Vertical Marketplaces and the Durability of Craigslist

Lately I’ve seen a resurgence of the conversation around disrupting Craigslist and other marketplaces. One of the better new ones to this meme is Fabrice Grinda’s post. Earlier contributions to the overall idea of unbundling or disrupting Craigslist from Josh Hannah’s on Quora and Andrew Parker on his own blog are also very much worth reading. In the four years since I’ve been following this thread, I’d say that Craigslist is still fairly resilient, albeit with stepped-up competition in some of its core offerings around housing, gigs, and electronics.

I meet with a lot of vertical marketplace companies in my role at SoftTech and have even invested in a few. One of the more common memes in the Craigslist disruptor pitch is that Craigslist’s UI is dated and ugly. After hearing that comment for what felt like the nth time, I felt the need to tweet the following:

Say what you will about the Craigslist UI and design. It still rocks when you want to sell stuff in SF. #liquidityrules

— Charles Hudson (@chudson) April 4, 2014

I think it’s easy to bash Craigslist for what it isn’t. It isn’t particularly beautiful in terms of modern design concepts. It isn’t “social” in the sense of deep integrations with social services for distribution or identity. It doesn’t have integrated payments or strong trust and safety. In thinking about what Craigslist doesn’t do well, it’s also worth revisiting that it does well.

What Craigslist Still Does Well

I have bought and sold a lot of things on Craigslist here in San Francisco. Two things about Craigslist still make it my go-to site for most things I’m looking to buy or sell:

• Craiglist is a very liquid market for buying and selling things in most major metro areas – Transactional liquidity is the real measure for whether a marketplace works. If buyers find sellers and sellers find buyers quickly, the marketplace is healthy. By almost any measure, Craigslist is the most liquid place to sell things.
• Local fulfillment and immediate payment on delivery – Unlike other places like eBay, selling things on Craigslist usually involves the buyer meeting your somewhere and taking possession of the item while also paying right away. No holds or escrows on the money, no trips to the post office or FedEx. Settlement happens quickly.

What I Dislike About Craigslist Transactions – What’s “Broken”

• Cash transactions can be sketchy – Because most Craigslist buyers and sellers are unknown to each other, cash is the obvious medium of choice for settling transactions. Depending on the sum of money involved, settling in cash might not be safe or desirable.
• Management and marketing of leads and communication with prospective buyers – If you’ve posted a popular item on Craigslist, there is some overhead associated with responding to people who write back with questions, want to get a lower price, plan to come by and don’t show up and the like.
• Onsite haggling – In almost all cases I’ve experienced, every Craigslist transaction involves some bit of face-to-face haggling at the last minute. The buyer usually wants some discount or comes up with some other clever reason why the price that was quoted was too high.
• Post-sales arbitration – If something you bought has an issue after you’ve bought it, there are no returns, there is no dispute resolution. There is no real trust and safety promise – once you bought it, you bought it.
• Sellers have little help in price discovery- Trying to figure out the right price for an item your are selling can be a challenge. There are some categories, namely electronics, where there are secondary markets that can help with pricing on popular items. But for lots of other categories, it can be hard to determine the market clearing price for an item on Craigslist.

What Vertical Marketplaces Can Offer Consumers

I recently had one of those “ah ha” moments about what vertical marketplaces can do to actually provide a good end-user experience. I recently started selling things on FOBO, which is a mobile-first marketplace for selling electronics here in San Francisco. I’ve sold a few items and it has been a good experience. A few things about the experience stood out to me as good ways that vertical marketplaces can compete with Craigslist. I thought I’d list out a few of the things that I’ve seen in some of the more successful vertical marketplaces and what it means for finding a wedge to be a better experience than Craigslist.

• Artificial or real liquidity – The starting point for competing with any established marketplace is the ability to provide comparable liquidity for buyers and sellers. That liquidity can either be real (as in there is a large pool of buyers and sellers) or somewhat artificial, with some guarantee that transactions will clear by having the marketplace take inventory or some other mechanism.
• Price discovery – In both product and service marketplaces, figuring out what to charge can be a challenge. Vertical marketplaces can help sellers and buyers by either setting prices, providing 3rd party data on prices (particularly useful in electronics), or providing community-wide pricing information on recent transactions (which usually takes the form of suggested pricing).
• Settlement and Escrow – For smaller transactions, I don’t mind settling in cash. There comes a point, though, at which the idea of walking around with a large amount of cash to buy an item from a stranger isn’t the safest thing to do. So long as there is a trusted 3rd party that verifies that the buyer has funds, whether cash or credit, the need to settle in cash on the spot goes away.
• Trust and Safety – Last but not least, it’s nice to have a service that has some platform-level trust and safety programs. That can include every thing from dispute resolution to reputation systems to refunds.

In the last four years, Craigslist certainly hasn’t gone away, but I am seeing more vertical marketplaces make inroads. If you have thoughts on this, feel free to leave a comment below or send me your thoughts on Twitter @chudson.