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What is the best revenue model for your online Marketplace? Part Three

What is the best revenue model for your online Marketplace? Part Three

I haven’t yet read the 1st Part
Neither the 2nd Part

It’s great to be back. Today we will conclude our blog series of finding the best marketplace revenue model. We have already discussed on commission and membership model. Let’s figure out the competence of listing fee model- 

The Listing Fee:

The simplest revenue generation model. Similar to the classified ads, merchants are charged here for each of their new product/service listings.

Benefits of Listing Fee Model:

  • Admins can control the product listing in the marketplace
  • Admins can charge for special products or categories
  • Admin will not be dependent on the sellers’ performance

How are the industry leaders playing?

Craigslist:

Spoiler alert!!! The popular classified ad marketplace does not charge for all listing. Most of them are free except posting a job, real estate and other selected listing-

wc marketplace blog revenue model

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Hugely benefited with this strategy Craigslist has not tested any other model. Browse through Craigslist website of any province and you will not find a single banner or lead-free (Additional cost for better placement at the website)- 

wc marketplace blog listing fee

Etsy:

The listing fee comes with a dilemma for marketplace owners.
Here, the marketplace owners do not get benefited from each transaction. To ensure that vendors do not eat the most of the profit pie, the admin will be lured to set a healthy list fee. But, over the top list fee can reduce vendor admission.

Etsy faced the challenge.

In their starting days, art and unique product marketplace Etsy offered a “1st-month special: no fees at all” promotion. But, when the listing fee was applied ( $0.10 per listing at the time ), there was an initial slump in new listing volumes: there were roughly 300 new items listed per day before the fees, but for the first five days afterward, their average was more like 160 per day.

Question is, despite the backlash, Why has Etsy kept the listing fee for their sellers?

Etsy’s reasons were-

1. They do not want to miss the revenue from their not so popular products.
2. Charging a listing fee prevents the marketplace from being flooded with redundant products.
3. At the end of the day, customers get high value from the marketplace

Ebay:

Ebay too charges the vendors an insertion fee to list an item on the website. As they have multiple revenue paths, the insertion fee is not applicable for monthly subscribers.

wc marketplace blog on revenue model

Zomato:

Unlike the Craigslist or Ebay, Zomato is the vertical search marketplace offering specific products and services. Can the listing fee be a viable model for them? Let’s introspect-

Zomato has an innovative revenue model. As a food search engine, it does not charge anything. So, there is no listing fee. But, if you want to avail additional services- Ad Sales ( Banners ), Online Ordering, Book etc. one has to spend bucks. 

What have we learned?

Listing Fee is not a primary revenue model for Product-marketplace:

If you are running a product marketplace, going along with the Listing Fee model would be a huge leap of faith. For example, Etsy has integrated both listing and commission model. Etsy charges $0.20 for each item you list and that item is active for 4 months.

Finding Parity is the greatest task:

No doubt. A marketplace should add value to the vendors. But giving freebies will lead a marketplace to the fragile state. And if one sets the fee high, vendors will reject the marketplace soon.

How many lists do you have?

Listing fee emerges as a sustainable primary business model for those who have somehow managed to stimulate the constant lead-flow. The marketplace leaders will not have a share in the transactions, however small and big it will be. More and more leads will save your marketplace.

Wooing Vendors:

Similar to the membership/subscription model listing fee does not ensure the selling of the products. The only benefit in listing fee is that it will not ask the vendors to renew their membership or push them towards the re-subscription. In such situation how can you win the hearts of the vendors?

After their initial setback, Etsy now has more than 1.7 million sellers surpassing 1.56 million of the previous year. A graph showing Etsy’s growing popularity-

WC Marketplace blog on revenue model

Number of active Etsy sellers from 2012 to 2016 (in 1,000) Etsy sellers

Etsy’s disruptive business idea turned the table for them. What’s your hack? 

The Set-Up Challenges:

Listing Fee on Selective Products:

An ideal listing fee model must have that flexibility to adapt your business objective.

Craigslist has successfully done that. Giving vendors a relaxation with their listing can turn up as a great boon for your marketplace. Make sure your marketplace has the right infrastructure to implement the required feature.

keep active your other learning paths:

Not every marketplace will have the fortune of keeping “listing fee” as their exclusive cash-generating strategy.

If you are a newbie, you would prefer to practice commission model along with the listing model. At the back-end of your marketplace, you must have a feature to enable commission system along with the listing fee model.

Let’s take a decision:

No one loves to fail. The word hustle seems to be a trend for modern entrepreneurs but why should you run an extra mile when you can set up a process to stimulate everything, even your revenue generation.

Choosing a right revenue model will be the first big step in your mission. All the data, industry-best insights and the development procedure that we have shared here are the best possible options for your future marketplace.

Now the ball is yours in your court. What looks the most profitable for you? The ever-dependable commission model or the recurring revenue generator subscription model? Or, the simplified listing fee model will be the best option for your upcoming marketplace? Share your views with us and take a decision now.

2018-06-06T06:49:01+00:00

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