How to Choose a Successful Business Model for your Marketplace
30 Mar

How to Choose a Successful Business Model for your Marketplace

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Ecommerce business is hitting a great success with its billions of customers. Many people become digital and love to shop online. Stats says that in 2020, out of 7.7 billion people, 2.05 billion people are digital buyers. As a result, most of the physical stores are also using this ecommerce system to sell their products and services.  

So, if you are planning to start an online store or already owning the ecommerce website, then following the right marketplace ecommerce model aids you to increase your business sales.  

Before jumping into the topic, you have to know the difference between the marketplace business model and the aggregator business model.  

Marketplace Business Model: 

The marketplace is a big platform where different vendors connect to targeted customers. For instance, Amazon is following a marketplace business model where the different vendors sell their products to their customers under their brand name. 

Aggregator Business Model: 

Aggregator business model is a process where the many service providers provide their services to their customers under one common brand name. For instance, OLA is a brand name where various service providers have registered their services with one brand (i.e.,) OLA. 

This is the huge difference between these business model, however, they have varied with partnership and price features. To know the differences in detail: Marketplace Business Model vs Aggregator Business Model

In this article, we can discuss, how to choose the right online marketplace business model. 

Categories of Marketplace Ecommerce Model: 

Beforehand learning the types of business models, the following five categories are the different economies based on the marketplace. Know which economy are you based on. 

  • Gig economy 
  • Peer economy 
  • Sharing economy 
  • Crowd economy 
  • On-demand economy 

Gig Economy: 

The gig economy is also known as a freelance economy where the marketplace admin offers the freedom to the product or service providers to provide any type of products and services. And this marketplace platform connects these providers with buyers who want to buy these products and services. E.g.: Fiverr is a freelance economy.  

In Gig model, you, as a marketplace admin, earn a commission from both providers (for referring them customers) and buyers (for referring the right resource). 

Peer Economy: 

In the Peer economy business model, the marketplace admin will provide different user interfaces for providers and users. For example, Uber or OLA is a marketplace platform having both providers and customers. The user-interface of providers is different from the UI of customers. So, these users cannot see providers interface and vice-versa. 

Sharing Economy: 

It is similar to the Peer economy that connects the providers and vendors in a huge platform. But the only difference is that the user interface of both providers and customers in the shared economy is the same. Airbnb is a good example of this economy model as the providers who offer rental services will use the UI of customers in the same application to get their services. 

Crowd Economy: 

As the name says, the crowd economy provides the platform for multiple new entrepreneurs to provide their products and services. Crowdsourcing, crowdlending are the simple terms that say about the crowd economy. This is all about running your business campaign to get customers but you are running this campaign along with new businesses like yours and you have to be unique to attain success. 

On-demand Economy: 

The on-demand economy looks alike freelance economy but here the services are offered physically like dog sitting, pet sitting, food delivery, etc., So, the customers will hire providers whenever they need service and the marketplace provides the right providers on time. This is so-called on-demand economy (i.e.,) the demanding services are provided here. 

To know about the components and types of marketplaces, read here: Ecommerce Marketplace 

How to choose your Marketplace Business Model? 

It’s time to discuss the types of business models that suit your ecommerce marketplace. Business models are generally based on the revenue feature where you have to choose which revenue model will be comfortable for you: 

  • Commission Fee 

  • Subscription Fee 

  • Listing Fee 

  • Lead Fee 

  • Freemium  

  • Feature Listings 

1. Commission Fee: 

A commission fee is the most preferred business model by the marketplace community. 

A commission fee is a model where the marketplace owner like you earns commission when each transaction is completed.  To say in brief, the vendor registered their brand in your marketplace platform to sell their products and services. Whenever the vendor gets customers and the purchase is completed, the marketplace admin receives a commission fee for renting the marketplace platform. 

If you are interested in this model, then you can rent your marketplace to multiple vendors to sell products and services. 

Things to consider in the commission fee business model: 

Fixed or Variable Price Range: You have to decide either to provide the same price (commission fee) for all vendors or to vary the price based on the selling products and services. 

Low or High Cost: If you are planning to increase the commission fee, then you will have the chance to lose the vendors as they will transfer to another marketplace platform. So, providing a low fee will keep your vendors in your platform. 

Gig Model: If you are renting the platform for services like Fiverr, then you can earn from both providers and customers as said in Gig economy. 

Examples of Commission Fee Model: Uber, Airbnb, Fiverr, etc., are under this model. 

2. Subscription Fee: 

Marketplace admin will earn in commission fee model only when the transaction is completed. Otherwise, the vendors do not have to pay any penny for the admin. 

The subscription fee is a solution to the above model if you are looking for something beyond that. The subscription or the membership fee model is based on monthly payment. 

To say simple, the vendors have to pay the subscription fee on a timely basis to access your marketplace platform. In this way, you can get payments on a regular basis, so you don’t have to worry about the transactions.  

Things to consider in the subscription fee model: 

  • You have to consider the same thing as in commission fee model. Don’t charge your platform users with a high price. 

  • You have to decide the price plans of the subscription-like basic, premium, or gold plans with extra features of high pricing platform. 

  • Also, you have to decide the timely payment options like the subscription fee which is made due per month or per 6-month options or for a long-term like one- year options, etc., Paying per month is the best choice from these methods. 

  • One tip to get succeed in this model is that you can offer many seasonal deals to get subscribed by many vendors. 

Examples of the Subscription fee model: Spotify, Netflix, etc., are some of the best samples of this model. Also, it is suitable for B2C ecommerce companies like Amazon. 

3. Listing Fee: 

Other than the above two business models, this is a different system. If you are running a website, then you may have heard the terms like classified or directory submissions. These are the listings to increase the backlinks of the website. 

Therefore, the listing fee is another popular ecommerce marketplace business model, where the vendors or service providers will list their brand in your marketplace website to get traffic. So, if you are providing paid listings to them, then you can earn the commission.  

To say with instance, there are many classified submissions like Craigslist or directory submissions like free ads time that are offering its website platform to many vendors and service providers to list their products and services. Likewise, you can follow this business model. 

Things to follow in the Listing Fee Model: 

You can offer your listing platform in two ways: a free or express review. In free type, the platform users will list their products in free options, so you can review and accept their listings after some long-time.  

If the users are listed in the express or premium model of your website, then you have to accept and display their listing ads within a short period like within 20-24 hours. 

How will you earn from this model? When the users get listed in the premium model, then you can get the charge fee that you are fixed with the model. You can use your website for displaying sponsoring posts or Google Ads by registering in Google AdSense so that you can earn money whenever the user clicks the banner ads that are displayed on your website. So, you can earn even when the users listed their products and services in a free method. 

Examples for this model are Classified and Directory submission websites. 

4.  Lead Fee: 

The lead fee is another model that you can also try. Lead or Lead generation fee model is a process where the vendors pay for you when they get customers on your website. Let me explain the process. 

  • The vendors will create an account on your marketplace website that connects vendors and buyers.  

  • The marketplace platform has a separate account creation for buyers. 

  • If the buyers need any products or services, then they will list their requirements on your website, which is notified to the appropriate vendors. 

  • If a particular vendor thinks that he/she is a fit for that buyer requirement, then he/she will get the contact details of the buyers from your marketplace platform. For that, they pay you money and you can earn easily. 

  • But the pricing range should be affordable to get many registrations in your website. 

Examples of Listing Fee Model: Thumbtack, Bark are some of the listing fee business model websites where they earn from the users whenever the user gets the contact information of the buyers. 

5. Freemium: 

Freemium is a famous business model that is used by most of the popular online businesses. 

Freemium, a combination of Free and Premium method is a process where you can get paid when the users in your marketplace platform upgrade to premium features of your website. The process looks like: 

  • At first, the user will create a free account in your platform to sell their businesses and to get traffic. 

  • As a free option, you may provide features like customized options, limited customer connections, etc., 

  • When the user’s businesses start to grow with the help of your marketplace website, then the user decides to upgrade their account with your premium price features. 

  • Now, you can have offer premium features like analytic tools, unlimited customer connection, etc., with a fixed price plan. 

  • You can provide these price plans in different categories like free, plus, premium, etc., to provide different payment options to your users. 

This is how it works and MailChimp, an email marketing software, Purchase Commerce, a leading ecommerce software provider, etc., are some of the best examples of this Freemium business model. 

6. Feature Listings: 

Feature listings or feature ads is a business model similar to the listing fee model. 

Here, when the user wants to display their businesses on your website, you can earn money by displaying their business banners and listings on your website at the top or main part of the website. This is the process of featuring the ads (i.e.,) you are recommending this particular brand over other businesses by placing this business in front of your business. In this way, the user can get targeted traffic, the customers can get the required resources and you can get commission fee for connecting vendors and buyers via your marketplace platform. Thus, everybody makes a profit. 

Yelp is a good example of this feature listings business model. Other than just displaying the business in the top of your website, you can also promote it to different locations to help the vendors and also get an additional commission fees. 

Another tip to get succeed in this model, you can use this process to recommend multiple categories of products and services. 

These are the types of business models available for you to make your online business profitable. From these six types, you can choose the business model that suits you. 

To get insights about marketplace revenue models, jump here: Ecommerce Inventory and Revenue Models 

Buy the best ecommerce platform: 

For all these business models, it requires the ecommerce platform. You have to buy the best ecommerce software to build your marketplace website to proceed with these business models.  

Purchase Commerce is a leading ecommerce software that helps you to build your ecommerce website with the right marketplace model. You can buy this user-friendly platform with customized features and price plans. Let’s connect to build your dream and successful marketplace platform.