Marketplaces have to do more than just connect one side of a platform to another. They have to solve a problem, eliminate a friction — in other words, add real value to both sides — in order to ignite.
Governance plays a key role in establishing the trust that serves as the cornerstone of that value equation. It’s also something that matchmakers often overlook or even take for granted.
With more than 10 years as a hyperlocal matchmaker of consumers and businesses, Delivery.com has evolved from just another platform that connects consumers with merchants to one that has seemingly cracked the code on establishing the trust that can be parlayed into value for both sides. Merchants are able to reach a whole new set of customers they would have otherwise not had access to, while customers can be confident that the merchants they are being connected with are held to a particular standard of service.
In this week’s episode of The Matchmaker Is In series, hosts Karen Webster and David Evans, economist and author of “Matchmakers: The New Economics of Multisided Platforms, were joined by Delivery.com CEO Jed Kleckner to explore the critical role value and trust play in igniting a marketplace platform.
How Delivery.com Delivers
Delivery.com takes a hyperlocal approach to bringing together local businesses and the consumers that want to shop with them. While the platform doesn’t actually do the delivering, it does help merchants deliver a bevy of products and services. It does that by making it possible for them to connect with consumers via the online and mobile channels that are out of the reach of these small, and very localized, merchants.
With 2 million customers that buy from a growing number of 12,000 merchants on the platform every day, making purchases across different verticals, Kleckner said restaurants remain a top category of the local commerce Delivery.com facilitates.
“We offer a really hyperlocal experience, which means, depending on where the consumer is, they will experience our platform very differently,” he explained, “because what they see is based on what’s available to them for delivery at their address.”
Kleckner went on to say that consumers can access merchants either directly from its app, website or a “growing number” of integrated third parties, such as Yelp, Uber, Facebook and Slack.
Basically, he said, matching their demand with Delivery.com’s supply.
From there, Kleckner, Evans and Webster had a free-wheeling conversation about how Delivery.com got off the ground and what’s next for this matchmaker.
KW: Why did you decide to approach the hyperlocal market in this way? What gave you the idea?
JK: Back when I started my career, there wasn’t a propensity to put credit card information online to the extent that it is today. The cost of developing technology for a local merchant at scale was really an insurmountable task, and there wasn’t the proliferation of mobile, as well as a means for commerce in a local environment, like there is today.
It was really just a matter of time for those things to be figured out. When I moved to New York, the city was already a delivery market and even has the saying of “everything in a New York minute,” so it was just a matter of time for the internet and commerce to connect the dots in the market. As consumers have become more comfortable to pass credit card information online in a secure way, there’s a growing number of people that use mobile devices not just for communicating but now for transacting, so the timing was right for something like this to operate and grow.
DE: You have all of these merchants, and you have all of these consumers. What’s the role of Delivery.com in getting things between the merchants and consumers?
JK: We are not in the business, despite our name, of actually fulfilling anything physically. What we do is write and provide software for a consumer to download our app or access our website to type in an address and then avail themselves to a merchant that can have things delivered to them. When they place that order, our job, as the merchant of record, is that we swipe their credit card, pass their requested order over to the merchant online and the merchant confirms the order online, on premises.
We let the consumer know that order is being prepared with an estimated delivery time, then it is upon the merchant to actually handle the physical delivery to the consumer. In the last 18 months, we’ve also started to operate with partners on a logistic side. An example is Uber, which has a product called UberRUSH, where they leverage a network of people on bikes or with cars that will handle deliveries of goods in urban corridors.
Nowhere in that description are we actually handling the physical fulfillment, which is certainly different than some of the other platforms that are matchmakers that have evolved more recently, that are both matchmaker and a labor network of people that are doing deliveries.
KW: What did you do to get enough merchants on board?
JK: In the past, we would walk into merchants and have that conversation. So, it was feet on the street. At first, you would see apprehension from a merchant, but we would explain that there were an increasing number of people that were searching for a business like theirs but really had no interest in accessing the business in a physical way. We asked them then: Would they like to extend their reach or brand presence online without actually having to make that a whole new division of their business?
That’s what we said we would do — essentially an enabler of commerce for the merchant. There’s no cost in signing up, and we only make money when we send orders. So, we are effectively a lead-generation platform that sourced leads these merchants would otherwise would never get in front of.
As merchants started to sign up, since it was a very hyperlocal thing, where a merchant on a particular street would see other merchants on that street receiving orders this way, then we started to get the reverse. Merchants would start calling us asking about how to get onto the platform. But a lot of what I’m describing has now moved to a more mechanized provisioning, and that’s better for us.
KW: Let’s flip to the consumer side. What did you do to get enough consumers interested in signing on either through the app or establishing an account online to give those businesses business?
JK: We did that a couple different ways. Some of it was through the expected traditional route, where we did outdoor advertising. One of the areas where you get some of the most concentrated volume of foot traffic is actually on the subways in NY, so that has now become a place where a lot of these platforms will try to capture demand. We also did online advertising by paying a platform like Google for paid search and using search engine marketing as a way to drive consumers to our website.
Once people were on our platform, we enabled them to then tell their friends in return for money off their orders, as well as establishing a loyalty program. The points earned can then be converted into value on the platform, goods or dollars that can be directed to charities within a charity network that’s built on the site.
It’s been a combination of acquiring through traditional marketing channels and then using our own platform as a way to leverage the enjoyment of our most loyal of customers and to have that amplified with other potential new customers. More recently, we’ve now used these third parties like Yelp as a way to also get customers onto the platform by exposing our merchant content directly into a third party’s website and allowing customers to order from there using our content. In that case, the traffic coming to us we don’t pay for, but in exchange for getting that traffic from Yelp, we may give them a revenue share on an order that’s placed on our platform.
DE: Have you developed any rules of thumb for how many consumers and merchants you need on the platform to really get momentum? Or get to the point where you’re igniting in a particular market?
JK: We plot points on a map. We take data that we have in our database and layer it on top of a map as a way to visualize our data in a geographical context. Then, we put points on that map to determine how many merchants are accessible at a particular point, and we have minimum thresholds. If those are met, that means that we can start marketing to consumers in that zip code. But if those thresholds are not met, then it’s our job to go in and activate another merchant in that area because, until we reactivate other merchants, we will stop doing marketing in that area. We know that there are minimum thresholds of content that are required for us to have the highest level of conversion. We are just optimizing for the consumers coming our site.
The other thing that we can do is ask consumers the names of merchants that they like if they don’t see them on the platform to sign them up on behalf of the consumer. When you are a merchant and you receive a phone call from a platform that has data to show, there is latent demand. It’s a pretty easy conversation to be had.
KW: How do you preserve the integrity of the service when you’re really not enabling the service, you’re just making the match? Suppose you have a dud of a merchant that is always late or cancels out orders. What do you do?
JK: This is the beauty of a marketplace. We can collect a fair amount of data that can give us signals as to how a merchant is performing on the platform. We enable our merchants to set an estimated delivery time when they provision on the platform. We also enable our consumers, after purchasing on our site, to review and rate that order. We are collecting that data as a way by which to police our merchant network, and those that are not keeping up with certain expected thresholds are given a polite warning, then told they may be temporarily deactivated, and finally, they are permanently taken off the platform. We are increasingly vigilant about this because, at the end of the day, we are enabling merchants to operate on the platform for free, but we are not required to provide the service if they are not operating in a way that we believe is necessary to be able to offer our consumers the right experience. We also now pulled into our experience Yelp ratings and reviews, which allows you to have a multi-layer of information that’s not only what people are saying about the orders they have placed but it gives a little bit more holistic view on the merchants themselves.
At the end of the day, when it comes to on-demand commerce, the thing that people are most concerned about is accuracy as opposed to speed. That’s often what people say they love most about Amazon. They say it’s going to be delivered in six days, and it shows up in three days. They clearly underpromise and overdeliver, and that is something that causes people to come back and stay.
KW: Speaking of Amazon, they certainly have their eye on these local markets as well and are doing a number of things to leverage their basic capabilities, Prime membership and logistics. Is that a worry for you?
JK: No, I think it’s a worry for the merchants, and that’s where we step in. We are acting on behalf of the merchant so that they can compete with a company like Amazon. Without question, Amazon is a competitive threat for us, but if anything, they’ve raised awareness about the fact that consumers can do this. It’s always the case of the push and pull of if it’s better to have no competition or is it better to have a lot of competition. I think, for us, it’s better to have the right competition.
If we are being mentioned alongside companies like Amazon, that’s actually a good thing and causes us to just be really smart about how we spend our money and what we do because they are obviously a force to be reckoned with. Our job is to focus on what we do, which is enable merchants to compete with Amazon. Amazon is building a platform that is best for Amazon; we are building a platform that is best for the merchant. I think we offer something similar but certainly with a different end game.
KW: We always like to ask matchmakers about a matchmaker platform they admire or that perhaps even gave inspiration for developing their own. Do any come to mind for you?
JK: I would say that what inspired me as a consumer was, for lack of maybe a sexier website, Craigslist. There was always something that intrigued me about it. When I moved to New York, Craigslist was not really something people used, which has changed now, but there are many other platforms that probably do in a more Web 2.0 and consumer-friendly way what Craigslist does.
DE: It was an early example of a hyperlocal platform.
JK: That’s right, and it was exceptionally efficient. It just works. It was quirky, it was in many ways not the best user experience, but it got the job done. It really inspired me from the standpoint of that it goes to show that, when you give consumers the ability to self-govern, it can actually be done in a pretty efficient way. A lot of tools and technologies have come out since, and perhaps they are better looking and solve the problem better in certain ways, but Craigslist is still a formidable operator in the space.