Different Types of Online Marketplaces Business Models – 2021
What is an Online Marketplace?
The online marketplace is an application or an e-commerce site that contains products and services of various companies or sellers and sells them on its own website. The online marketplace provides a common platform for sellers and end-users. They do not have their own products on which they need to invest but they provide well marketed and promoted online platforms to various businesses for selling their products or services.
They are nowadays becoming the first choice of entrepreneurs. Online delivery marketplaces have achieved great success in every business area whether it is fashion, real estate, travel, beauty, etc. If you approach any Online Marketplace Development Company, you will know about a variety of features by which you can deliver a good user experience and earn money also.
Marketplace works on one rule which is earning commission without making any real investment. Following are the type of marketplace business models:
- Subscription Business Model: This kind of business model is the most famous method used by marketplace owners. Subscription businesses are known to generate good revenues. As soon as people subscribe to your services, you can charge them annually, monthly, or half-yearly as per your plans.
Businesses based on subscription models get a fixed earning on a monthly, half-yearly, or annual basis. However, keeping your customers engaged is a big challenge. Many companies such as eBay use a subscription model.
Subscription rules the world all-around starting from digital products like apps, software, books, music to services. Subscriptions enable splitting large payments into several small payments that are easily affordable. Also, these are a good way to help keep your business financially backed.
- Listing Fees Model: This is also a good business marketplace model used for generating revenue by just investing nothing. In this kind of model, marketplace owners can list the products and services of their customers on their website and charge a monthly fee from them.
If companies want to have a higher ranking, then you can charge additional fees for the same.
Additional benefits like featured ads, blogging benefits can also be provided to the companies with some extra fee. For instance, OLX offers featured ads. You can offer many benefits to the companies listed on your online marketplace and the interesting part is that you don’t need to invest any amount rather than preserving your online marketplace platform.
Few tips can be used to consider if you are thinking to use this model:
- If you want your sellers to list plenty of products, then make the payment of fees for the sellers easier.
- Give the sellers valid reasons why your platform is best and beneficial for them.
- Consider using hourly fees if you are using price-based calculations.
- Sign-Up Fees: Sign-up fees are a flat payment collected from the sellers for signing-up on your online marketplace platform. It is one of the most straightforward marketplace business models. Sign-up fees do not need complex payment gateways and your sellers can pay you instantly.
You have to convince your sellers to join your platform early if you are brave enough to charge sign-up fees prior to having a well well-known two-sided marketplace. If you are able to convince them then your sellers would not mind paying a small amount of money to join a good online market platform.
Few tips that you need to keep in mind for your business model to work are:
- Keep your sign-up fee feasible and affordable for your sellers.
- Tell them about the benefits that they will gain after signing-up with your online marketplace platform.
- Offer a lucrative incentive for those who joined early in order to encourage more sign-us.
Sign-up fees are a decent marketplace business model in the starting phase of your business at that time when you are having low sales volumes and selling fees are not feasible.
- Selling Fees: This is one of the most used and popular online marketplace business models among the marketplace owners. In this particular business model, you earn a small share on each sale mostly before the payment reaches the seller. Your fees will depend on the payment flow you are using like it is a flat selling fees or the percentage-based fees.
Mainly three types of payment flows are there in online marketplace:
- First is direct payment in which the customer’s payment directly goes into the seller’s or vendor’s account.
- The second is aggregated payments in which the payment from the customers is collected on your platform and then distributed to the vendors in the form of pay-out.
- The third is parallel payment in which a payment processor divides the payment made by the customers between your online platform and your vendor at the tie of checkout.
- Payment Processing or Transaction Fees: This kind of online marketplace business model is just like sales fees but here transaction or payment processing fees bring in revenue to your business. You get a small number of fees for all the transactions that occur at the online marketplace platform. The payment transaction fee differs from company to company and yes even one percent of fees make a difference to your revenue if you are processing millions of transactions.
- Sponsored Products and Stores: Promoting products and profiles are a good method to give your vendors further exposure after an online marketplace platform has become well-known. This business model is also known for generating good revenues for the marketplace owners.
There are different forms of marketplace promotions:
- Promoted products in the cart or at checkout.
- Promoted blog posts and newsletters.
- Sponsor products on the page of other products and also in categories.
- Featuring vendor profiles and their products on the main page.
Sponsored products work best on product-focused marketplaces like Amazon, eBay while on the other hand featured vendor profiles are very useful for engaging customers in the vendor-center marketplace in which vendors sell exclusive products and build relationships with your customers.
- Pay Per Lead or Lead Fees: This kind of marketplace business model works best when you are having a contract-based marketplace or service-based marketplace and you are not processing orders by way of your platform then in that case charging lead fees is a feasible model for you. In such a model, your vendors are able to browse the prospective client’s list but for accessing their details they need to pay you and this is the stream for your revenue generation.
