Wednesday, October 2, 2013

Forming a Sustainable Marketplace

Companies like Ariba that set up all the technology required to connect businesses to businesses struggle in their inception stage to gain customer traction. The article ‘For an Online Marketplace, Better Late Than Never’ left me thinking about how Ariba managed to attract large businesses like Proctor & Gamble and Ford Motors to become their major customers despite its initial failure. Although its shares fell down to $2.2, Ariba was persistent enough in its business and came out successful, proving that there is always some light at the end of a tunnel.

Why this article interested me is because of the entrepreneurial initiative I have taken up in CMU. Just like how Facebook started in Harvard University and scaled upward, I plan to launch an e-commerce application in Carnegie Mellon University(CMU) to connect students with local sellers around CMU.  The major stakeholders of this app are local sellers, buyers, payments gateways and deliverers. The idea is to connect the local sellers to the right buyers and the buyers to the right sellers. The technology is in place but all that is lacking is enough local seller and student buyers. A seller would be willing to come onboard only if he sees enough buyers use the app. A buyer would use the app only if there are enough and popular sellers onboard. Solving this chicken and egg conundrum is the most challenging task in this initiative. Nevertheless, I, with a team of three started pitching the app to the sellers and they did seem interested. What interested them more is how we are different from our competitors like GrubHub. Just like Ariba, we plan to provide our suppliers with supplier analytics, that is, information on how well their business is running, compared to their competitors and provide details on which product of theirs is fast selling and which product needs improvement.

Another challenge tied to the initiative is to design an effective delivery model, which closes the supply chain. How can we accommodate shops that are way too popular among the student community but do not have a delivery system in place? The idea is to employ CMU students to do the deliveries as a part-time job. This will provide employment to the students and accommodate the above-mentioned shops too. There are multiple risks behind appointing just one person to take care of delivery the whole day. CMU is a huge campus with innumerable buildings. Moving from one building to another is time taking. Appointing more than one could lead to coordination issues.  Reaching out to students at different buildings on campus is also a problem. Having multiple pickup locations at major hubs on the campus is a solution to this problem.  In his model, students order through the app and pickup their orders at the pickup locations selected while making the purchase. This still requires multiple resources to pickup orders from the suppliers. Thus, there are a lot more factors that need to be considered to formulate an effective delivery model.  How does a company Ariba, start small but sustains its business with numerous supply chain issues? How can a business like this ensure customer retention?

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