Marketplace Platforms & Service Providers
What Value Marketplace Platforms Add to the business of Service Providers?
A trend is gripping the service sectors across the world where heavily funded Technology based Marketplace Platforms are coercing and recruiting the service providers, individuals and business concerns to offer their services to their customers through these Platforms. This is an interface that adds no value to service providers, increases their cost of service instead, reduces their margins, which in turn forces them to offer a substandard service to the consumers.
When these platforms approach the service providers, they sell, rather scare them of the marketing muscle they have and claim unabashedly how they are going to dominate the search scene by heavily advertising on Search Engines like Google, Yahoo and Bing etc. The tone is… either you join us or be ready to become irrelevant and extinct! Due to their Financial Muscle, they can afford to hire army of SEO, SEM and other online digital marketing specialists. The service providers who depend solely on organic search or with low marketing budgets will be pushed to pages on search engines where they will be invisible to convenience seeking customers/users.
- These are Robots designed to Maximize Returns for Investors: In the name of convenience and market place, they are machine portals that are designed to maximize the returns on the money invested by the investors. These Investors have no concern for a particular industry, its service providers or the consumers of the services offered through these portals. For them Consumers are merely users of their platform.
- Their Business Model is Wrong: Mostly they are working against the interest of their collaborators, i.e., the service providers. The contract they offer to the service provider is so lopsided in their own favor that the service provider is rendered a slave to serve their masters. For example their contracts stipulate that customer acquired through their platform remains the customer of the platform even though next time she approaches the service provider directly. It does not make sense to me as the service provider pays anywhere from 20% to 30% of her revenues to the platform to acquire that customer. Once paid their service fee, the customer should belong to the service provider who has paid hefty amount for that acquisition.
- Revenue Model of these Marketplace Platforms equally sucks! They require service providers to advance deposit their own money with them, where they will apportion and deduct amounts worth the jobs performed by the service providers. The service providers are asked to top up the amount once that initial deposit is depleted. No deposit no jobs. It means Service providers have to cough up the money and then work to earn it back as and when jobs will be provided by the platforms.
- They are causing service providers to lose money: In order to appeal to the customers and compete against the very same service providers they recruit, they ask the service providers to lower their prices – sometimes up to 50% of their original offering of a service. On top of that they demand 20% to 30% of the revenues as their commission. This actually means that the services providers may have to do 50-75% more jobs to maintain the existing revenues. To perform these extra jobs expenses increase. This is a direct hit at the margins and profits of the service providers.
- The Paradox: On one hand these Market platforms present themselves to be the partners in extending the reach of the service providers, on the other hand they act as masters who want to own and control each and every aspect of the operations and economics of the service providers. There is a direct conflict of interest in this Business Model where Platform seems to win all the time and Service Providers are at the losing end. A perfect Win-Lose proposition between Platform and the Service Providers.
- The consumers get cheaper services but quality is compromised! Being a boutique cleaning company, we refused to enslave ourselves after weighing the pros and cons benchmarked against our commitment to our customers, quality and environment consciousness. On regular basis we service those disgruntled clients who booked a cheaper service through these platforms and got a horrible service from an unprofessional cleaning outfit only a day earlier.
The Realization Needed in Each Service Industry
The service providers have to realize that these alien Bots, known as Marketplace Platforms, are not part of their industry. They are not humans. They are product of the greed of their sponsors and their Investors who don’t care about the consumers, the quality of the service and the livelihood of the service providers. They are the parasites that will feed on your flesh and suck the blood out of you.
I am Not Against Technology
Don’t get me wrong here. I am not against Tecnology. Technology that creates new market spaces and empower ordinary humans by creating Blue Oceans are highly appreciated. We have witnessed how AirBnB created and empowered millions of Hosts around the world and how ordinary travellers have benefitted from the easy access and cheaper alternatives to hotels. Similarly Uber and Careem like Tech companies have empowered both riders and drivers across the world. But make no mistake, the Market platform trying to recruit and enslave existing service providers are creating no Blue Oceans. Instead of empowering, they are simply trying to maximize their returns at the expense of service providers and lowering the service levels for the consumers at the same time.
What’s The Solution?
Each industry has to fight this menace by coming together and
- Raise The consciousness Through Conferences and Seminars: Each Industry needs to create the awareness through collective consciousness of the looming danger. If we don’t act now, I can see a time not far off in the future when individual service providers will provide the bulk of slaves of these monsters. Service Providing companies will lose their identity as they won’t be able to keep dropping their prices and paying ever increasing commissions and charges to such platforms.
- Stifling their growth! Service providers in each industry should not register with these platforms. Once they will not have the slaves, they will not be the masters anyway. They can’t survive without service providers being on their side. Even Search Engines will relegate them to insignificant rankings.
- Launch their own Platforms by Democratizing Access: Associations and Bodies in each Industry should initiate the use of technology to facilitate and empower its members and service providers. They should launch their own platforms that ensure democratization of access for all instead of favoring the powerful and prominent.
I hope I have highlighted an important issue that affects directly owners of small businesses. I am sure this is problem, if not tackled right now, will haunt the bigger players too in each industry.