allow them to list their products and get a bigger audience than they would from the people who might be walking down the street and looking for bikes. You actually did a tour of the country, am I right, to try to find all these bike shops?
Jason: Yeah. We didn’t take my first Holden Commodore, because I don’t think it would make it that far. But we drove up the east coast of Australia, my buddy and I. We went surfing and had some beers and did a bit of riding at the same time. We basically door-knocked every one of these bike stores. There were only 400 of them. So you could say we had a fair few meetings, but—
Andrew: 400 on the east coast of Australia or 400 in the whole country?
Jason: Yeah. There were about 600 in the whole country and about 400 on the east coast. I remember one day in this little town called Coffs Harbour, we walked into this bike store, this would have been in probably March of 2007. We walked into this bike store and we got chased out.
Jason: “The internet is the devil. The internet is stealing my business.” So not only did we have to create the demand from a seller and a buyer perspective, we had to put a lot of time and energy in our community into in some respects a community of sellers that really didn’t understand the power of the internet and how to really engage with that internet. By making it easy for stores to list their products and in many instances actually listing them for them and teaching them how to content market and how to have good service around answering the phone and responding to emails and then shipping items on the same day in a reliable manner.
What we were able to do is we were able to really create a community of sellers that have made hundreds of millions of dollars out of BikeExchange in a pretty small market, which was the Australia market.
Andrew: What was your commission on sales back then?
Jason: Five percent.
Andrew: Okay. Five percent of what was sold. I wonder, though, how did you get the shop owners to come back and update the photos? I understand the first time, they’re excited. Someone is potentially going to help them sell. They put some effort into it. But after the bike is sold, they have to remember to remove it. In fact, even on Craigslist I know they’re a pain. Sometimes things are sold and people don’t remove it until they get hassled about it enough that they finally get it down.
Jason: Yeah. It was a challenge at the start with these businesses, because there was no such thing as an API or integrations to websites. So we did it the old-fashioned way. We listened to customers. We had really strong KPIs at every store that needed to be contacted every two weeks so that we could go through their account, we could update it. We built inventory systems so when we sold one online, it would automatically come off. These systems or processes didn’t exist. We were inventing them.
We were listening to our customer and we were — I nearly find it like young love. You know when you’re young, you don’t care about the girls you go out with. You’re not ruling out every girl you see. By the time if you’re single and you’re 30, you’ve got all this criteria about what not to do. As entrepreneurs, we were in young love mode. We just did it because we wanted to do a good thing and we’d give it a crack.
And I think that was a huge advantage, because we were prepared to fail and we were prepared to fail fast and we led our community down a path of, “We might make some mistakes here as we go, but let us in and we’ll listen to you and be honest with you and create a trusted environment. If we do that, we can create a community where everyone has benefits and everyone can belong to it and everyone can eventually for the sellers have a great economic impact.
Andrew: So that’s how you got the sellers on board. What about the customers? Talk about some of the things you did to bring them in, both like the hand-to-hand combat stuff where you actually go out and talk to your potential customers and the online stuff that brought them in. What did it?
Jason: Yeah. I think if you look at Sam and I back in our — we were 25, 26, we were amazing promo girls. We would walk around these events and we would hand out cards that say, “If you want to buy and sell a bike, visit BikeExchange.” But we did it on scale. So we’d go to it’s probably the equivalent to the Tour of California in the United States. But we would go to the Tour Down Under, which was a pro tour event. We would hand out close to 50,000 to 60,000 of these cards in a week.
Andrew: You would hand them out to individual people there, if you want to buy a bike, there’s the place to do it?
Jason: Yeah. If you want to sell your bike, here’s the place to do it.
Andrew: Didn’t you feel like, “I was working at General Motors. I was working on big projects. I’m now handing this out like a 13-year old kid could do.”
Jason: Yeah. It was very funny. I’ll never forget the day, but on that same day, somebody bought their first product on BikeExchange and we made five percent. Then I thought, “Hang on a second here, we can make money in our sleep.”
Andrew: I see. So it wasn’t like you said, “I just made five percent, that’s less than minimum wage.” You said, “Hey, this is a great start. I can actually make some money.” I see.
Jason: That’s right. There were more bikes sold than cars, so if we could pick up this percentage and then the five percent of that. Then we create some modern revenue streams around a membership base to the sellers where they could list all their products, get unlimited results, but then pay us a monthly membership fee. There’s lots of talk around creating membership economies today, creating sense of belonging and benefit over a lifetime.
But we really created that in 2007. That’s how we grew our business. We created a membership economy or subscription economy where we created benefits to our sellers where they’d pay us a monthly fee, they’d receive more benefit than the fee, and we were able to self-fund our business and grow our business out of that.
Andrew: What were the benefits that you gave members in the beginning?
Jason: It was a little bit of faking it until you make it, because we didn’t give them a whole lot. But we gave them the vision that they could believe in.
Andrew: What was the vision?
Jason: They believed there were more bikes sold in Australia. They believed it was a good enough idea to create BikeExchange because they couldn’t get online. They couldn’t SEO their products. They couldn’t search optimize their products. They couldn’t create a big enough audience where they could really cut through in the online space. That’s what we’ve been able to do for ourselves at that period of time.
Andrew: I see. You said, “Look, everything is going online and then there are tons of bikes being sold. This is going to be your way of getting online and getting a piece of this business, this growing industry.” But there were no big features. What was the big killer feature that finally did bring people in and was actually the selling point.
Jason: I think it’s really hard as a marketplace to pin down a killer feature. I think there are features and functions that you develop over a period of time that I think in business if you sell features and functions, you’re dead. What you need to do is create a community where people actually believe in it. But I’ll give you a couple of tips that really helped in onboarding sellers.
Jason: We’ve launched it at scale now in the marketplace a little. We created a central product warehouse. This is where we invested heavily in product data for our niches. So when sellers wanted to place an ad, they could select the make, the model and boom, the images would come up, the descriptions would come up. So they didn’t have to go and get their old Casio camera and take photos of it. They could actually do it on scale, and we can get scalability behind our product advert system. We did that.
That just adapted into integrations and into live inventory, and now with BikeExchange, consumers can buy with confidence because we actually have live inventory for the majority of our stores. We know what they’ve got in stock, when they can dispatch it. If they can search online, they can go into a store with confidence that bike is in the store as well.
Andrew: But they get that even if they’re not members. What’s the big thing that brings people into the membership?
Jason: The sales, that simple.
Andrew: You help them — what do they get for membership? They can’t list unless they’re members?
Jason: Yeah. They can’t list unless they’re members.
Andrew: I see. They needed a monthly fee in order to list. Got it. Okay. Let me take a moment here to talk about my sponsor, come back and talk about how you got more consumers into your marketplace to actually buy and then talk about how you expanded to other marketplaces and finally about your software to allow people to create marketplaces for themselves. It’s called Marketplacer.
Let’s get into the sponsor. My sponsor is a company called Pipedrive. It’s a tool that both of us actually use, Jason and I. Jason, how do you guys use Pipedrive to help you close more sales at Marketplacer?
Jason: So we use Pipedrive in the majority of our marketplaces. Our marketplaces use it. That’s to onboard sellers. We find it a really effective, scalable tool where you can put people through your different pipes and manage a sales funnel to close them. Then we have recently set up a new Pipedrive for Marketplacer for people who are contacting us all over the world who want to create successful marketplaces. We use Pipedrive again to take them through that customer journey and to hopefully make them valued customers over a long period of time.
Andrew: So every time there’s something new you want to sell, you create a new pipeline in Pipedrive to manage it. Pipedrive forces you to say what are the steps involved in taking somebody brand new and turning them into a customer and then as a team you all collaborate to move people through that process.
That’s what we do too, every time there’s something new that I want to sell, I create a new Pipedrive for it so that I can keep it organized. There are parts of the system that I may not want to do myself. Frankly, there are most of them. And Pipedrive allows me to collaborate. So if you guys are out there and you’re doing sales one to one via email, phone call, etc., you need Pipedrive.
If you’re going big, meaning like thousands of emails, everything happens on a landing page and people buy without talking to a person or interacting with a person, it’s not for you, but if you’re trying to sell by communicating with people one on one — email, Messenger, Facebook, I mean Facebook Messenger, chat, phone especially, this is the system that will help you get organized and allow your whole team to support you in moving people to completion.
By the way, one of my favorite features in Pipedrive is that if we lose a sale, whoever lost the sale have to just move the card into the loss column and tell us why so at the end of the month, at the end of the year, I can go in and see why have we lost sales and do something to fix it in the future.
If you want to sign up for Pipedrive, they’re making an incredible offer to everyone listening to me right now. All you have to do is go to Pipedrive.com/Mixergy. They’re going to give you 14 days of free Pipedrive. You’ll see how you can actually close sales in those 14 days and 25% off for the next three months after that. Go check them out at Pipedrive.com/Mixergy.
Okay. One more thing, I’ve noticed as I’ve looked at your marketplaces, Jason, that you guys do SEO really well today. You told me before that SEO played a part from the beginning. What did you do to bring in traffic from just people who are searching on Google? What was it that helped you guys get traffic in the early days?
Jason: Yeah. I think of this as a core element of a difference between a marketplace and a pure play or an ecommerce site is that what a marketplace has the ability to do is go after that long tail. What I mean by long tail, if you take BikeExchange, you take Giant road bike TCR in the suburbs. So you can go after your geographic long tail. You can go after your model search and you go and do it on scale. So if you look at the bike market, there are 900 brands and thousands and thousands of individual models. What we can do, we can go after them in both model-based search and also at a geographic base.
So what we’ve been able to do over a long period of time is learn some tricks around creating marketplaces that drive traffic for marketplaces. What we’re not doing is taking an ecommerce platform and trying to get marketplace traffic, because I think they’re different strategies. But what we’ve been able to do is build that over a long period of time in a really appropriate way.
I always say with Google, the best way to attract Google is to become popular. That’s the number one thing. Then you’ve got to have good on-page and you’ve got to have good off-page, but never try and cheat Google. You’ll get short-term wins, but in the long term, if you have content, a great customer experience, mobile friendly, a really good site structure, focus on the terms that you can win at, I think that’s pretty sound basics for SEO.
Andrew: Yeah. I’m looking like one of the terms that sends traffic to BikeExchange right now is Bennett’s Bicycles, which I’m guessing is a bike shop in Staten Island, New York. That’s the kind of thing that would send traffic over to you. If I were looking for them, I might end up on your site where I get to see their inventory all cleanly laid out, and I get to in this case not buy out of their inventory but contact the seller, I guess, about buying each product.
Jason: Yeah. I think that’s the thing. You also promote the sellers into Google. What you often find is as a small business, it’s pretty hard to become SEO legends in your own right, but by partnering with marketplaces, what you can actually do is get some genuine SEO traffic and grow your brand through the marketplace traffic and the benefits the marketplace brings to you as well.
Andrew: Okay. So you’re building this thing up. You take funding or no?
Jason: No. We’ve taken considerable amounts of funding in the last two years, but we went for a very long time with no funding. What we did, though, is in 2012, we won Australian Business of the Year. On the back of that, we got a huge amount of publicity — these two young punks who were traveling around the country riding their bikes and surfing created this really fun community. It was a really good story. Then we got inundated by people saying, “That’s a great idea. Can I create a classified or a marketplace site for home products? Can I create one for babies and kids’ products or for outdoor products?”
So what we thought is how do we grow? We need passion behind creating marketplaces. We need some money. We haven’t got enough money to do all these marketplaces. We’ve got no chance. What do we have? We’ve got some know-how. We’ve got some knowledge. We’ve got some experience now and we’ve got a technology stack that we use for our bike business.
So then what we did is we partnered and we joint ventured with smart, passionate entrepreneurs who had a passion for their industry, had a little bit of capital, but most importantly had the hunger to be an entrepreneur. We did 50/50 joint ventures where they funded their marketplace, the profitability and we provided the knowledge, the know-how, the technology and the emotional support sometimes you need in creating the marketplace. We did that on a smaller scale basis.
So we did Tinitrader for baby and kids products, House of Home for homeware products. We partnered with one of Australia’s most successful businessmen for Outdooria for outdoor products. We partnered with a big Instagram account now for Lenzo for party products. We created a travel marketplace for GoSeeAustralia.
Andrew: I’m on one of the sites right now, House of Home. I can see how for home products it would make a lot of sense. I have an abhorrence for anything IKEA because anytime you go to someone’s house, they all have the same IKEA stuff, so you don’t feel like you’re in your own home. You feel like when you’re back at your house, you’re in every other friend’s house. I get how even some of the higher end stores are now repeating the same stuff over and over again. I understand why someone would want to come to the site and buy something unique.
What I’m wondering is why didn’t you just sell them the software? Monthly basis, $100 or $1,000 or price per hit on their site. They get to use your software. They get your support. Why partner up with them instead of giving them your software, instead of selling them software?
Jason: That’s a really good question. It’s just the strategy we took at that time. We thought there were lots of fragmented industries and that we could grow the equity base of our business by partnering in this strategy. It was just the strategy we took in the Australian market. And now, we have millions of products for sale from thousands and thousands of retailers and hundreds of thousands of private sellers in the Australian market.
I think what else was interesting is we didn’t know it, but we had to really adapt the platform. So we’ve literally spent the last five years throwing away that old code base, building a new code base that is scalable in a way where people can create any form of marketplace anywhere in the world very quickly on scale. Back then, our technology didn’t stack up. So we didn’t want to stick our name and our brand behind not being able to create successful marketplaces.
What we wanted to do was take people on a journey, put our own skin in the game, our own blood, sweat and tears to help other people create it. But now, we’re really proud last month. We’ve finally announced that we’ve got our technology in a position where it’s in a really great spot. We’ve got our community management in a position where it’s in a really great spot, and we can create and help others to create marketplace at scale.
Andrew: So now it is SaaS. Now I can go in and sign up. I can’t pay for it and implement it on my own at this point, but I can pick the plan that I want, contact one of the salespeople there and have a team from your company come and set it up for me so that I can get started if I wanted to add a marketplace for Mixergy, for example, or if I had this idea that are need a standing desk revolution and I was going to create my marketplace for that, right?
Andrew: Am I right to understand that part of the reason why you decided to partner with other people is so that you get to see on the inside how they’re using your software, work with them when the software breaks as opposed to having them say, “We tried this vendor. This vendor doesn’t do what we need. Let’s go try another vendor,” right? They’re committed to you. You have inside information from them and together, you learn a little bit more so that you can create software to sell on a SaaS basis in the future.
Jason: Absolutely. What we did is we did it in different industries in different ways. We did ticketing and sports and entertainment marketplace in Tixstar. What you’ll find in creating any business, there are always features and functions you’ll want that don’t exist somewhere. What you need is you need a backer partner who has a track record in my experience, who has actually been successful in the industry that you’re trying to do who has a community of like-minded people who can all help you out and then over a long period of time, the features and functions will come.
That’s exactly we’re able to do with our partners and we’ve been able to go on that journey together. We’ll continue to go on that journey and create that community behind the people who license our technology and join our community on a SaaS basis.
Andrew: What are some of the things that you learn by partnering up with people who are using your software that you might not have learned if they were just signing up for software and using it on their own?
Jason: I learned — it’s funny. When we started our business, we were 25 and we were footloose and free. We didn’t have a whole lot to lose. We were both relatively single. But some our entrepreneurs have a lot to lose. They’ve got families and they’ve got houses on the line. What I learned is that being an entrepreneur, you’ve got to really commit to something that’s going to win and you’ve got to take it incredibly serious. [Inaudible 00:33:42] but we take the role of taking on a client incredibly seriously.
We say no a lot because we just don’t think it’s a good idea. Through our experience, we say, “Don’t create a marketplace. Go create a Shopify account. That’s completely fine.” You should buy some stock and sell some stock. It hasn’t got enough fragmentation. It’s not going to scale at the rate. You’re not going to be able to create a big enough sense of belonging, all of the attributes of creating a successful marketplace. So, I think that’s the most important thing. But the stuff that entrepreneurs do really, really matters.
Andrew: That you couldn’t have done minimum viable product here. You needed to have something really strong. First of all, is that right?
Jason: Yeah. I think if you just do minimum viable product, you get a minimal result, why wouldn’t you take 10 years of experience, 10 years of a technology stack at an incredibly affordable rate and scale fast.
Andrew: And then you also realized, “We can’t just give them the software. We also have to help them promote this.” So you worked with them on search engine optimization, am I right? You worked with them on ad buys, am I right?
Jason: Yeah. So we work with our marketplaces on sales techniques and how to onboard sellers, customer service philosophies around how to great customer experience, how to create the right form of content. So we’ve got 10 years of experience in processes and systems in creating marketplaces that really gets shared amongst our whole community.
The other thing that’s really interesting is it can be lonely as an entrepreneur sometimes. That fear of failure and those feelings that you have, if you’ve got other like-minded people who are out there in a non-competitive way but you can bounce ideas off in a community, it’s incredibly powerful. These are people that have created successful marketplaces globally that all want to contribute to our community so everyone can be a better them, if that makes sense.
Andrew: How are you helping them all talk to each other? Like Tinitrader is the site where I can go and buy car seats for my baby. How are you helping that founder speak with the founder of House of Home, where I can buy products for my house like kitchenware. What are you doing to allow them to learn from each other?
Jason: Yeah. So we do some really fun things. We’re going to continue to do more, but we’ll do a monthly podcast, where we’ll interview the local founders and take them through their success stories and some real case studies about the lessons they’ve learned. We have a really good educational hub on how to educate and to onboard sellers and to create it. So what we’re trying to do is to create a — I haven’t branded it yet, but a marketplace university and an education and center of excellence in there so you don’t have to reinvent the wheel every single time.
Then every year we have an annual conference where we can get together and we can actually collaborate as fellow marketplaces and bounce ideas off and say, “This didn’t work, this did work,” and together we’ll be stronger is our mindset.
Andrew: You know what? One thing I’ve noticed as I’ve gone through some of the stores is they’re products that I can’t just buy. What you do is you link me to the store owner via email or phone. Why is it that I can’t for example, buy this bowl set from House of Home? Why do I have to call them up?
Jason: That’s actually one of the key differences behind our mindset is that we want to take our retailers on a journey. Some retailers and some brands just don’t want to sell online, but they still need to be found online. Some consumers don’t want to buy online. They want to find out what’s in store.
So we say that there are five ways consumers interact with retailers and sellers. Sometimes they want to call up a store, sometimes they want to email a store, sometimes they want to visit a store, sometimes they want to click and collect and sometimes they want to buy. We don’t say to our sellers, “You must sell online,” because if you’re not ready and you can’t provide a great experience, don’t do it. But what you do need to do is drive people back into your store.
So what we’ve tried to come up with and we have come up with a way where we drive consumers back into store if that’s where they want to shop or we drive them online. We educate our sellers around how to answer the phone and techniques around how to convert them, around how to answer emails, create an experience, not just a process around how to handle people after they do come into their stores after they’ve shopped around online and they’re educated.
The consumers, powerful is the consumer now. As a business, to think that your consumer is not researching is a bit naïve in the modern world. So what we try to do is say okay, if you’re looking for a bed and there’s not great shipping for ugly products anywhere in the world in my experience. To be honest, there’s not much that great experience around shopping online. Even if you buy it online, nine times out of ten it turns up ten weeks later because they’ve got to manufacture it.
But what you don’t want to do is you don’t want to spend your weekend driving around to all the furniture stores looking for the bed that suits you or looking for the style that suits you. So, what we’ve basically done is we’ve enabled the classified world and the transactional marketplace world to roll into one.
Jason: So you can filter out the products you can’t buy online. If you just want to shop online, you can. You can filter out the product that you can shop in store or you can search for both. But it’s that ease, convenience and choice of a marketplace that we’ve been able to facilitate.
Andrew: So now you don’t charge a percentage of the sale and now you charge a listing fee and that also gives you a little more secure revenue.
Jason: Yeah. So what we’ve done in there is we’ve created a membership economy. You can charge a listing fee. We’ve got a listing fee module at marketplace, we’ve got a membership module where you can charge a monthly membership or you can charge per inquiry. So, what we’ve been able to do is through different marketplaces, we’ve tried all the different revenue streams in the different industries, we’ve developed all the revenue modules so you can scale fast.
Andrew: All right. Let me take a moment to talk about my sponsor, then I want to come back and ask what your revenues are because we’ve talked about how much you’re helping other people create marketplaces. I want to know how your marketplaces are doing. I want to find out what kind of business can actually create a marketplace and how it would work to get customers, to get sellers, etc. Finally, what does it mean when you said that we were mostly single. It sounded like there was something behind that. I’ll talk to you about that.
First, I’m going to take a moment to talk about my sponsor. The sponsor is a company called Toptal. I’ve told you guys about Toptal for a long time about how when we needed somebody to rebuild our site, that’s where we went to get things started to find a great developer. But first, instead of me telling you again about me, I’ll tell you about one of our listeners.
There’s a listener named Brett Staper. Brett, let me know how I should pronounce your last name. He emailed me and said, “Andrew, I’m a member of Mixergy. I’m a huge fan of your show and I just wanted to drop you a note to let you know that we started working with Toptal after hearing about them on your show and it’s been a complete game-changer for us.”
I should tell you guys it’s top as in top of your head, tal as in talent. “We’ve always,” he goes on to say, “We’ve always just patched together design and developer projects from. . .” and he lists a tons of sites you guys know. There are tons of different places where you can go and hire developers. He says, “We’ve always ended up with okay quality.” Frankly you will get—I can rag on those other people. You’ll get okay quality from them.
But he goes on to say, “We’re launching a new project and decided this time okay just wasn’t going to cut it, so we went with Toptal. Two weeks in and it’s by far the best looking design we’ve ever had. So thank you for the tip and thank you so much for the awesome show. As a youngish entrepreneur, it’s truly a huge impact on me.” That, again, is from Brett, the CEO of Hack PR.
Brett and so many other people who have listened to me have gone to Toptal because they know Toptal prides itself on getting the best developers in its network so when you need to hire someone, you don’t have to go through months of looking and talking to dozens and dozens of people. You talk to Toptal. They have a matcher on the phone with you. You tell them what you’re looking for and you can hire someone for a project, full-time, part-time, a team of people, whatever you need and they have a wide range of specialties.
So if you’re looking for a great developer, you owe it to yourself to go do what so many people in the Mixergy audience have done, go check out the special URL where you’re going to get 80 hours of Toptal developer credit when you pay for your first 80 hours and that’s in addition to a no risk trial period of up to two weeks. Go to Toptal.com/Mixergy for that. That’s Toptal.com/Mixergy to get that special offer from them.
All right. Why don’t we start with revenue. So you’ve built a marketplace. Can you give me the numbers—I know you’re not going to give me the numbers for your whole business, but what about like BikeExchange? How much revenue is that doing from this marketplace?
Jason: We don’t give out revenue numbers for anybody.
Andrew: Even that? The first time I asked you I couldn’t get it.
Jason: No. We don’t because we’re on a journey and we’re very deliberately on a journey. But I can tell you that we’re in nine countries. We’ve got scale behind our business, like BikeExchange with cycling tips. All of our businesses, 95% of them have hit profitability already. So, of our investment businesses, we’re in a really good spot. Marketplacer, it’s a really interesting proposition for us because we’ve had—
Andrew: Sorry, just one second. By the way, I can’t stop looking at BikeExchange. I told before we started that I bought a bike trainer so I could exercise in the backyard. Your freaking photos really are beautiful. They keep sucking me in because I see the one that I have. You asked me before we started what I’m using. I’m using a Kinetic and I wish that — it’s Kinetic — I wish that I bought one of the even smarter trainers that that. Can you give me a sense of scale? Are we talking about a site that’s doing over $5 million a year, over $1 million a year, where are we roughly with this?
Jason: You’re cheeky because you set a higher number than you did the first time.
Andrew: Give me any sense of it?
Jason: We’re definitely doing over $5 million.
Andrew: Over $5 million on BikeExchange alone?
Andrew: On BikeExchange alone and it’s all through marketplace?
Andrew: We’re not talking about the overall sales of all the trainers that are sold and all the bikes. We’re talking about your cut?
Jason: Yeah. Absolutely.
Andrew: Marketplace can be that big?
Jason: Marketplaces need to be that big. They need to be bigger than that, in my opinion. You’ve got to pick an industry that scales. If you’re going to put your blood, sweat and tears into an industry, pick one that scale en masse and can scale globally. That’s our mindset behind creating marketplaces. It’s minimal effort, maximum return. They’re pretty hard.
It’s different to a pure product business or an ecommerce business where you develop your product, which I’m not saying is not hard, but then you market and you sell it and you make a margin. With a marketplace, you’ve got to onboard sellers. You’ve got to create a community. You’ve got to find out how to merchandise that community. But when you do it en masse, you definitely reap the rewards.
If you think about a traditional retail business, on exit — a lot of entrepreneurs create businesses to sell them, which is completely fine — but on exit, a retail business would get one to two times revenue at best. A marketplace, really, if you look at the marketplace valuations, they get 10 times net revenue as long as you’re growing at sustainable growth.
Jason: Because they grab the whole market and they get triple digit growth. So there are very few businesses that can sustainable grow triple digit for year and year and year on end.
Andrew: I guess it’s also that it’s a higher margin business, right? If you’re reselling your own products, the large part of the revenue is the product itself, right? But with a marketplace, it’s less.
Jason: Yeah, definitely. Marketplace have proven around the world that they can easily run between 40% and 60% EBITDA. So they can be incredibly profitable businesses when you get it going. The other attribute behind it is there are no boundaries. There’s no capital constraints around opening stores and there are no capital constraints around inventory. There’s no obsolescence risk. And they’re modern, the largest hotel business in the world doesn’t own a hotel. It’s a marketplace. The largest taxi business in the world, they don’t own a taxi.
Andrew: You’re talking about Uber and Airbnb.
Jason: Definitely. They’re scalable businesses that are not constrained. The rules that apply to a marketplace don’t apply to a —
Andrew: So what kind of businesses do you think would do well as marketplaces? What kind of products would do well?
Jason: So what I like around industries or markets is when you can create a community of like-minded people. So there are a couple of businesses I think I’d turn into marketplaces. So I think big retailers are going to turn into marketplaces. They have to.
Andrew: Nordstrom’s is going to have a marketplace?
Jason: I’ll tell you what. I’ll bet you a beer that Nordstrom’s will have a marketplace within 18 months.
Andrew: I’ll do that, a beer that Nordstrom’s is going to have a marketplace. So I won’t just be able to buy Nordstrom’s stuff, but I’ll also be able to buy from other people on their site.
Jason: Yeah, 100%. Retail is too tough at the moment. It’s too hard out there. You’ve got to hold all the inventory yourself. You’ve got to manufacture it. You’ve got expensive leases. You’ve got an expensive cost of delivering [inaudible 00:48:11].
What a marketplace gives you, it gives you an endless aisle. You’re not constrained by your lease structure. You’re not constrained by warehouse. It gives you a portal as well. You can onboard sellers from all over the world into a n audience that can give you a market. It gives you an audience you can monetize from a media perspective. It gives you a membership economy.
So what you’re finding is businesses will turn into marketplaces, I think the large retailers at a rapid rate. We’re seeing it in the Australian market. We’re partnered with some large retailers that are going to turn into marketplaces, which I can’t disclose just yet. I wish I could. We’re getting approached every single day from all retailers all over the world.
What you’re going to find, the other thing is when there’s a highly fragmented industry of like-minded products, there are many brands, there are many sellers, there’s many consumers. It’s a considered purchase. It’s not an unconsidered purchase. I think you’ll see marketplaces pop all over.
Andrew: Let’s go through examples. So who might be listening to us who should actually create a marketplace? What’s an example of someone out there? Nordstrom’s people aren’t listening to this. They’re doing Nordstrom-y stuff. They’re listening to some business podcasts. What’s an example of someone who might be listening who should be considering a marketplace right now?
Jason: It’s really interesting. Some of the most interesting inquiries we’re getting at the moment are actually B2B marketplaces. So this is where you’re a large distributor and you’ve got a huge market to penetrate into, but you’re constrained by your current distribution strategy. How can you bring other sellers on board and sell it to your stores and retailers? I think we’ll probably get 10 to 15 approaches a day from all over the world from that.
Andrew: For example, what type of B2B company? I’m looking around here to see what’s a B2B business that I’ve interacted with. All I use is software and Macs.
Jason: That’s right. If you think of any product, chances are it’s gone through a traditional distribution model, whether it’s a brand being imported into the company, there will be a distributor that sells that to retailers. What we’re finding is that they’re turning — we’ve been approached from a horse distributor who says —
Andrew: A horse distributor?
Jason: Yeah. So what he wants to do for all equestrian products, he wants to create an equestrian marketplace. There are millions of people that ride horses and their products are highly fragmented and they want to sell to millions of people. So that’s a prime example of one that—
Andrew: So I see how that’s a fragmented market, big audience, maybe don’t have a good place. They don’t have a home to go buy from. How does he then start building up an audience? I imagine he doesn’t have a big email list, doesn’t have a big presence, doesn’t have a big brand name. How does he start out? I get the opportunities out there. But to find customers and to find sellers is tough for marketplaces. What would you recommend?
Jason: It really does depend on each. It depends on each vertical themselves but you’ve got to think in the same mindset around traditional digital marketing. So you’ve got to have a strong SEO foundation and a strong platform that delivers SEO results. You’ve got to—we use our data and insights platform on all of our marketplaces to actually understand our customers. So what we do is we grab our first party data. So who’s interacting with our marketplace.
Then we grab second and third-party data, whether it be Mosaic segmentation tooling. There’s lots of different segmentation and second and third-party data that you can overlay to get some really deep insights about who your customer is, where they’re behaving, what they’re doing, how they’re interacting. Then what we do is we form an effective communication strategy.
So what we try to do is create perfect customer segments and then we target those perfect customer segments and we go find them in audiences of where they’re at. In social media, in Google, you can target these perfect customer segments now. What we find is when we do that, we convert at a much higher rate. We convert with a more relevant meaningful message and we convert on scale.
Andrew: I see. So I imagine then I’d use your tools to do some SEO to understand how I can buy ads and that’s how I would bring in the audience, bring in the sellers probably would be something like what you did, contact sellers individually, maybe create a Pipedrive account to try to figure out who’s out there selling, what are the local stores and have them list on my platform.
Jason: Yeah. As you become more mature in your thinking, in bigger business, what they’re starting to do is say, “How can we do a joint venture and create the—instead of fighting with each other head to head, why don’t we create a marketplace together and share in the marketplace wealth?” So what we’re finding is big retailers are approaching us as well and saying, “We’ve got the market between two to three to our sellers. Why don’t we create a marketplace above it? We’ll join forces and create a marketplace fast on scale?” We’ve seen that a few times as well.
Andrew: I see. Do you think I should create one at Mixergy? I’ve got an audience of entrepreneurs. Would a marketplace make sense?
Jason: What do they want to buy?
Andrew: That’s an interesting question. It’s usually software or services, I guess.
Jason: Yeah. So I would say if you had a large community, which you do have a large community and you’ve got a tribe, people believe in you and you said for all of the great tools and software out there, could I create a classified or a marketplace where people could go to Mixergy and they could find all the great tools in creating startups from all over the world and it was a one-stop shop for a startup or growth business in their journey.
And then people could go on and you could create a community behind it and they could rate and review those products and service and it was a trusted source of truth and that you weren’t selling your soul to the devil or selling out, then I think there’s a compelling need for that service. I don’t know of anywhere that does that well today. So whether it’s a classified site or a marketplace, I probably think it’s fragmented enough that there’s a need behind it and people would use it and I think your sellers would probably pay for the privilege.
Andrew: So then why use your platform instead of some of the other platforms that are out there? Why use Marketplacer?
Jason: There are a few reasons. Successful marketplaces . . .
Andrew: Oh good. I thought we lost you again. Yeah. Sorry. You were saying there are a few reasons and then it paused for a few seconds I said, “No, I just lost him again.”
Jason: So the first and most important thing is we’ve got a proven track record. We’ve created successful marketplaces in all forms of categories over ten years. We’ve got a proven track record in our technology in that we know that it scales at rapid rate. We’ve got great processes and we’ve got great processes and procedures people can tap into. Then most importantly, you can belong to a community of like-minded people that are actually creating marketplaces so you can learn from them.
You can get some of the insights that I’ve shared today I hope people are finding useful. But these are the insights that we want our community to share amongst each other on a continual basis. So what we say is why if we were going to create an essay or a novel, you’re not going to go and create Microsoft Word, right? What we’ve been able to do is create a really scalable, proven marketplace platform that you can use for an incredibly affordable rate in comparison—
Andrew: What’s the price? I can’t see it on your pricing page or plan page.
Jason: It starts from $1,500 US a month, and then depending on what bundle you want, the highest for everything is $6,000 US a month to use all of our features and functions and community. That’s not even one developer. I can’t say how many developers I have, how much money I’ve spent creating the technology over 10 years.
But what we say is that it’s a fully hosted solution. So you don’t have to worry about hosting or technology or all the features and functions you need to be successful. What you need to do is get out there and create that community, understand the marketing plan, understand the sales plan, focus on creating a good experience around onboarding sellers, going to get traffic, getting everybody results and leave the technology and that side of it to us. Over a long period of time, I think you’ll be a big winner and we’ve proven it in many instances.
Andrew: Now I’m getting like Lenzo.com.au. This is the one that’s creating by the Instagram star that you mentioned earlier. She does Instagram photos of events, of parties and now on her site, I guess it’s going to be hire people to work at my party or buy stuff for my party, right?
Jason: Yeah. Lenzo is one of our newest one. It’s a new community. It’s a really interesting one because it actually uses the full suite because you want to hire services and hire people, then you want to buy cool balloons and products that address your party. Then you might want to book a venue. So it uses that booking engine in there as well. So it uses a big gamut. I think Lenzo will even use that digital download technology where you can download your invitations to your party and customize them and personalize them. So it’s a really cool one for us to be involved in. We love it because it really stretches us.
Andrew: She’s got a lot of stores on her platform already, a lot of sellers.
Jason: She only launched in February. So she’s doing amazing. She’s an amazing individual, Elleni. She’s got a huge Instagram following. She’s a great storyteller. If you look at the inspiration and amazing content she produces, she’s a bit of a rock star of the Australian party scene. We’re really proud to be part of that.
Andrew: It looks gorgeous. All right. For anyone who wants to check out your site, they should go to Marketplacer.com. What a great domain. I heard you spend $1,500 on it. It’s worth way more than that, Marketplacer.com. And of course, the two sponsors that I mentioned are the company that will help you close more sales, it’s called Pipedrive.com/Mixergy and the company that will help you hire your next great developer, Toptal.com/Mixergy. Jason, thanks for recording this twice with me.
Jason: Thank you, everyone. See you later.
Andrew: Thanks. Bye.