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Three-sided digital platforms are a relatively new phenomenon that seek to eliminate the hassle in a transaction by owning fulfilment and delivery of the product or service. Redbubble is a three-sided marketplace connecting individual artists, fulfilment partners, and customers. The process is simple: artists upload unique designs and Redbubble partners with fulfillers to produce 'print-on-demand' (POD) products and ship to consumers.
Most marketplaces ‘take’ a rate from the supply side: Etsy ‘takes’ a rate from craftspeople, Uber from drivers, and Amazon from sellers. Redbubble, on the other hand, has a ‘reverse take rate’: the artist takes a rate from Redbubble. The artist uploads and configures digital designs to Redbubble’s product suite for free and then waits for the dollars to roll in. Redbubble deals with the rest: lead generation, manufacturing, and fulfilment. This fundamentally changes the relationship with suppliers relative to other three-sided platforms like food delivery networks or Amazon.
The connection that Redbubble fosters between individual artists and consumers and the relatively attractive unit economics piqued our interest in the company. Unlike most other three-sided marketplaces, Redbubble has scaled to over AU$500m in GMV with healthy gross margins and positive cumulative FCF. We interviewed the CEO of Redbubble to understand what makes the business unique and the opportunities to scale the marketplace.
Redbubble reminds us of Etsy in late 2016. Etsy was built by a craftsperson for craftspeople. The founder spent the first 10 years focusing on serving handmade artists like himself and built a sticky and differentiated supply side for the company. In 2016, Josh Silverman became CEO and reframed the way Etsy would serve craftspeople to explicitly focus on helping them sell more products. Redbubble is going through a very similar transition: a founder-led business with a new CEO reframing the focus to drive sales for artists. Mike, the new CEO of Redbubble, explains:
"The heart of Redbubble, particularly among a lot of the staff, is with the artists. As I said, that’s why we exist; we exist to serve artists and help them sell products. It’s not about shifting the focus but it’s about adding the focus and recognizing the core job artists want out of the platform is to sell their products. Therefore, our job is to bring the consumers to the site, enable them to have a great experience on the site, find the products, find the designs they can buy from the artists and then transact in a really good way. It’s actually about focusing on the core thing that the artists want from the platform, which is to sell products featuring their designs."
This is an important reframing as the artist ultimately cares about sales. In the early days of a marketplace, focusing on building proprietary supply is crucial to kickstarting the flywheel. However, in the long run, owning proprietary demand builds long-term value in the company.
The nature of Redbubble’s flywheel is also very different to a business like SEEK, the Redbubble CEO's former company. Mike’s comment highlights just how powerful the pure online classifieds business really is:
"What you would see with SEEK is that there are different balancing mechanisms. The goal was, if you had the most job ads, you would get the most job seekers and, if you have the most seekers, you would get the most job ads and it just naturally reinforces itself so beautifully. It’s like all those classifieds sites; it’s not just winner takes most; it is the winner gets better and accelerates away."
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