Until you reach liquidity, you’re vulnerable. After, you have the opportunity for dominance.
But what is liquidity? Liquidity is the reasonable expectation of selling something you list or finding what you’re looking for.
It isn’t an exact science. Some guidelines:
- A conversion range of 30-60% is a reasonable expectation.
- The higher your average selling price, the lower the conversion rate may be.
- The harder it is to find a good elsewhere, the lower the conversion rate may be.
- Price dispersion is a sign of the inefficiency of your market, and in turn, illiquidity.
There’s a question of who are your market participants: individuals, small businesses, or large businesses. But the more fundamental question is centralization vs decentralization.
For every aspect of the marketplace, ask: does the user do the work or does the platform do the work?
If the user does the work, it’s decentralized. If the platform does the work, it’s centralized. At a high level, decentralization gives you speed, but the cost is an inconsistent and possibly poor user experience. When you structure your marketplace you need to evaluate each action and decide whether it should be centralized or decentralized.
examples for replication but not for copypasting http://techcrunch.com/2012/08/19/how-to-structure-a-marketplace/