What is a Multi-Vendor Marketplace?
A Multi-vendor marketplace is a platform where customers can purchase goods from different suppliers. The platform features multiple vendors, each having an account on the marketplace, and allows them to add and display products on the website. The sellers can focus on their core competency, providing customers with the most relevant products. In contrast, the marketplace owner is responsible for attracting customers, storing products, handling logistics, or facilitating payments.
Revenue Models for a Multi-Vendor Marketplace:
- Subscription or membership fee: Registered sellers can host their products on the multi-vendor platform for a fixed price paid in the monthly subscription. Marketplaces provide several subscription options for arranging membership, depending on the volume of features delivered. The platform has to become valuable enough so that both customers and sellers gain enough benefits from using it.
- Commissions: Marketplaces charge sellers a specific percentage commission for each transaction. It is one of the most commonly applied business models in marketplaces and is an attractive proposition for buyers and sellers. They only have to pay the commission after a buy or sell transaction (receive a real value) on the platform. This strategy is lucrative for marketplace operators as they receive funds on every sale on the website. The more transactions are performed on the marketplace, the more revenue you generate.
- Payment Processing Charges: If the marketplace owner processes the payment, they charge a fee for the amount processed in the form of a percentage or a flat fee.
- Logistics: Another additional revenue source is offering logistics and shipping services to vendors by the marketplace owner or affiliating a third-party provider.
- Listing Fee: E-commerce websites charge sellers for listing their products on the website for sales and exchanges. The listing charges will be based on the value of the products listed and the number of days to keep the products. This strategy is widely used for non-monetary transactions and when the listings have a high potential value such as OLX, Click.in, etc. Listing fees may be regular or premium depending on the type of visibility they provide and are often called featured listings
- Advertising: Since multiple vendors are vying for the same customers, online marketplaces allow vendors to advertise on the platform to grab more eyeballs.
- Fulfillment Fee: It is the fees paid for the products in the warehouse for shipping. This fee is charged for the space utilized by the product in the warehouse.
Wrapping Up
Deciding on a core revenue model in the initial stages itself is beneficial for the business as it gives clarity in operations of the business and as the business grows, more approaches to generate revenue can be incorporated into the business model.
For a detailed insight on how to build a Multi-Vendor Marketplace App in 2021 do visit our website!
