A merchant said, Speak to us of Buying and Selling. And he replied saying, To you the earth yields her fruit, and you shall not want, if you but know how to fill your hands. It is in exchanging the gifts of the earth that you shall find abundance and be satisfied. Yet unless the exchange be in love and kindly justice, it will but lead some to greed and others to hunger. When in the market place, you toilers of the sea and fields and vineyards meet the weavers and the potters and the gatherers of spices,— Invoke then the master spirit of the earth, to come into your midst and sanctify the scales and the reckoning that weighs value against value. And suffer not the barren-handed to take part in your transactions, who would sell their words for your labour. To such men you should say, “Come with us to the field, or go with our brothers to the sea and cast your net; For the land and the sea shall be bountiful to you even as to us.” And if there come the singers and the dancers and the flute players,—buy of their gifts also. For they too are gatherers of fruit and frankincense, and that which they bring, though fashioned of dreams, is raiment and food for your soul. And before you leave the marketplace, see that no one has gone his way with empty hands. For the master spirit of the earth shall not sleep peacefully upon the wind till the needs of the least of you are satisfied. — Kahlil Gibran, 1883-1931
How is the market created?
You probably know what a market is, or the definition of one, but have you for once thought about how a market is created? A simple google search brought some interesting articles about how the market is created and two of the most interesting perspective is from Anastasia and Yale Insight;
Anastasia Belyn said; Whenever a new business launches a product or a service, it can either enter an existing market or create a new one. The conventional and perhaps easier option is to develop products for an existing market, but there are plenty of lucrative benefits to creating a brand-new market instead1.
And Yale Insight opined; Creating a new market is different from developing a new product or service — it requires convincing an array of customers, partners, and other constituencies to see the world differently. And the effects can be far-reaching, as markets are capable of taking on a life of their own2.
What makes these articles interesting is that Anastasia sees the market through the lens of products, while Yale insights look at the market from the perspective of relationships.
But the question still remains, how is the market created?
In the year 2012, while being the governor of Osun State, Rauf Aregbesola created a new market3 at the epicenter of Osogbo, he was able to convince lots of sellers (market women) to pay in advance to own shops in the new market he is planning to build4.
He also talked bankers and investment titans to buy his idea, and he was quite successful at selling them the vision of a new ultramodern market, with modern-day facilities and warehouses and banks at the reach of the market.
The keyword here is ‘selling‘, a dream of a modern way of relating and transacting with people.
At every corner of the South West of Nigeria, there are ladders to market and all of these take on the shapes below;
- The everyday market – market that operates on a daily basis, it is limited in products and produce since it only comprises locals.
- 5 days market – market that operates in circles of 5 days, merchants come from different parts of the state.
- 8 days market – market that operates in circles of 8 days, merchants come from different states.
- Kings market – market that operates close to the King’s palace, listed to locals (the idea behind this market is that the proximity of the market to the Kings’ place allow his family to be able to buy whatever the palace needs – here, I will opine that the king wants convenience for his queens or maybe he did that just to make sure he keep his eye on his wife/wives).
Unlike law, the market is an informal agreement between people to come together and transact at particular days of every week. Also, what determines the flow of a market is its proximity (or call it location) and timing to another market.
What this mean is, assuming a market in Osogbo shares the same market-day with a market in Ibadan, the big merchants would prefer to go to Ibadan instead of coming to Osogbo.
Sometimes, events also affect the flow of markets.
To answer the questions of how to create a market, one would agree that creating a market is an act of the king, an unwritten agreement that brings lots of actors together to buy and sell from one another, at a particular space in a particular time.
What makes market work is as timeless as the world itself. As humans, we transact with people like us, and as such, what makes a market work is its language.
Connection, confidence and community.
According to David Rock in his SCARF: a brain-based model for collaborating with and influencing others. He identified five key domains that influences our behavior in social situations, they are;5
- Status – our relative importance to others.
- Certainty – our ability to predict the future.
- Autonomy – our sense of control over events.
- Relatedness – how safe we feel with others.
- Fairness – how fair we perceive the exchanges between people to be.
Every marketplace has status, there are the retailers and the wholesalers and as one could observe, each market store is designed to signal its status through its size and product pricing.
Come rain, come sunshine, people have the sense of certainty that the market will open on a particular day of the week to the point where many market players automatically memorize the next market day.
You would agree with me that each player in the market has autonomy that allows for who they choose to buy or at what bargain.
And on relatedness, being able to negotiate, speak the same language, and knowing that the seller is in the market for a long time, automatically helps us to relate with the market and there is an automatic sense of fairness.
To all humans of society, young or aged, the market is a place of trust, a place of connection and a place where communities exist naturally based on products, and associations which are not far fetched from the architecture of the market which groups sellers of the same products at the same location.
What makes the market work really?
According to Li Jin,6 “Fake it til you make it is a key strategy for overcoming the chicken-and-egg problem of starting a new marketplace, popularized by companies like Uber and Yelp. The idea is to bootstrap one side of the marketplace inorganically in order to attract the other side.” And she went ahead to give examples, some of which are below;
- Uber launched by going to black car companies and paying drivers to be available on Uber during certain hours, ensuring that riders would be able to find a ride.
- Relationship Hero, a relationship coaching marketplace, scaled to dozens of customers with just one coach–it’s cofounder! But the website listed 10 fake coaches, to give users the sense that it was a more active platform with diverse coaches who fit their particular situation. (Today, all the coaches listed on Relationship Hero are real)
- Beepi, which was a used car marketplace, had a massive chicken and egg problem in attracting sellers and buyers initially. To solve this, the founders went out and purchased used cars to seed the supply side. After a few months, they moved to the marketplace model.7
Unlike Uber, Relationship Hero, Beepi and others, Aregbesola was able to convince the supply side of the market which consists of Bankers, Investors and Sellers to invest in the market he is making, that way, it gives the market the deserved credibility and exposure which automatically solves the chicken and egg problem8.
What has amazon got to do with this?
One of the activities I hate the most is following my mom or my girlfriend to the market, and one of the main reasons is because I end up spending more time than I had expected.
Going from one shop to another, my mom would talk, sample products, ask questions, bargain and this will determine if she would be buying the products or not.
The process of shopping goes below;
- Product discovery
- Pricing comparison
- Purchasing and
- Transporting back home
According to Morgan Housel,9 Amazon figured out to make a bet on something that didn’t change right from the beginning. The line, “One million titles, consistently low prices” seems like marketing guff. But it helps explain why Amazon has dominated where others have failed.
And he further explained that Amazon focuses on product selection and price but it should also be noted that Amazon is more of a logistics company than an e-commerce business.
This led to Jeff Bezos being touted as saying; No one would want a costly priced product and no one would say they want to receive their goods late.
Amazon comfortably solves the problem of;
- Product discovery by providing more selections of products
- Pricing comparison by the transparency of product price and shipping cost
- Negotiation by removing the need to negotiate
- Purchasing by providing a seamless way to pay and
- Transporting back home by making sure ones order gets to their footstep
My mom would definitely love Amazon!
According to Li Jin, search cost (search fiction) is the time, effort, and money consumers spend to search for the best product or service. In a marketplace, higher search costs create decision fatigue for consumers, as well as lower liquidity.10
Here, it can be observed that search costs are probably one of the cores of the marketplace problem considering one would need to at least find a product first, before they can commit to making purchasing decisions – so many businesses out there are suffering from discoverability.11
What about e-commerce and user experience?
As a student in the USA, the first time I went to the grocery store, I almost ended up not buying anything. The question would remain why, and the simple answer would be that, that was the first time in my life I would be seeing so many choices that I ended up having decision fatigue.12
According to Barry Schwartz in his famous Ted talk,13 choice is a paradox, and yes, till date, I still make sure I write everything I want to buy on my notepad and just go straight to buying, this allows for a quick decision and less time.
My grocer experience looks like;
- Pick a cart
- Move through product categories to find the right product (product discovery)
- Select my desired products (of course pricing was a core decision factor)
- Put it into the cart
- Push the cart to the cashier for checkout
- Pay for my goods, collect receipts and
- Exit the grocery store
Online shopping experience looks like;
- Look for products through the use of categories or search button (product discovery)
- Select my desired products
- Add it to cart
- Click checkout
- Pay for my goods and
- Expect delivery
The most astounding discovery here is that my online e-commerce experience follows my grocery mental model, and the language and metaphor used is the same.
Even if I have to use an online shopping platform the first time, it would be easier for me considering that it is already a part of my mental model.
And the most disappointing discovery is that e-commerce (or online shopping) in Africa also follows the same mental model despite the discrepancies in mental models, metaphors, and language of interaction.
My mental model for going to the marketplace in Nigeria is;
- Take a bag
- Product discovery by walking from one storefront to another
- Pricing comparison by walking helter-skelter from different merchant/shop
- Negotiation with the seller/merchant
- Purchasing and
- Transporting back home by putting the grocer into my bag.
A little observation about the implementation of e-commerce and adaptation has shown rather a failure of ideology, and language or metaphor than technology.
What about market segmentation?
My first introduction to niche-based market segmentation comes from binge reading Blue Ocean strategy and listening to one of Seth Godin’s talk (I’m not sure which one). I did not understand it better, despite the fact that it has always been a part of African/Nigerian culture – Africa is a big continent, coupling all the continent together will be an uninformed argument.
A considerable amount of people from the South West of Nigeria understands that the best place to find good clothing materials is Gbagi market in Ibadan, and it is a well-known knowledge that the best place for publishing work and market is Mokola market as well as Yaba market in Lagos.
Turns out that this is the core of niche market! Having a market dedicated to a particular product category.
Putting one’s lens to work, one would see more niche markets in every corner of Nigeria which is mostly dedicated to a particular product and also, many big general markets have submarkets that cater for specific product category – please don’t say Computer Village14
to be continue…..
Thanks to Happiness Zirra for helping to edit and review at draft mode.
- see appreciation here
- don’t take this serious, the government later found itself in trouble
- is this not the problem advertisement is meant to solve?