How to Use Marketplace Supply-Side Data to Drive Growth and Profitability
After spending 10 years building four different marketplaces, spanning from FMCG, hospitality, commercial real estate, and healthcare, I’ve noticed a common thread in terms of growing a marketplace business: it all comes down to supply, demand, and operations. Maintaining a balanced effort on all three aspects is essential for marketplace sustainability.
However, in today’s competitive marketplace landscape, it’s not enough to simply balance supply, demand, and operations. It is also necessary to leverage the right data to drive growth and profitability.
One of the best ways to do this is to focus on the supply side of your marketplace. By tracking and analyzing key supply-side metrics, you can identify opportunities to increase sales, improve margins, and reduce costs.
In this article, I’ll discuss some of the most important supply-side metrics to track, and how you can use this data to drive growth and profitability in your marketplace.
Category Lens
From a category lens, some of the most important metrics to track include:
- GMV: The total value of goods sold in a category
- % Take Rate: The margin percentage that the marketplace takes as revenue
- Total Unique SKUs: The total number of unique products listed in a category
- % SKU Productivity: The percentage of SKUs in a category that are sold
- Total Active Sellers: The total number of sellers listing products in a category
- % Seller Productivity: The percentage of sellers in a category that are generating sales
By tracking these metrics, you can identify categories that are performing well, as well as categories that have potential for improvement. For example, if you see that a category has a medium GMV but a high SKU productivity, this could indicate that there is an opportunity to increase sales by adding more SKUs to the category.
SKU Lens
From an SKU lens, some of the most important metrics to track include:
- GMV: The total value of a SKU sold
- Price: The selling price of a SKU
- % Take Rate: The margin percentage that the marketplace takes as revenue on a SKU
- Stock: The current inventory level of a SKU
- Sold Quantity: The total number of units of a SKU sold
- % SKU Productivity: The percentage of times a SKU is sold in a given period of time
- Weight: The weight of a SKU
- Volume: The volume of a SKU
- % To Breakeven: The percentage of GMV that is needed to cover logistic costs for a SKU
By tracking these metrics, you can identify SKUs that are driving the most revenue, as well as SKUs that are costing you more money than they’re worth. For example, if you see that an SKU has a high GMV but a low margin, this could indicate that you need to increase the price/margin of the SKU or reduce the cost of goods sold.
While quantitative data is essential for understanding the supply side of your marketplace, it is important to remember that it is only one piece of the puzzle. To truly drive growth, you need to combine this data with field insights from customers and sellers.
Seller Lens
From a seller lens, some of the most important metrics to track include:
- GMV: The total value of goods sold by a seller
- ASV: Average Shipment Value (the average value of goods sold per shipment by a seller)
- % Take Rate: The margin percentage that the marketplace takes as revenue from a seller
- Average Weight per Shipment: The average weight of shipments generated by a seller
- Total SKUs: The total number of SKUs listed by a seller
- % SKU Productivity: The percentage of SKUs listed by a seller that are sold
- Average Sold SKU per Shipment: The average number of SKUs sold per shipment by a seller
- Average Sold Qty per SKU per Shipment: The average number of units of each SKU sold per shipment by a seller
- Average Sold SKU Price: The average price of SKUs sold by a seller
- % Fulfillment: The percentage of orders fulfilled by a seller
- Rp Unfulfilled: The total amount of revenue lost due to unfulfilled orders
By tracking these metrics, you can identify sellers who are driving the most value for your marketplace, as well as sellers who may need additional support. For example, if you see that a seller has a high GMV but a low fulfillment rate, this could indicate that they need help with order fulfillment.
Another useful practice is to measure seller performance over time using the seller dashboard (can be built on Google Data Studio). This allows you to track and measure progress with sellers on a monthly or quarterly basis. I typically recommend that the Seller Management Team share a monthly update on seller business performance, highlighting both the positive and negative aspects. This helps to keep sellers engaged and motivated to improve their overall performance.
How to Use Data to Drive Growth and Profitability
Once you have a good understanding of your supply-side data, you can use it to develop strategies to drive growth and profitability in your marketplace. For example, you could use the data to:
- Identify categories and SKUs with high potential for growth and invest more time and resources into these areas
- Segment your sellers and develop targeted support programs for each segment
- Optimize your pricing and promotions to maximize revenue and margins
- Reduce costs by identifying and eliminating inefficient processes
- Improve customer satisfaction by ensuring that orders are fulfilled accurately and on time
Here are some specific examples of how you can use supply-side data to drive growth and profitability:
- Increase sales by identifying and adding more of the similar to best-performing SKUs. By tracking SKU sales data, you can identify the SKUs that are most popular with customers and driving the most revenue for your marketplace. You can then focus on acquiring more of these SKUs from sellers and promoting them to customers.
- Improve margins by optimizing your pricing and promotions. By tracking pricing and promotion data, you can see which SKUs are performing well and which ones are not. You can then adjust your pricing and promotions to maximize revenue and margins.
- Reduce costs by identifying and eliminating inefficient processes. By tracking seller data, you can identify sellers who are having difficulty fulfilling orders accurately and on time. You can then work with these sellers to identify and eliminate the root causes of these problems. This will help to improve customer satisfaction and reduce costs for your marketplace.
- Improve customer satisfaction by ensuring that orders are fulfilled accurately and on time. By tracking fulfillment data, you can identify sellers who are consistently meeting or exceeding customer expectations. You can then reward these sellers with incentives and promote them to customers. You can also work with sellers who are struggling to meet customer expectations to help them improve their fulfillment process.
By using supply-side data to drive growth and profitability, you can build a more sustainable and successful marketplace. What other metrics have you found to be effective for growing your marketplace business?