How To Know If You’re Supply or Demand Constrained 🤹‍♂️ – Phase 2 of Kickstarting and Scaling a Marketplace Business

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How To Know If You’re Supply or Demand Constrained 🤹‍♂️ – Phase 2 of Kickst
Insights from today’s biggest marketplaces, including Airbnb, DoorDash, Thu
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Step 1: Determine if you are supply or demand constrained 🤹‍♂️
Overview
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Part 1 : How do I know if I’m supply or demand constrained?
Is your marketplace still supply-constrained — maybe it’s demand constrained now?
And, as it happens, these are the same questions we’ll explore over the next few posts — starting with how to determine if you are supply or demand constrained 🤹‍♂️
Step 1: Determine if you are supply or demand constrained 🤹‍♂️
Though many marketplaces continued to stay supply-constrained indefinitely (e.g. Uber/Lyft, OpenTable, DoorDash), an equal amount saw different supply vs.
Side-note: What does being supply-constrained or demand-constrained even mean?
It simply means that your biggest constraint to driving additional transactions is a lack of supply (e.g. Airbnb Homes, Uber drivers) or a lack of demand (e.g. Rover dog owners, TaskRabbit customers).
A very large share of marketplaces are always supply constrained
In some places these marketplaces were supply-constrained, and in others demand.
“We created a model that looked at restaurant coverage in a market to tell us which markets were supply constrained: (1) What % of restaurants in a market are on GrubHub vs.
If orders per restaurant in that area were in the higher percentiles, we focused on supply in those markets.” — Casey Winters
Below that meant we were supply constrained.” — Sander Daniels
“To determine if we were supply or demand constrained in a market, initially we used occupancy rate — if it was above a certain % we were supply constrained.
bookings rate, and when there was a downward inflection point we knew what occupancy rate that market was supply constrained at.
Most recently, we use an econometrics model that tells you for each market — do you get more incremental revenue from one additional unit of supply or demand

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