An online marketplace is a model that generates revenue at zero investment in inventory. With competitive pricing and the best vendors onboard, a multi-seller platform can be a rewarding business model for enterprises across various industries. Whilst promoting benefits of scalability and efficiency, it is also the preferred shopping experience for online buyers. Still unsure about marketplaces? Consider the statistics below:

• Fashion tops the list of the categories in online marketplaces, accounting for 61% of the total market.

• 56% of online retailers prefer to sell on marketplace platforms.

• Online marketplace originating sales including Amazon and eBay are likely to reach $2.1 trillion by 2024.

• B2B marketplaces will continue in 2024, and the total number could exceed 1,000 within the next 2 years.

• 70% of consumers worldwide now believe online marketplaces are the most convenient way to shop.

• B2C marketplaces are estimated to reach $3.5 trillion in sales by 2024.

• There are now 750 vertical industry marketplaces (and counting).

• B2B marketplaces grew year over year nearly 100% in 2023. An increase to $224.0 billion from $113 billion in 2022.

The trends show that an increasing number of customers are opting to shop on marketplace websites. The question with this however, is whether it is enough for an enterprise brand to adopt a marketplace model. Is it still possible to gain consumer trust through an online marketplace instead of an e-commerce website?

To simply answer, yes. With a marketplace model you can become a trusted brand in the eyes of consumers. The difference is that you do not have to handle inventory or process/fulfil orders, which speeds the process in increasing your brands awareness. For businesses seeking to disrupt growth in the market, the marketplace model aids in easily multiplying revenue channels and increasing profits with minimal investment required. 

It’s important to know that it requires strategic planning to ensure your marketplace has long-term viability. In this blog, we will go through the best ways to create multiple sources of revenues on your marketplace. 

Creating a multi-vendor marketplace can be an effective way to generate income from varied sources. However, enterprise brands should also consider doing these points to ensure their business model is successful:

• Measure both the total market and the addressable market size to understand the full scope of your target market.

• Develop a business model that validates buyers/sellers pain points.

• Ensure your acquisition strategy includes the most effective channels for outreach.

• Define your revenue model(s) to ensure you generate income.

• Choose a tech stack that is flexible as you scale.

• Measure marketplace performance to make data-driven decisions on future growth. 

Marketplaces can employ multiple revenue models to diversify income streams and reduce dependency on a single source. This approach can enhance financial stability and appeal to different user segments. For example, Amazon uses the following revenue models:

1. Commission model: Amazon charges sellers a percentage of each sale made through its platform, which varies by product category.

2. Subscription fee: Through Amazon Prime, customers pay an annual or monthly fee in exchange for benefits like free shipping, streaming entertainment, and exclusive shopping deals.

3. Advertising fee: Amazon offers advertising options where sellers can pay for product placements on the platform to gain more visibility.

4. Subscription box model: Amazon has ventured into this space with offerings like Subscribe & Save, which provides periodic delivery of products at a discount.

Etsy on the other hand, uses these revenue models:

1. Listing fees: Etsy charges sellers a minimum of $0.20 for each product they list on the platform. If there are multiple quantities of the same item, the listing fee will be automatically renewed after each of the items sells. 

2. Commission model: Etsy also charges sellers transaction fees, which are commissions of 3.5% of the total amount for every sale made on the platform. 

3. Advertising fee: Sellers can advertise their items or shops on the platform. The ads are charged on a cost-per-click (CPC) basis.

4. Subscription box model: All Etsy’s users have access to the Etsy Standard suite of tools to help them manage their shops. But the company also offers a premium option, Etsy Plus, which is $10 per month.

5. Pattern: Sellers can build a personalised website to sell their products inside the platform which is free for the first 30 days. After this, Etsy charges $15 per month.

12 revenue models to maximise your online marketplace profits

1. Adopt a freemium model

Offering premium services has become a lucrative revenue model for multi-vendor marketplace websites. This revenue model ensures recurring income for the marketplace brand from customers who wish to access premium services such as faster delivery or early access to new product launches, illustrating how to maximise your online marketplace profits.

The paid membership model extends engagement with buyers, by aiding in cost reductions or in accessing unique experiences. And for sellers, this boosts the opportunity of increased sales as when members are offered free or discounted shipping, they are likely to order more often. 

Freemium is a suitable choice if you are providing a certain value proposition to the users. For example, Amazon offers exclusive shopping, free fast shipping and more to Prime members.

2. Sell your own products on your marketplace

Whilst the commision is one of the most common methods to monetise from a marketplace, exploring this further and launching your own products on your marketplace is an effective way to increase revenue as it utilises your existing marketplace infrastructure and insights to launch profitable products. This also builds brand value and credibility which is key to building customer loyalty. 

3. Develop tiered commission rates

Implement commission tiers where the percentage of commission decreases as sellers reach higher sales thresholds. This encourages higher sales volumes and seller loyalty, as the more they sell, the less they pay proportionally.

4.  Allow sellers or brands to pay for advertisement

This revenue model differs slightly from the product or seller promotion. With this, you allow third-party advertisers to promote their products and services on your platform. If your marketplace has a high number of online searches, you can charge advertisers a fee to publish their ads on your platform. You can consider the ad placement for:

• Display advertising including, banners, graphics etc.

• Text advertising such as blog posts.

• Mixed advertising for example, sponsored third-party listings.

5. Monetise on marketplace data

Leverage the data generated by user interactions and sales to provide market insights to sellers or third-party businesses. This can include trend analysis, consumer behaviour reports, or product performance data, which can be valuable for strategic planning.

6.   Product listing fees

This revenue model operates primarily on volume. The value proposition for sellers is that they get a centralised platform to showcase their products and gain the attention of customers. Here, the online marketplace brand charges the sellers when they list their products on the platform which in general, has relatively low fees. 

7. Offer currency exchange

For marketplaces that operate across different countries, offering a built-in currency exchange can simplify transactions for international buyers and sellers. Charging a small fee for currency conversion can be an additional revenue source while enhancing the user experience.

8. Sponsor marketplace events

For marketplaces that organise virtual or physical events, such as workshops or webinars, offering sponsorship opportunities to businesses can be a lucrative revenue stream. These sponsorships can help cover the costs of the events while providing businesses with valuable exposure to your marketplace's audience.

9. Set seller registration fees

Registration or sign up fees are a standard payment collected from sellers when they register to sell on your marketplace platform. It is a straightforward revenue model as you can charge sellers prior to selling. This source of revenue does not require much justification to your sellers as paying a small fee to join a well reputed multi-vendor marketplace brings more exposure for them. 

Here are some points to think about when setting your fees:

• Highlight the benefits for vendors joining your marketplace.

• Ensure that the registration fees are realistic and affordable.

• Offer incentives for early sign ups to create a sense of urgency.

  
  

10.  Create affiliate and referral programs

Running affiliate and referral systems have the potential to increase the traffic of customers in your marketplace and thus, drive more sales. With affiliate marketing, third-party advertisers promote the products of your marketplace without any membership. This can be advertised through social media, where influencers or UGC (User-Generated Content) creators demonstrate the product/service and attach affiliate links, earning a commission for every purchase. In referral marketing, the existing members of an online marketplace refer visitors to the platform through word-of-mouth experiences. Both options can be utilised, depending on the capabilities of your e-commerce marketplace platform, as they encourage the build of a great user base or community.

11. Charge fees for featured products

The featured product model works in a varied marketplace where sellers may have difficulties in reaching the attention of customers. Using the featured listing of products or services, the sellers buy enhanced visibility for their offerings. If this model is followed on a multi-vendor marketplace, the product listing on the platform is free. This is suitable for sellers operating in a specific niche to reach their target market.

12. Build brand collaborations

Develop partnerships or collaborations with brands to create exclusive products or services that are only available through your marketplace. These collaborations can attract a dedicated following and create buzz around both the marketplace and the brand involved.

Final words:

Online marketplace models offer versatility and the potential for multiple revenue streams, enhancing the profits and profitability of enterprise brands. As we've explored before, when building your marketplace, we recommend that you start by building a minimum viable product (MVP). This allows you to refine your value proposition and adapt your business model based on user feedback. By doing so, you can pinpoint and address the specific needs and challenges of your target market, ultimately shaping a revenue model that aligns with their demands. This iterative process ensures that you develop a marketplace that not only meets market expectations, but also builds a strong foundation for sustained growth and success.