The trend of marketplaces is at its peak right now, and that isn’t going to change anytime soon. Many business owners have invested in creating an online marketplace for their brand over the last decade. However, only a few of these businesses could generate enough revenue to sustain the marketplace. One of the biggest reasons for this is not developing the correct business model for your marketplace. It is important to have a detailed business model before starting a marketplace to ensure its success.
Marketplace business models to generate revenue
Here, we will take you through 6 of the best marketplace business models to generate revenue. Let’s jump right in!
1. Sign-up fees: A sign-up fee is a one-time fee that the sellers have to pay when they register with your marketplace platform. This is one of the most common and straightforward marketplace business models out there. As long as your marketplace brings profit and various other perks to their business, the sellers are always willing to pay a sign-up fee for registration. Here are a few tips to successfully execute the sign-up fee business model –
- Make sure the sign-up fee is feasible and affordable for the sellers.
- Let your sellers know the benefits they can receive by signing up with your marketplace.
- Create an incentive for early-bird registrations when you launch your marketplace
- Offer a personal approach to the sellers signing up with your marketplace.
2. Subscription with recurring payments: Subscriptions is another business model a lot of organizations have experienced success with. Recurring revenue has proven to be the lifeline for many organizations over the past few years. This is because subscriptions make it possible to split large payments into smaller monthly payments, which is affordable for everyone. Moreover, recurring payments are a great way to keep some income flowing in and evolving over a longer period. Along with online marketplaces, several business owners have also adopted the subscription method on their mobile applications. The only thing to remember here is that your users must get more value than it costs for the subscription.
Here are a few things to keep in mind when implementing a subscription business model –
- Offer a free trial if possible
- Describe what is included in the subscription clearly
- Try keeping multiple subscription options with different prices and perks
- Keep your members engaged
- Offer incentives for large payments at once
- Offer valuable content for every member
3. Product listing or publishing fees: The product listing fee is a common marketplace model, especially among two-sided marketplace platforms. A listing fee is a flat or variable fee collected from the seller when they list their product on your marketplace. You may want to consider several options to calculate product listing fees. These include Flat amount, Price-based amount, category-based amount, or any combination of the above. You may also collect the product listing fees from your sellers all at once, or after every product is listed. Here are a few things to consider while implementing product listing or publishing fees –
- Make it easy for the sellers to pay, try encouraging them to list multiple products at once.
- Use statistics and analysis to explain why it is beneficial for the sellers to list their products on your marketplace.
- Consider maximum fee caps for expensive products.
4. Selling fees: Selling fees or sales fee is probably the most popular marketplace business models among online store and marketplace owners. Selling fees are the fees collected from the seller for every sale made through your marketplace. You may have a flat selling fee, a commission-based fee, or a combination of both, based on what is convenient to the sellers as well as the marketplace.
You may collect the selling fees in 3 different ways; direct payments, where the customer’s payment goes directly to the seller, and then the seller pays you; aggregated payments, where the customer’s payment is collected by you, and then sent to the seller after cutting the selling fee; split payments, where the customer makes two payments, one to the seller, and the selling fee to you.
Here are a few things to keep in mind while implementing the selling fees marketplace business models –
- Selling fees won’t bring you a lot of income in the early stages but has great long-term benefits.
- Having a low selling fee might be affordable for the sellers, but might not be able to sustain the marketplace.
- You may also want to consider your own processing fees when implementing selling fees as a business model.
5. Sponsored products and stores: Promoting products and profiles is another great way to give your sellers some extra exposure and ultimately increase their sales. You may consider several ways to promote products on your marketplace. These include sponsored products on other product pages, promoted products in the cart, or at checkout, featured seller profiles on the home page, or promoted blog posts and newsletter mentions.
Collecting payments for promotions can also be done in several ways like –
- Sellers pay for individual product and profile promotions.
- Sellers receive product promotions in a higher-priced membership plan.
- Credit system to let the sellers purchase the credit and use it for promotions.
- Free promotions to certain valuable sellers for encouraging newer customers to join your marketplace.
6. Third-party advertisements: Here, you let third-party advertisers promote their products, services, or websites on your marketplace. Although this business model may bring you easy income, it may also upset customers and sellers as it interferes with their business. Hence, it is essential that you know about the product you are advertising and don’t go overboard with a lot of ads. Third-party advertisements also have a number of ways for payments which include cost per impression, pay per click, cost per day/week, cost per mention in blog posts or newsletters. Again, you may use one or a combination of these methods when implementing third-party advertisements on your marketplace.
Here are a few things to keep in mind when implementing this business model –
- Don’t publish third-party ads at the cost of losing your customers
- Make sure you have control over what gets published on your marketplace
- Consider choosing a marketplace platform with a built-in ad system to avoid issues after the marketplace launch.
While there are some more business models like payment processing fees, pay per lead, or bidding fees, the above-listed business models are easier to implement and have proven to be successful for many top marketplaces in the past. If implemented correctly, these business models can generate a lot of revenue for your marketplace over the long run. The key is to consider the best options for all the parties involved, i.e. the customers, the sellers, and you as the owner.
You may also consider using referral systems where you give perks to your sellers for every new seller they get to your marketplace. While the list of business models may be lengthy, analyzing each model and using the best combination that works for your marketplace will ensure that your marketplace generates revenue for you. We hope this article has been helpful. Thank you and all the best!
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