Have an overview about the various online marketplace monetization business models to pick for your eCommerce business in 2021.
What is the exact way to measure the success of an online marketplace platform?
Build a scalable online multi-vendor marketplace to 5x your revenue with better monetization model!!!
Is that number of users who come and visit the marketplace site or the total principal amount invested in the project?
No, definitely nope.
It is your online marketplace revenue, that is, the amount of money you be generating with the marketplace platform.
So, starting an online marketplace with no clear idea about the monetization model is not the right way you launch a successful multi-vendor marketplace business.
Moreover, if you decided to go with a marketplace business and build a platform, then you have to look into the monetization model strategy.
Why it is much important to choose the right-fit business model? Because proper eCommerce marketplace monetization models strategy could be the base and key factor in developing a scalable and profitable marketplace platform.
Choosing the best among various marketplace monetization models to implement is the crucial part of starting an eCommerce marketplace business, as it’s going to the revenue generator rule. Sometimes it even becomes the most relevant business decision eCommerce owners should address before kick-starting.
One can even pick the monetization model from the competitor or from anyone who is benchmarking, but that would not reap your best results though. Because each marketplace business is different, so do yours. Therefore, choosing your niche-specific and business value-based revenue streams is very important, so keep an eye on that.
So here, let’s discuss the various methods a multi-vendor marketplace platform can use to be more successful in monetizing the business.
Top Online Marketplace Monetization Business Models To Pick In 2021
Commission Monetization Model
A commission model is the most common and generally employed across all online marketplaces, also it is a popular pick of every marketplace platform. The commission model has proven itself potential in making revenue, so it becomes a popular choice.
Here, the commission model allows platform owners to charge fees to the vendors for every successful transaction made on the platform or even simpler, the store admin will capture value by taking a percentage of every sale made on the marketplace.
Commission fees that been charged can either be fixed or percentage-based may vary based on the transaction value and product category. As the marketplace gains traction over time, the commission model remains a scalable monetization technique since profits are directly related to the frequency of successful transactions on the marketplace.
Airbnb is the best example of a marketplace that has leveraged the commission-based monetization model.
- No charges will be collected prior to a successful transaction
- It facilitates a better new vendor onboarding process, as there is no risk for them in listing their products and services.
- It scales in a better way than any other revenue model. Because the higher the value of the products sold, the higher the revenue for the marketplace itself.
Subscription marketplace monetization model
Subscription monetization model is the well-packed revenue model, if the marketplace gained enough traffic may begin to consider the subscription model. This subscription model charges subscription fees. Here the users are charged a regular fee to access the platform, but only thing is, users may consider the subscription model as an imposed one.
It may include monthly or yearly fees for accessing the platform over the mentioned period of time. The subscription revenue model is not widely used in the eCommerce business as large as the commission monetization model.
Generally, transactions between the users will not be part of the charge of subscription fees. While using the subscription model, one should make sure the quality of goods and service are upto the mark.
Most users look for the quality you offer with your products and services, which is not available or easy to find on other sites. This strategy will work for you if you choose to go with a subscription model.
eBay is the best example of a subscription revenue model.
- Store owner can predict the monthly revenue on a regular basis
- Attracts more clients as it used to charge only a minimal amount as fees.
- Act as the great revenue model for the businesses in the long run
Product listing monetization model
Product listing revenue model suits the marketplaces that primarily offer high-value items such as cars, bikes, and luxury accessories as the frequency of transaction is not much higher than the other models. Here the listing fee is the most appropriate to satisfy the sellers who sell such huge ticket items.
While the commission-based revenue model, chargers only if the successful sale has made by leaving and miss the revenue or fee from the low-performing or less popular products. This is where the product listing model gains by allowing to get profit on every ad or listed product on the marketplace platform.
- Generally cheaper fee to list when comparing with other monetization models
- Improved earning quality as seller pay only for the advertised products
- Greatly fit for the marketplaces that offer expensive and luxury goods and services
Lead fee revenue model
Lead fee monetization model is most popular among the service-based marketplaces, where users post a request and vendors pay the marketplace platform fees to win the bidding process. In simple, in the lead fee monetization model, suppliers pay the platform a fee in order to bid to win the customer.
In every lead fee model, the use case comes in two forms, they’re:
- By collecting charges from the merchants to access the lead, and
- By imposing fees only after the successful transaction
In some cases, a bidding process may come into play if there are multiple merchants targeting the same lead.
Upwork, a talent marketplace, is the perfect example of a lead fee monetization model.
- Gives user enough value to the fee they’re paying to the marketplace platform
- Suppliers or vendor can connect with high potential clients
- No risk in case of paying the fee when comparing to the listing fee model
Freemium listing models
Freemium is a lesser-known monetization model where a marketplace platform has features to align both with free and premium sets. In simple, the marketplace makes revenue by offering some premium features to sellers in exchange for a standard fee. Freemium listing model might look tricky by needing to offer additional features to its users.
- Freemium model enables to generate lead quickly
- Allows expanding loyal and frequent user base
- Gains trust by offering alluring features to the users
In a nutshell, there are both pros and cons for online marketplace monetization models listed above. But we’ve mentioned only the benefits just to be a positive note.
Every monetization strategy differs from each other and profits each seller differently. Taking it further, choose the best online marketplace strategy to make a stable income and ensure business growth in the long run.
Moving forward, it is always a good idea to start an online marketplace business with the right marketplace monetization models to make it in a most perfect way.
If you need help in building and launching your online marketplace, our expert team would love to help you. Don’t hesitate to get in touch!