Latest / Talk Commerce / Marketplace Mastery: Crafting Online Magic with Niklas Halusa
Transcript
- Brent Peterson (00:05.138) Welcome to this episode of Talk Commerce today of Nicholas Halusa. Nicholas is the CEO of Nautical Commerce. Nicholas go ahead and introduce yourself, tell us your day to day role and one of your passions in life. Niklas Halusa (00:17.238) First of all, thanks for having me on the show, Brent. Obviously pumped to be here, pumped to talk about marketplaces. I talk about it all day, and it's still not enough. So you got to be doing that here. I'm the CEO and co-founder of Nordical Commerce. But before we go into that, my background is actually a weird mix of finance and Startup, so I spent a bunch of time investing very short period of time investment banking And also spent a bunch of time at early stage companies. So I sort of flip-flop between You know, do I want to give startups money? Do I want to be at a startup? and And I finally settled for doing the startup and the reason I did is because I spent a huge amount of time as an investor trying and failing to invest in marketplaces and realizing that the reason I can't invest in marketplaces is because all of the marketplaces that we looked at had to be software companies. And so I'm on the mission or the problem I'm really trying to solve here is to make it possible to be an incredible entrepreneur, an incredible builder of businesses, an incredible Niklas Halusa (01:37.792) knows how to build software, raise money, deal with all the problems of having being a software company. And I want to take that, the burden of owning code and the burden of having to deal with code, which Brent will be an expert in as well and knows what I mean when I say the burden of owning code and take that on. on Nautical and in this case, I'll take that on myself and help people build great businesses which I think really makes the biggest difference in people's lives and the economy and everything else. So I'm out on that mission and as a result, the company that I steward, Nautical Commerce, is a platform for marketplaces. Brent Peterson (02:24.935) That's awesome. And what about off work passions? Do you have do you have anything that you're passionate about? Niklas Halusa (02:31.062) You would think that it's sailboats or something similar. Although I'd love to be able to sail, I can't. I'm a huge petrolhead, so I race cars. Honestly, I'll race anything. I race skeleton too, and I used to ski race. If you make me race tractors, I'll do that too. But the one that I spend most time on is racing cars. Brent Peterson (02:56.283) That's awesome. One of the largest sailing schools is here in Minnesota in at Lake Minnetonka. So nautical is of course, there's a lot of water. You're in Toronto, so we're connected. We could come to each other by boat if we wanted to. So we're connected now in multiple ways. Nicholas, before we get started, you had volunteered to get told a joke and all I'm gonna do is tell you this joke. And all you have to do is should it remain free or do you think at some point we should charge for it? Or should that joke just sail away into the future or the past or the dustbin? So here we go. It's called the Free Joke Project. I don't know if I mentioned that. This is a good one today. Not to brag, but I just got fired as a fitness model. They use me as the before picture. Niklas Halusa (03:51.714) So I feel like the delivery could maybe do some, there could be some work on the delivery there. But what I will say to that is, I think it's actually quite a good joke, but I don't think jokes should ever be paid for. I think jokes should be paid for. Brent Peterson (04:15.363) Good. Thanks. And half the time it is my delivery that ruins it, so I apologize again for that. Niklas Halusa (04:22.648) Nah, yeah, that's easily solved. I'm sure we can find somebody who can help you work on that, but I would say free. Brent Peterson (04:32.559) Alright, good. Alright, so let's talk about marketplaces. What is a marketplace like? Tell us, you had mentioned, we talked about it earlier, but tell us, give us your definition of marketplace and why people should be starting to look at these. Niklas Halusa (04:47.766) Yeah, it's a good question. So I try to keep it as simple as possible and differentiate it particularly from things that are not marketplaces, not pure plain marketplaces. So marketplace is, or building a marketplace is the exercise of building a store, a platform. a piece of real estate. You can think back in the day of literal markets, right? Where you built a forum in the middle of a Roman city and that was your piece of real estate. That nothing, the forum sold nothing, but what the forum did was make a space in which a bunch of other businesses can congregate and start to sell things. And a place where buyers or people interested in buying things could go and expect to find a bunch of sellers who have congregated and sell things. One way of looking at that in marketplace, a hot way of talking about it nowadays is sort of a platform. You're not selling anything yourself. You're building a platform within which other people can sell stuff. The big difference... I often get is what is the difference between that and let's say a retailer or a distributor or a job shipper or even a brand. And the main way to think of Marketplace and how it differentiates is first of all, in a Marketplace, you are not typically holding inventory. You're not buying inventory and then reselling it. You might get a stretch to something like consignment like Amazon does with the FBA You typically will put the work of pricing as a result onto the individual vendors. So you take a very, you have a very fixed relationship typically in terms of the way that pricing works. You'll take something like a commission versus, you know, buying and marking up and controlling all of that. And then you typically will also hand off all of the work related to managing products and managing, you know, Niklas Halusa (07:00.322) how they're discounted, is there inventory, how are they described, et cetera, et cetera, pictures to the vendors to work on that. Effectively, you're opening up and you're saying you do the work, you sell whatever you think is important to sell. And the reason people typically do or make marketplaces on a very broad perspective, it's to be able to offer breadth and depth of catalog that they would not otherwise be able to offer, either because they don't know how to, or don't have anything to sell themselves. That's kind of the pure play marketplace model, right? You start a whole new one and you're not setting a brand, you're aggregating brands, aggregating products, or because you already sell things and you want to go get into, you know, a space. or let's call it you already have demand, you already have a business and you're trying to get into selling things that you don't sell already for various reasons, either there's a bunch of stuff that you don't want to have the inventory for, or there's a bunch of stuff that you don't know is if they're gonna sell, so you want to take a bit of a risk, or because you don't really know what would best be sold through your brand, and so you want to open it up. A great example of that right now is something, for example, like TikTok. where they have a bunch of demand, they have users, they have what they call eyeballs back in the dot-com boom, and they want to be able to monetize those eyeballs. But instead of them saying, we define what we're going to sell, they're going to turn themselves into a forum, a platform, and allow anyone to go and sell something to the users that they have and be able to aggregate all that supply. I'm gonna miss it. Brent Peterson (08:55.438) Is there a difference between a company participating in the marketplace and a company becoming the marketplace? Niklas Halusa (09:04.042) Yeah, so, huge difference. Let me figure out how to structure that nicely. So, when you are participating in a marketplace, it's effectively, it's one of your channels. It is not that different of an exercise than executing your own, let's say, if you have a first person store. It is an exercise of executing and both creating products, putting them on a place to buy them, in this case the marketplace, and then executing orders, particularly fulfilling them and making sure that is a profitable exercise. Right? It's an execution work, piece of work. When you are, that's why a lot of actually, to add to that, that's why a lot of marketplace seller experiences, if you go and sell something in Etsy or Amazon or something like this, they look more or less like boiled down, simplified, guard railed commerce platforms. in a lot of ways. They have a lot of the same concepts and entities and if you sell something through a nautical marketplace, it'll look like that too. If you are running a marketplace, I sometimes joke because you don't sell anything, you don't do any execution really. What you're doing when you're running a marketplace is you're sitting in your little control tower, in your oversight tower, and you are... connecting the buyers and the sellers and most of your job is keeping oversight over whether you know the vendors are doing what they're supposed to do, the buyers are buying like you'd like them to and are buying more stuff. Niklas Halusa (10:58.538) and effectively matching the supply and demand there, and then making sure that you are a trustworthy and responsible intermediary for all the money that you're taking on and then distributing out to all your vendors, since it's not obviously going into your final bank account. So your job is, let's call it the referee. If you're sort of taking the forum example again, you are the police and the referee and the... and the organizer of the piece of real estate of the Forum. Brent Peterson (11:35.288) So if I'm a merchant and I want to become a marketer, or I want to launch my own marketplace, I'm assuming there's good fits and bad fits. Is there a specific type of customer that you would look for? What type of businesses should be looking at making in a marketplace? Niklas Halusa (11:56.682) Yeah, it's a very broad question. I think the first thing that is, I think, important to understand if you're asking the question for yourself of whether you want to build a marketplace. And I had a wonderful talk, which is somewhere online also, on NRF with the former CEO of By.com and McFadden. talking about what are the constraints, and it's very business specific, but largely, I think there are two categories of whether you should start considering it. The first is if there is that you have the feeling that you have effectively some sort of pent-up demand that you're not able to service. You have people coming to your store that could buy more stuff that... You're doing a lot of marketing, but you only sell very little stuff towards it. You have people who engage with your platform, your content, but they're not buying anything. It typically will tell the story to you. Okay. People like me, people like what I offer. I have a customer base, but they don't like what I'm offering, right? Where they don't, you know, they're not buying everything that I'm offering to them. And so maybe they want more, they want more effectively catalog breadth or catalog depth. And I think the other set that should look really seriously if you really have an existing business and you're not starting a new marketplace is to start to look five, 10 years ahead of time and start to understand who is going to be putting pressure on your business. You know, in a lot of industries, marketplaces are, as they gain scale, are incredibly efficient businesses. And they, in whatever spaces marketplaces become big, they typically crowd out or put pressure on any of the legacy businesses in that space. And as a result, marketplaces or multi-vendor retailers are actually a majority of online commerce and actually offline commerce as well. Niklas Halusa (14:14.946) So I think the other set of people who are already in business should seriously consider it are the ones who think, okay, you know what, I want to be around for the next five, ten years. I got to find a way to go and be the one stop shop for the kind of customer that I serve because if you're not, quite frankly, somebody else will be a one stop shop. Now the people who shouldn't really, you know, don't necessarily need to go down the space, if you're really a brand focused company, you really only sell, want to sell your own stuff and you're very focused, I wouldn't necessarily put it on your roadmap right now, but if you're already in the place where you're selling more to a type of a buyer or profile of a buyer and you sell other people's stuff, I think this is something you probably should seriously be considering. Brent Peterson (15:00.519) Earlier you had mentioned drop shipping and a lot of people would think I'm going to participate or I'm going to have a bunch of different people and do drop shipping. What's the difference between running a marketplace and running a store where you're drop shipping other vendors? Niklas Halusa (15:18.046) Yeah, I sometimes joke that dropshipping is kind of the gateway drug to marketplaces. Dropshipping allows you to sort of, we by the way handle both to an extent, although we're more focused on the marketplace problem today. But dropshipping has the benefits of obscuring who the vendor was. and you have more control. You sort of look for dropship vendors, you procure them, you do all the merchandising, you figure out effectively how it's described, how it's priced, everything else. However, the flip side of having more control and you doing the procurement is that dropshipping is a more manual thing to scale. where marketplaces can scale more easily with the right technology, because you have to be involved in everything. You typically have a much more hands-off relationship with the vendors, so it also becomes a little bit more difficult getting certain bits of information and things like this. Do you have inventory? You name it. So a little bit more arm's length. And the final thing that you don't get with something like dropshipping is that you... Niklas Halusa (16:51.667) It's effectively like a centrally planned economy versus a capitalist economy. Because you centrally plan everything, you heavily define what can be dropped, what's sold in your store, everything else. And one of the strengths of marketplaces is that you often don't know what people are going to sell. And I'm sure if you asked Jeff Bezos... you know, did you expect to sell some of the things that you sell on Amazon today? His answer would be absolutely not. And it locks a bit of that creativity. Brent Peterson (17:26.707) Do you think there's other Amazons coming along that are just going to become huge? I guess you could define some of these global marketplaces like Alibaba and Amazon and eBay. Are there up and coming ones that are really going to compete against that or are some of these really big marketplaces so big that you're always going to have this second tier? Niklas Halusa (17:54.978) So I don't think somebody will compete with Amazon necessarily, in part because I don't think it makes any sense to compete with Amazon. This is, of course, unless Amazon does something incredibly stupid or counter to the values of the customer, like Google does with Google's homepage nowadays, where they're so busy making money that you can't find anything on Google anymore. Unless they go do something really painful with their business, I don't think it makes sense to replace Amazon, in part because Amazon may be comparable to Walmart. It's a commodity selling business nowadays. And so it's just a race to the bottom and a race to scale. And if they're ready at scale, you're never going to be able to outprice them. You're never going to be able to out selection them, you name it. But what they're bad at, and what Alibaba is bad at and... you know, all these mega stores are bad at where I think is a huge opportunity in marketplaces is one creating an experience that's specific to a particular buyer. Right. The one of the craziest things is that on Alibaba, you can buy mangoes and a ventilator and steel and a car and I don't know what else, phone case, all in the same basket, first of all, and, you know, none of those experiences are, are are specific to the buyer, the filters aren't, the content isn't. I think there's a huge opportunity, for example, for a medical equipment marketplace that is aimed at what people who buy medical equipment care about, first of all. And the second one is what a lot of these really big ones, their main mandate is pure supply, endless aisle, and competition for, let's say, the buy box or something similar. I think the other opportunity is that increasingly these places will become more curated, more bespoke, more localized, because that's where the buying trends are going to an extent. Right? Where not only are you getting to a place where Amazon, Alibaba get a reputation for just sending you junk, and people look for a little bit of trust. Niklas Halusa (20:16.734) And the second part is that commerce has become so big that the niches in which you can really make something special are now becoming big enough. And the greatest example of that is something like a stock ex. Brent Peterson (20:32.555) Yeah, I think you hit it on the head that there's always opportunity for the big players that they're missing out on niche segments. And I guess, would your advice then be for marketplace people, if you have that niche, that this is an opportunity for you to kind of fill that gap and really be that expert in that particular segment that you're in, and a marketplace would make sense? Niklas Halusa (20:57.834) Yeah, I just had a brilliant chat with the founder of a business called Tall Size, which is a marketplace for tall women and their clothes. And what really jumped out at me in that conversation was that the founder, Nicole, really understood her customer, why they're underserved. and can make an experience and a selection for that customer that nobody else can replicate and nobody else has replicated. So my advice to anybody thinking about a business like this is that they should go find an underserved or specialist niche that they think they can understand far better than anybody else. that is big enough and there are lots of these too. have its own specialized experience. There are enough people out there who fit into that niche. And then absolutely dive down and make sure that those people get the best experience in the whole world. And if you look at again, don't, you know, people are so scared of Amazon and say, well, it's gonna eat everything. But even if you look offline, right? Walmart hasn't eaten everything, right? There is one of my favorite retailers in the US that doesn't exist in Europe is Bass Pro Shops. That's a great example of a business that has really understood a certain customer and has an incredibly loyal following in that customer. And they've just drilled down on that set and can differentiate in a world where you think they get squeezed out from every angle. Brent Peterson (22:42.779) Yeah, that's a really good point. So where do you think then, where are we headed now in 2024 with e-commerce and marketplace? What's the future look as a merchant? Niklas Halusa (22:57.162) Yeah, so I think the e-commerce, I'll talk from the software perspective. That's where I think I can be, I can say that I have some expertise. So I think from the software perspective, the e-commerce part, the e-commerce software is looking more and more like a commodity, to be honest. And I'm in Toronto right now, obviously the big 800 pound gorilla in Canada or all commerce is something like a Shopify. And if anyone comes to me today and says, I want to start a store that is not something multi-vendor, a classic store, I will give them the same answer every single time. Just use Shopify. Get it right. Because Shopify has built for most businesses the basics of what you need to be able to run an online store. And that I think is becoming and should become more and more of a commodity. And they've done a brilliant job at that. And anyone who builds software should take them as an example. The marketplace world is. Is way more out in the wild here. And and I think the story that has. finally sort of caught on and started to make sense with people is that the this should not be a build exercise anymore right that there needs to be something here that is bought and quite frankly there are you know a few players us included that are attacking this problem from a different direction obviously I believe in my approach, but I think what we're going to see is consolidation around the point of, okay, this needs to be a buy, not a build. And then through the end of this year and beginning of next year, I think, or maybe give it a couple of years, you're going to start to see the buyers become increasingly sophisticated around what they are actually looking for. Niklas Halusa (25:06.806) and start to be able to make clear decisions between the different software and the different platforms and become a lot more sophisticated, which right now is relatively unsophisticated. And finally, I think if that trend carries on, I think the rate of new marketplaces or marketplace business models is going to explode in the next three to five years. Brent Peterson (25:31.379) Just a clarification, when you say a build exercise, do you mean that you shouldn't be looking at building a marketplace from scratch? You should be looking at using some software that helps you to launch your product or your marketplace quicker? Something like Nautical Commerce. Niklas Halusa (25:48.274) Absolutely. You should really think very, very hard about owning code. I don't know if anyone has on this podcast ever or you have ever built a house. The owning software is the business equivalent of doing your own plumbing or doing your own electrics. And anyone who's ever done any project like that will tell you, do not touch your own electrics. Same with rebuilding cars. Never touch your own electrics. And you don't want, to be honest, the headache that comes with that. That doesn't mean you don't have to touch code at all, connecting things and connecting apps and building reporting layers and things like this. But the core plumbing, the thing that keeps you ticking over, I think is a big mistake. to own and I'm happy to provide some examples for what I mean when I say that it's painful. Brent Peterson (26:50.695) Yeah, so I mean, you gave the shop where example earlier. So in the e-commerce space, Magento used to be the really big player in the market and now shop where's the big player in the market. And part of it is that shop where just really has a fantastic marketing engine behind them. But the other thing is that it's easy to get started. You can just go push a button to get going and in a couple of hours and the complexity about owning your own code and then say, and updating and keeping maintained and worrying about. hackers and all these other fun things that you just give that up to your SaaS provider and your SaaS provider does all that for you. Niklas Halusa (27:29.046) Yeah, there was this brilliant marketing line that they had recently, which I think about every single day, which is something along the lines of, they just said, it just works. Use us, it just works. And that's exactly what it should be. Something I talk about is that if we do our job well, and this is one of the key parts for why I am the CEO over here now. is that we should really be invisible. It should just work. You should be able to go focus on doing the stuff that makes money. And underneath all of that, your commerce system should just handle the business the way that you would like your business, or you need your business to be handled. And in marketplaces, that's a very specific way and a very specific way of doing business. Brent Peterson (28:21.292) So circling all the way back to the beginning, you said you weren't a sailor. So where did the name Nautical Commerce come from? Niklas Halusa (28:28.558) So my co-founder was a sailor. And first of all, that was certainly an inspiration. But the way that we think about it is, I gave you the forum example earlier. But if you really think about what made the middle class, what created the middle class in the West, although I'm sure there will be some historians who will correct me on this, but a big driver of that was the was and the big driver of people making, for the first time, generational money or really changing their, changing their stars, was people being able to get on a boat in the god knows 14th, 15th, 16th century and take a flyer at going to some far off place and finding a bunch of effectively supply, right? Crazy things, textiles, silks, spices. you name it, and bringing it back to their home country and selling it in the marketplace. And being able to make money by finding supply and solving a customer demand that they never even, the customer never even knew was there, right? And sort of that era, the explorer's era, effectively the nautical era, I think is a fair argument to say that's sort of the beginning of the modern era. And that's a little bit what we want to be able to enable. We're effectively those ocean-going boats that allows people who maybe weren't sailors, who didn't have the wealth, to go and do some of these things, to get on the nautical boat, the nautical platform, and go build a business by creating supply. Brent Peterson (30:17.511) That's awesome. So Nicholas, as we close out, I give the guests an opportunity to do a shameless plug about anything you'd like. What would you like to plug today? Niklas Halusa (30:29.378) So I think I've really done more plugging than I wanted to earlier, but obviously I care a lot about this topic. Look, I am the CEO and co-founder of Nordical Commerce. We are, as far as I can tell, the only scalable proper marketplace platform end to end. This is what we do. If you are thinking about building a marketplace, you are our customer. We care about the marketplace customers. We're not a commerce system. We're not aiming at first person. You're not a, what's the right term? You're not a side project. You're not a small sliver of our customer base. You are a customer base. We're building a platform for you. We're building one that's end-to-end so you don't have to worry about having to wire a bunch of systems together, have to go and Frankenstein something together, something that gets you to get going but you never get any further. We want to be that partner that you can start out with and that you can scale with and that can evolve with you. And for that, we have a brand spanking new platform built in all the most modern ways. And and we want to power your merchandise. Brent Peterson (31:47.275) Awesome. And, and how are they going to get in touch with you. Niklas Halusa (31:52.186) There's multiple ways, so you can either reach out to me on LinkedIn. There is also a come chat with us form on our website, www. And if you want to reach out to me directly, you can contact me at nich Brent Peterson (32:16.487) That's awesome. And I'll make sure I put all those links in the show notes. So if you're listening to this on Apple podcast, you can find it in the show notes or wherever you're listening to this or watching it on YouTube. Nicholas, thank you. It was been such a great conversation. I appreciate you being here. Niklas Halusa (32:35.446) Yeah, absolutely appreciate the time and great to meet you.