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Is your site suffering from ‘marketplace leakage’? If so it’s because your customers are sharing their personal details with each other – to avoid paying site fees. But by doing so they also put themselves at risk. Here’s how to make sure your business protects itself from marketplace leakage and those that use it.
Marketplace leakage (also referred to as ‘breakage’) is a real problem for many online businesses. According to Venture Capitalists, Samaipata, the term can be defined as ‘what happens when a buyer and seller agree to circumvent the marketplace and continue transacting outside the platform.’
Broadly speaking, there are several ways in which personal details are shared – via listings, embedded in images, and within one-to-one chats. Information shared typically includes phone numbers, email addresses, WhatsApp details, and money transfer account details.
From a user perspective, it might make sense to try and do so. However, many don’t realize the wider ramifications of marketplace leakage and the negative impact it can have on the platforms they transact on – and on their own businesses.
Let’s look more closely at the impact of sharing personal details online via marketplaces and what can be done to prevent it.
How personal details do damage
As we see it, there are 3 key ways in which sharing personal details can have a negative impact.
1. Conversions
From eBay to Airbnb; Amazon to Fiverr – the vast majority of marketplaces facilitate the trade of goods and services. As a result, a core part of each platform is its payment infrastructure.
But not only do these solutions offer a trusted way for users to transact, they can also be used to collect fees – a percentage paid for using the platform.
In the early days of a platform’s existence, many sites may be available to both buyers and sellers for free – whilst the marketplace is trying to scale and get as many users as possible. However, once it’s reached a certain threshold and networks effects are visible, it’s common for them to begin charging, often through the transaction.
This is often when users – primarily those selling on these sites – will try to circumvent the platform and include their contact details in each post. It might be that they paste their email address in the product description itself, or create an image that has details included within it.
When this occurs, your marketplace loses out on conversions. It’s something that’s easy to overlook and – on the odd occasion – let slide. But in the long-term, activities like this will seriously dent your revenue generation.
2. Retention
One of the major differentiating factors between online marketplaces is whether they’re commoditized or non-commoditized – particularly where service-focused platforms are concerned.
While commoditized service providers are more about getting something specific fixed, delivered, or completed (think Uber or TaskRabbit); non-commoditized providers (eg Airbnb) take into account a number of determining factors – such as location, quality, and available amenities.
Due to the nature of these sorts of services, they are more likely to encourage personal interactions – particularly when repeat transactions with the same vendor are involved. Once trust and reliability are established, there’s little incentive for either party to remain loyal to the platform – meaning conversions are more likely to be forfeited.
Leakage of this nature was partly to blame for the demise of Homejoy – an on-demand home services recruitment platform. The nature of the work involved increased the likelihood of recurring transactions. However, it transpired that the features facilitated by the site – in-person contact, location proximity, and reliable workmanship – were of greater value than the incentives offered by using the site itself in many cases.
As a result, more and more transactions began happening outside of the marketplace; meaning that the site lost out on recurring revenues.
3. User safety
Losing control of the conversation and having users operate outside of your marketplace, increases the risk of them being scammed.
This is particularly prevalent in online dating, where even experienced site users can be duped into providing their personal details to another ‘lonely heart’ in order to take the conversation in a ‘different direction’.
eHarmony offers some great advice on what users should be wary of, but the general rule of thumb is to never disclose personal details of any kind until a significant level of trust between users has been established.
While similar rules apply to online marketplace users too, some telltale signs of a scammer are requests for alternative payment methods – such as bank or money transfers, or even checks.
An urgency to trade outside of the marketplace itself is also a sign to be aware of. So it’s important to advise your users to be cautious of traders that share their personal details. Also, make a point of telling them to be wary of vendors who are ‘unable’ to speak directly to them – those who request funds before any arrangements have been made.
In all cases, marketplaces that don’t monitor and prevent this kind of activity put their customers at risk. And if their transaction is taken away from your site, they forfeit the protection and assurances your online marketplace provides.
But unless your users understand the value and security of your platform, they’ll continue to pursue conversations off your site and expose themselves to potential scammers.
Preventing marketplace leakage
The best way to overcome these issues and prevent marketplace leakage is to do all you can as a marketplace owner to keep buyer-seller conversations on your site and reinforce why it’s in their (and to some extent your) interest not to share personal details and remain on your platform.
There are several ways to do this.
Stronger communication
The stronger the communication channels are within your platform, the less incentive there is for customers to navigate away from your site.
From eBay and Airbnb’s messaging functionality (which look and feel like email servers) to one-to-one chat platforms (similar to Facebook Messenger or WhatsApp), or even on-site reviews and ratings; the more user-friendly and transparent you make conversations between different parties, the greater the likelihood they’ll remain on your site. A point we also highlighted and covered in our webinar about trust building through UX design.
In addition, it’s always worth reinforcing exactly what your marketplace offers users – and reminding them of their place within it. For example, telling them they’re helping build a trust-based peer-to-peer network is a powerful message – one that speaks to each user’s role as part of a like-minded online community.
Provide added value services
If users feel as though there’s no real value to using your site – other than to generate leads or make an occasional purchase – there’s very little chance that you’ll establish any meaningful connection.
The best way to foster user loyalty is to make the experience of using your marketplace a better experience to the alternative. In short, you need to give them a reason to remain on your site.
In addition to safety and security measurements – consider incentives, benefits, and loyalty programs for both vendors and buyers.
Turo, the peer-to-peer car rental site is an example of a company that does this very well – by offering insurance to lenders and travelers: both a perk and a security feature.
In a similar way, eBay’s money-back guarantee and Shieldpay’s ‘escrow’ payment service – which ensures all credible parties get paid; regardless of whether they’re buying or selling – demonstrate marketplaces acting in both customers and their own interests.
Another way in which marketplaces offer better value is through the inclusion of back-end tools, which can help vendors optimize their sales. Consider OpenTable’s booking solution for example. The restaurant reservation platform doesn’t just record bookings and show instant availability; it also helps its customer fill empty seats during quieter services.
Platforms that can see past their initial purpose and focus on their customers’ needs are those that thrive. They offer a holistic, integrated solution that addresses a wider range of pain points. Which is a great way of ensuring they’ll remain loyal to your business; ultimately reducing leakage.
Filter and remove personal details
A relatively straightforward way to prevent marketplace leakages is to monitor and remove any personal details that are posted on your site.
However, this can turn out to become quite the task, especially when the amount of user-generated content increases.
The next logical step here would be to direct efforts towards improving your content moderation. Either improve your manual moderation and expand your team or look at setting up an automated moderation solution.
An automated filter is a great solution to help prevent personal details to be shared, and although the filter creation process can be complex, it’s definitely possible to create highly accurate filters to automatically detect and remove personal details in moderation tools like Implio.
Machine learning AI is another great automated moderation solution that will help with preventing personal details, and much more. Built on your platform-specific data, a tailored AI moderation setup is developed to meet your marketplace’s unique needs. This solution is a great option for online marketplaces that look for a complete customized solution.
Added value and moderation – a mutual benefit
Trust, security, and accountability are the most valuable features that any marketplace or classified sites can offer its users. However, they’re not always the most visible components.
But when they’re parts of a broader benefit – such as optimized user experience or a suite of useful features – the need to share personal details and transact way from a site is mitigated.
That said, shared personal details will always contribute to marketplace leakage. And without the right monitoring and moderation processes in place, it’s impossible for marketplace owners to overcome the challenge of marketplace leakage.
At Besedo, we work with online marketplace and classified sites to help them make the right choices when it comes to safeguarding their businesses and users by removing personal details.
To learn more about how you can prevent personal details form your marketplace, specifically through automated filters, check out our on-demand Filter Creation Masterclass.
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