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Platforms: blessing or curse?

20201117-blog-platforms-blessing-or-curseThe New York Times ran an article some time ago called “Sorry, eBay and Uber. You're Hated. ”. The article is about the power of platforms, shopping sites and market places, who are connecting buyers and sellers. According to the New York Times, it's only a matter of time before these kinds of parties become the bad guys. Is that true? And if so, why is that and of course: what could you do about it?

Love and hate

There is a fine line between love and hate. When you look at the lifecycle of a platform, you can discern a common path between the successful ones. Regardless of the nature of the platform: from Airbnb to Takeaway to Amazon, they share a common path.

They start small, attract buyers and sellers (which is a chicken and egg challenge) and gradually gain mass that can further increase growth. As soon as people know that platform X is a place that has a good selection together with good services, they might use that platform. Sellers see that potential customers are on the platform and want a piece of the action. Even though they would prefer to have the direct customer contact themselves in most cases.

Consumers like platforms so much because it offers what they are looking for. If you are looking for a house in a certain place in the Netherlands, then Funda is the place where to look. You are not going to drive through the village or city where you want to buy or rent a house to see if there are houses available or find all realtors that have listings in that area. You will find most houses on Funda.

If you want to eat out or order something, go to sites such as TripAdvisor or Doordash. So, for buyers it's a great solution. But why are platforms hated by sellers?

Beware of the 800-pound gorilla

There are several reasons for this, depending on the platform. It could be that the fees or commission you need to pay to the platform is too high or increases over time. The platforms need to earn money as well and as Amazon has figured out many years ago: people will buy from other vendors as well so why not offer them your platform and earn some money on the purchase that you otherwise would not have earned.

But the most important thing is that the platforms have a lot of power, at least the big ones like Amazon and Dutch company Bol.com. They determine the rules (and change the rules) and the affiliated entrepreneurs feel like they have little choice.

Why are entrepreneurs still on them?

That is a good question and the answer is: because it generates sales. A good example: AO, the English online white goods supplier has tried to gain a foothold in the Netherlands (unfortunately failed), but in addition to their own website they were also a seller via Bol.com. Simply because that's where the people are. If their own site would get enough visitors, they would then phase out and drive the sales from there. Bol.com (part of Ahold / Delhaize) receives money for a piece of turnover that they would otherwise not receive.

What can you do if you’re dissatisfied?

You can of course build your own platform. Create a joint platform like Koninklijke Horeca Nederland did for reservations in restaurants with 'BookDinners'. But, like the nature of platforms, a new platform does not instantly have many users. And even a platform like that costs money to build and maintain. There is no such thing as free lunch.

Alternatively, if you really are dissatisfied, stop using it. I can imagine that would be a big step because other platform users might still continue using it and grab your revenue.

There is a third way: make sure you have mass group of entrepreneurs / platform users and start a conversation with the platform. Keep in mind that the platforms need the entrepreneurs as well as the other way around and of course the customers. So there might be some space to negotiate.

But you are not alone in your objections against dominant platforms. Legislation is coming from the EU that regulates several aspects of these platforms, among others with regards to fairness.

If it works …

But it is also really a situation that it works and that you're satisfied. A platform gives you more visitors and more turnover. The platform grows because of the entrepreneurs. They create their "own enemy". So, it is mainly a problem of power and money? If entrepreneurs were to say: we will stop with platform X, they will take back control. And of course, they all must do that. The question is: will sales keep up or do I lose sales? If I am not on the platform but my competitor is, I am almost taking myself out of competition.

It must be said that platforms are not a panacea. There is not one platform, but multiple. There are specialized sellers online and in the real world that thrive based on their own strengths. But platforms allow you to quickly board the service. One of my favorite platforms, TooGoodToGo (combating food waste), will board a new client in a matter of an hour. If a baker, or supermarket wants to sell via their platform they can be added, and the same day sell the items that are close to “sell by” date. That is the power of a platform. It is easy to use and easy to board.

Connext Platform

Our Connext Platform is also such a platform which allows you to quickly onboard your new service. It's not an ecommerce platform per se, although you could use it to create one. Connext Platform does not connect two parties as an intermediary, so we are not like the above mentioned platforms. What we do share is the easy of use and quick deployment.

With the Connext Platform you can innovate and grow your company quickly. You can integrate and introduce new services quickly by offering you the possibility to use the platform rather than being responsible for all aspects like maintenance and so on. It combines the essence of integration: API Management, Enterprise Integration and Identity and Access Management. Working with Connext Platform will shorten your time to market for new services, relieve you of maintenance burdens and gives you a usage-based fee. It is based on open source technology so little vendor lock-in.

Go ahead, have look at Connext Platform and see what you think. Download the case study of brainbay, sister company of the before mentioned Funda, and see how they make use of Connext Platform.

 

Download your copy of the brainbay case study

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Picture of Ruben van der Zwan
Published November 18, 2020

Ruben van der Zwan

As Co-Founder and CEO of Yenlo, I am an IT-visionair and from the first hour. I believe that digitalization enables companies to grow by creating new channels to reach their customers. Important in such a digitalization journey is to avoid lock-in’s by vendors, technology and budget. Therefore, I am a fan of an API-first, Open-Source first and Cloud-first strategy. Obviously Yenlo’s key-focus services are aligned with these key-pillars by combining WSO2 open source technology with a secure and professional cloud-solution: Connext. Our Integration-Platform-as-a-Service solution for medium and large enterprises. Want to learn more? Contact me or join conferences all around the world where I am a frequent speaker.

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