Top 5 Marketplace Business Models to Explore for Your Startup in 2023

The startups now provide quality services for their customers more quickly and efficiently. Customer-oriented online businesses are flourishing immensely and are highly supported by the audience at large.

If you are looking for business model ideas for your online marketplace. You have come to the right place. Here, you’ll get familiarized with various marketplace business models and revenue streams that suit these models. Also, in the end, you’ll learn the marketplace metrics to help with your business.

Why wait? Let’s get started!

What is an online marketplace business?

An online marketplace business is to connect the buyers and sellers in one centralized place. Usually, the marketplace establishments don’t hold any inventory, but they help the buyers and sellers with digitized transactions.

How does a marketplace business model work?

There are two kinds of marketplaces: Horizontal and vertical marketplaces.

Horizontal marketplaces give products and services across various categories like eBay.

A vertical marketplace is exclusive for one product but provides multiple services revolving around that product.

The objective of the online marketplace is to serve as a meeting juncture between the customers and the service providers. The customer can either use an app or a website to browse through and order, book, or rent products or services, and the service providers connect with the customer if they are ready to dispatch the same.

It’s a simple, quick, and efficient way of running your business in this era!

How do marketplaces make money?

The marketplace owner can earn based on a commission from the customer or service provider or both. It’s completely based on how you want to generate your revenue.

• Charge a commission to the customers as a service fee, booking fee, etc.
• Charge a commission to the service provider as a listing fee.
• Charge commission to both the customer and the service provider.
• Pick what works best for you!

What are the advantages of starting a marketplace business?

Check out the advantages of running a marketplace business as an entrepreneur!

A marketplace is an online form of business which means you’ll be able to collect a lot of consumer data that can be used to predict the future of your business and also track the changing needs of your customers.

The marketplace business owners can generate a handsome revenue since the service fees etc. are fixed by the marketplace owner. There is no fixed amount set anywhere, it’s completely based on your target audience and their ability to pay.

The user engagement is substantially high when compared to traditional business. Since people love to avail their products and services online - a marketplace business model could be one of the ways to increase traction towards your business.

An online marketplace business will require less to no administrative expenses therefore, the profit margins are high. When you are a marketplace business owner, you can easily connect with your customers by using social media and a website.

What are the trending marketplace business models that you can utilize for your business?

These are some of the marketplace business models that function in the industry. Let’s take a peek at them.

1. Sharing economy business model

Sharing economy is where both the users and the service providers can use the same platform to book or list their services.

For example, Airbnb has an online platform that is used by both the user for booking a vacation rental property and the user can also become a service provider and list rental properties in the marketplace platform.

2. Peer-to-peer marketplace business model

The peer-to-peer marketplace business model is similar to that of the sharing economy. But p2p marketplace is majorly used to connect two users instead of two businesses. And the customer board differs for customers and the service providers.

For example, Uber has a separate app for customers and drivers. The riders cannot book a taxi using the driver account and vice versa.

3. On-demand marketplace business model

The on-demand marketplace business model provides access to the users and the service providers to find each other under one platform. The on-demand economy is mostly based on service delivery. For instance - food delivery, beauty salon services, logistics services, dog sitting services, etc.

Want to read about how to create a dog-sitting app like Rover? Go ahead and click here!

4. Freelancing business model

Have you heard of Fiverr? Freelancers or gig workers post their services in this app and people who are in need of such services connect with them and they mutually get benefitted.

The services such as content writing, digital marketing, graphic designing, website designing, programming, etc. can be availed for the rates fixed by the freelancers.

What are the marketplace metrics to know about?

Whether you are a B2C or B2B business these are some of the metrics that you should have a track over to know how far your marketplace is performing in the market.

1. Average Order Value: This helps you understand the performance of your AOV better than your competitors. AOV= Total transaction value - Total sales
2. Gross Merchandise Value (GMV): It helps you understand the total value of goods and services that got sold on your platform. GMV = Average Order Value X Total Sales
3. Take Rate (TR): It helps you understand the standard of your marketplace platform and how far it is positively growing. Take rate = (Commission + Fees) / Total sales
4. Net Revenue: It helps you understand the revenue you generate from the platform after paying your taxes. NR = GMV * Take rate
5. Customer Acquisition Cost (CAC): It helps you understand how much you spend on acquiring one new customer. CAC= Sales & Marketing costs / No. of . new customers

Conclusion

Finding the right place to develop your online marketplace business could be a little difficult.

Let’s see what we can do.

Would procuring a ready-made marketplace solution be more helpful?

🧠I thought so!

Pick one (or more!) of your choice and get amazed with the results.