{"id":11545,"date":"2020-03-24T13:37:01","date_gmt":"2020-03-24T17:37:01","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/trademes-kiwi-dominance\/"},"modified":"2020-03-24T13:37:01","modified_gmt":"2020-03-24T17:37:01","slug":"trademes-kiwi-dominance","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/trademes-kiwi-dominance\/","title":{"rendered":"TradeMe’s Kiwi Dominance"},"content":{"rendered":"

Started in 1999, TradeMe is the largest online marketplace in New Zealand by a considerable distance.\u00a0 85% of the New Zealanders have a TradeMe Account[1]<\/a>, and the site was the 4th<\/sup> most popular website in New Zealand in 2018, behind global giants Google, Facebook, and YouTube[2]<\/a>.\u00a0 \u00a0In my opinion, there are 4 key reasons for TradeMe\u2019s total dominance:<\/p>\n

1 – First Mover<\/strong> – TradeMe was able to scale quickly as a result on being the first local online Marketplace in New Zealand. When it entered the market in 1999, it was the first time New Zealanders had another option to buy items (especially secondhand ones) aside from newspapers, auctions, and their personal networks[3]<\/a>.<\/p>\n

2- Strong Network Effects <\/strong>– Given its clear value proposition and the simplicity of transactions, the site\u2019s popularity grew quickly, and the network effects snowballed. The more buyers it had on its platform, the more sellers signed up, which attracted more buyers and so on and so forth. This has made it extremely difficult for anyone to compete effectively with TradeMe over the years (see a comparison of TradeMe and selected competitors below[4]<\/a>).<\/p>\n

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3-<\/strong> Variety of Services<\/strong> – TradeMe provides a variety of different marketplace-based services (see a picture of the TradeMe homepage\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 below[5]<\/a>). Although its major categories include Property (purchases and rentals), Jobs, Motor, and Marketplace (which includes several general\u00a0 \u00a0 \u00a0 items), TradeMe also offers links to dating sites, and insurance applications.<\/p>\n

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4- Different Sale Options<\/strong> – Transactions on TradeMe vary from sales between companies to individuals and individuals to individuals. It also offers auctions and fixed price sales. \u00a0Given this and the fact that the marketplace offers several categories, TradeMe often feels like a mix of eBay, Amazon, Zillow, and PriceLine.<\/p>\n

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How TradeMe Captures Value<\/strong><\/p>\n

\u00a0<\/strong>Buyers do not face any direct charges from TradeMe which is another attractive feature of the platform which further increases its popularity. TradeMe captures the value it provides by charging sellers 3 different types of fees[6]<\/a>:<\/p>\n

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  1. Success Fees <\/strong>\u2013 These are approximately 8% and have a ceiling of $NZD 250<\/li>\n
  2. Withdrawal Fees<\/strong> \u2013 Sellers are charged $NZD3 every time a listing is withdrawn before it closes<\/li>\n
  3. High volume listing fees<\/strong> \u2013 Sellers are charged additional fees if they are selling an item that is already exists in bulk on the platform.<\/li>\n<\/ol>\n

    TradeMe also leverages its strong position by paying sellers in 30-day cycles[7]<\/a>.\u00a0 This gives the company a great financial advantage since it receives its payments as soon as transactions are processed.<\/p>\n

    Is TradeMe\u2019s Edge Scalable and Sustainable?<\/strong><\/p>\n

    Given TradeMe\u2019s total dominance, it is difficult to see how the company can scale further in New Zealand. International expansion in the Oceania region would also either be extremely difficult given the amount of competition in larger economies (e.g. Australia) or not worthwhile given most countries in the region have much smaller population sizes than New Zealand. Thus, a more important question is whether TradeMe\u2019s dominance is sustainable.\u00a0 The answer is yes<\/strong>.<\/p>\n

    TradeMe\u2019s biggest competitors include Amazon, eBay, and Facebook Marketplace. While these companies are global behemoths, TradeMe seems to have the following advantages over one or all of them:<\/p>\n