When launching a marketplace one of the first decisions you ought to make is how you’re going to make money. After you put time and effort into developing your idea into a fully functioning platform that is connecting people who were longing exactly for this sort of solution, at some point you should start getting the reward for your investments.
Not sure how to do that? Learn from the best! If you are eager to know how e-commerce giants like eBay and Etsy found their way to success, then this overview is highly recommended for reading.
Here we collected 10 popular revenue models that would help to make your online marketplace a profitable business.
1. Sign-up Fee
The sign-up fee is a fixed amount of money the seller pays when registering on your marketplace platform.
Registration-based revenue model functions the best if you adhere to these principles:
- Reasonable price — fee rate should be affordable for the users, but sufficient for your business to survive in the long run;
- Point out the benefits — highlight the advantages of joining your platform;
- Be convincing — make an offer that is tempting enough to actually pay for it.
2. Listing Fee
A listing fee is a payment collected from the vendors when they post their goods for sale. It is one of the most common ways of marketplace operators to gain profit. Normally, these three pay-off methods are applied:
- Flat fee (e.g. $0.20 per listing)
- Price-based amount (e.g. 3% of item’s cost)
- Category-based rate (e.g. $15 to publish a product in a certain category)
Here are some tips to take into the account if you opt for this business model:
- Explain the payment process in details — it should be clear how the calculations are done and when the fees are collected;
- Motivate sellers to post more products — offer bonuses to successful sellers or start a blog with viable advice on how to develop an online business within your platform;
- Persuade vendors to join your platform — use stats, infographics and other suitable means to make quality sellers sign-up and stay.
3. Selling Fee
This marketplace business model is somewhat similar to the per-listing scheme only the merchant is charged not upon the publication of the item, but after it is actually sold. You can set a flat fee or a percentage-based rate.
The way you’ve organized the payment flow from buyer to seller is going to define how you collect the selling fee:
- Direct payment — money goes directly from customer to retailer so you can only get your share by invoicing the vendor;
- Aggregated payments — the marketplace serves as a middleman between the two parties, so you subtract the selling fees before transferring money to the merchant;
- Parallel payments scheme allows splitting due payout between the seller and the marketplace right at the checkout.
Under a subscription monetization model, users are paying a recurring fee to get access to products or services.
It works incredibly well with such categories as audio & e-books, music, films and software. Take Amazon Prime as an example. This paid subscription service allows users to watch popular movies and TV shows plus get unlimited music streaming and reading for as much as $12.99/month.
Here are a few points to consider if you are planning to use the subscription model:
- The value should exceed the cost — benefits your clients get should be worth keeping the subscription on;
- Free trial — let users assess the perks of your offer;
- Create few different plans — you can charge customers on a weekly, monthly or yearly basis and include various features in each package.
Recurring payments are a simple way to keep your e-commerce business up and running for a good long time.
A freemium business model offers basic functionality for free, and additional features are accessible only upon paying a premium membership fee.
Here are some tips that might help you to induce users to upgrade their accounts to premium:
- Eliminate the number of free listings or introduce a higher fee in a regular plan;
- Set different selling fee rates for premium users and all other sellers;
- Offer advanced features that can facilitate their work and boost sales.
Promoting goods/services is a good way for a seller/provider to get extra attention to their profile. At the same time, it creates a sustainable revenue flow for marketplace owners.
There are several types of promotions:
- Sponsored items displayed on related pages;
- Promoted goods offered for free or at a discount price at checkout;
- Links to seller’s profile and/or products on the marketplace homepage;
- Mentions in blog posts.
This business model works in a similar way to the previous one, but here you allow third-party vendors to promote their goods, services or websites on your platform.
Depending on advertiser’s campaign goals and your system capabilities you can agree on ad cost:
- Per impression — rate per 1,000 views of a particular advertisement;
- Per click — an amount paid for each click that brings users to the featured page;
- Per period — money you get for displaying an ad for a certain timespan;
- Per post — the price of one promo publication.
8. Lead Fee
Lead fees are a perfect solution if you are starting a service marketplace. It works like this: service-providers can browse the list of potential customers or orders, but to get full access to those leads they need to pay. You can either charge vendors for disclosing the details of the deal or simply for putting them in touch with potential clients.
9. Transaction Fees
A transaction fee is a commission you get from every electronic payment processed on your platform. It’s the most lucrative model as you get your slice of the pie all the time.
If you manage to provide your users with reliable invoicing, payment and scheduling tools you can receive processing fees for:
- Order payments;
- Payouts to shipping companies;
- Recurring membership payments;
- Escrow services;
- Payments from advertisers.
10. Organic Grows
Last, but definitely not the least method to generate revenue is surprisingly simple. Just make your platform grow! Engage quality sellers, draw the attention of clients seeking for the solution you provide, built a strong community, never cease to adjust your platform to your users’ needs — all of that will help you to maintain your marketplace afloat in a long run. Steady activity leads to a stable income.
Probably, you are not likely to find a perfect solution at once. Thus, to avoid unnecessary risks it would be wise to start with a business model that brings regular payments while being easy to implement. These include sign-up fees, listing fees and selling fees schemes.