You can start thinking about monetizing(Revenue Model) and profit-making once you decide on your marketplace structure and your B2B marketplace business model platform business interaction between you, the seller, and the buyer.
The best part of developing your strategy is customizing it to the B2B marketplace, customer needs, or competition offerings by making it adaptable.
Choosing the correct revenue model format with the help of the relationship that will emerge inside the platform between various parties,
- Buyer and Seller
- Buyer and Platform Owner
- Seller and Platform Owner
You can choose the best revenue model for your marketplace by knowing how these players interact since these interactions dictate who makes the initial move and who must respond.
Choosing a revenue model that cannot scale to assure long-term sustainability is one of the most frequent causes of marketplace failure.
We examine the various income stream alternatives in this post and offer advice on selecting the best marketplace revenue model for your niche marketplace idea.
Marketplace Revenue Models to Bring Profit and Make Smart Choice
I suggest some of the revenue models that generate revenue for your marketplace are,
These are the five popular revenue models among many entrepreneurs now. You can adopt these models into your business either by using them individually or by combining them.
The commission fee is the most widespread revenue model for modern marketplaces. It is also known as the transaction model since the platform owner gets profits for every completion of an order on the B2B marketplace platform.
The main advantage of this model is that the sellers are not charged until they sell the order on your marketplace. It attracts many sellers to use the platform.
From the marketplace owner’s point of view, this model is more profitable since you have a share of the deal that passes through your platform.
The B2B marketplace platforms using this revenue model are Airbnb, QMarket, Amazon, Fiverr, TaskRabbit, etc. According to Airbnb, their commission fee is 14–16%.
The commission fee can be either a flat fee, a certain percentage of the total cost, or both. You can get back your initial investment quickly with this model.
For example, Your platform has a commission fee of $1, and your platform’s initial investment is $300. You can take back your initial investment quickly as your platform completes 300 orders.
I suggest using the commission model as your primary source of income whenever possible. I see a growing number of software marketplaces adopting this revenue model in the future.
Fixing Fees is a hurdle in this strategy. You could be unsure whether to impose a flat fee or a percentage of each transaction.
How much should you charge to generate income without turning away customers?
This question does not have a precise solution. Your marketplace revenue model should guide your decision on the payment method.
There are several circumstances, yet, in which the platform cannot effectively enable financial transactions.
In some cases, the commission model doesn’t work. For example,
- When the usual transaction size is enormous. For instance, the marketplace finds it tricky to support the commission fees
- A wide variety of items are available on the market. As a result, it is hard to create a transaction design that offers value in each situation. Good examples of this include conventional classified advertising.
- The marketplace cannot handle the complexity of the invoicing procedure.
In these cases, you need to find the best revenue model for your marketplace.
The service fee is similar to the commission fee. A service fee is collected from the buyer after completing each order.
When service fees are allowed on your software marketplace, you have a revenue stream that gives you a small cut of each transaction before the seller receives the money.
The service fee can be either a flat fee, a certain percentage of the total cost, or both.
Take into account the following factors when deciding whether to introduce service fees in your online B2B marketplace:
- While they don’t perform as well at the beginning of the project, Service fees scale nicely as your sales increase.
- Low service charge rates could appeal to your users, but they might not be viable for you.
- Do not forget to include your own processing costs when implementing service fees.
The primary issue with service fees is that they won’t function properly in the early stages when your two-sided platform doesn’t have many sales yet.
Long-term success for your software marketplace platform will come from charging fees; however, as you expand, be sure to have additional sources of income.
Regular pay is required of users under the membership model in order to get access to the platform. OkCupid and CouchSurfing are using this revenue model.
The ordinary value proposition for providers using this revenue plan is that the platform aids client acquisition. Customers might find bargains or unusual experiences thanks to this service.
If the value you give is substantial and a typical user would conduct multiple transactions, the membership price is a smart option. However, payment processing may be difficult or impossible when there is a delay in the user’s monthly subscription.
You may regularly forecast your monthly revenue using the subscription revenue model. If your marketplace already has a group of loyal customers who will frequently pay for the services offered there, you have a solid revenue strategy.
The membership fee model works best for online markets that lack the tools necessary to support user transactions or whose revenue models do not even hint at them.
The membership fee concept on the online B2B marketplace makes the chicken and egg problem even more complicated.
Users only pay when they receive money using the marketplace in the commission scheme. For example, when people get a chance to see the advantages themselves.
That means they are not taking any chances. Potential customers can choose not to use the site if they need to pay in advance. By giving new users of your product a free trial or discount, you can get around this problem.
You may design several subscription plans (such as free, essential, and premium). Additionally, each group’s users might receive a separate set of permissions.
On some marketplaces, providers must pay a fee to publish new listings. When providers receive value depending on how many listings they have on the site, and the potential value per listing is high, this software marketplace revenue model is generally employed.
With classified listings, this type of income arrangement is significantly typical. The website offers a pretty straightforward value proposition: it compiles a sizable number of listings into a single online location and ensures high visibility for those ones. Platforms for classified ads usually do not attempt to ease the transaction.
Each listing is paid for by the sellers, who seek to maximize the money they make from each one. It forces them to focus on the quality of each product rather than producing several advertisements in the hopes that they will be sold somehow.
When vendors only want to sell a few products and don’t want to commit to a recurring membership charge, a listing fee is preferable to a membership fee.
The marketplace with a listing fee revenue model is Etsy. When Etsy first started, it provided a promotion: one month of free listings for each customer.
After the trial period, it began charging $0.20 for each listing. It reduced the number of goods posted each day but improved the effectiveness of the already-running advertising. The user can publish this ad for 4months if they pay the listing costs.
Feature Listing and Ads Fee
This model helps to leverage your marketplace’s visibility. To be at the top of a specific category or to have a featured listing higher than others, sellers or service providers have to pay some amount as a fee.
This revenue model works well when combined with other revenue models. It is the best model for your marketplace when you plan to introduce a new revenue flow. You must be careful with this model since too many ads may sometimes irritate the customers. So don’t overflow your marketplace with ads.
For classified sites, featured listings and ads are the popular revenue streams. This marketplace revenue model is frequently seen in the real estate marketplace.
Zillow is a real estate marketplace that uses the featured listing and ads revenue model. It is one of the most popular marketplaces. They charge for advertising the listing on the platform from their users.
The challenge with these models is that, once again, in order to produce substantial money, they need a sizable user base. If you’re in the eyeball business, your revenue per user is probably far lower than it would be if you could add value to your transaction flow.
Additionally, when you include advertising on your website, you’re catering to two groups of people having opposing viewpoints: adverts nearly always detract from the user experience, and most users would be happy without them.
Ad-based income models function best when you have a very specialized niche. And there are businesses interested in customizing their offerings for that audience. Featured listings and advertisements are not the ideal choices if you want to provide the best experience for your users.
Now you may be confused about which is the best revenue model for your marketplace from the above-listed models.
Which is The Best Revenue Model?
So far now, you have seen the five best revenue models for the marketplace. Well, each model has its own pros and cons. Definitely, not every revenue model suits every marketplace.
Ensure the marketplace revenue model you select is appropriate for your industry, your target market, the number of items you want to deal with, and your revenue goals. You can utilize many revenue models separately or in combination with other strategies. If you are a baby marketplace owner, you can start your marketplace revenue model as a commission.
You can implement one revenue model at the beginning of your marketplace. Later you can change it to a different revenue model by considering the marketplace and personal interests.