What is a Marketplace Business Model?

A marketplace business model is a type of eCommerce platform that facilitates the end-to-end transactions between a seller and a buyer. The marketplace acts as an intermediary in the process.

You can turn your single vendor ecommerce store into a larger marketplace with thousands of sellers and higher earning potentials. Try the Shipturtle marketplace solution to get started.  

Different types of online marketplace business models

Typically, an online marketplace business model is classified into 3 types: that are business business (B2B), business-to-consumer (B2C), and consumer-to-consumer/peer-to-peer (C2C/P2P).

In the following sections, we will also be sharing other revenue-related marketplace business models for better reach and understanding.

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Business-to-Business (B2B) marketplace model

The B2B marketplace business model facilitates transactions involving business-to-business. There is no role for individuals. The marketplace model here acts as an intermediary between manufacturers, distributors, wholesalers, and suppliers as a whole.

B2B business models connect one business to another through a marketplace business model. A classic model marketplace example is Walmart.

Business to Consumer (B2C) marketplace model

The B2C online marketplace model facilitates transactions involving businesses and individuals. In this marketplace business model, businesses sell their goods and services directly to consumers through an e-commerce platform that acts as an intermediary.

The marketplace model in this case requires the business to offer an end-to-end shopping experience for consumers. The best B2C online marketplace example is the Amazon e-commerce platform, which is a widely successful model marketplace.

Consumer-to-Consumer or Peer to-Peer marketplace model (C2C/P2P)

The C2C/P2P marketplace model involves transactions between individuals to individuals. Consumers themselves act as sellers and buyers in this marketplace business model. Goods and services are initiated among peers or consumers as per their needs and requirements.

The best example is Uber cab services, where drivers accept consumers' rides based on consumer requirements. Riders and drivers use the C2C marketplace model technique in this effective marketplace model.

Creating an Online Marketplace? Consider These Fundamentals

Before diving in, consider these essential building blocks that define successful platforms.

Knowing Your Market:

This is the golden rule for any marketplace model. Identifying your niche (vertical marketplace) or offering a broad range of products (horizontal marketplace) is crucial.

• Vertical Focus: Here, you cater to a specific audience and their needs. Think Airbnb for accommodations or Upwork for freelance services.
• Horizontal Reach: These platforms offer a wide variety of products across different categories, like Amazon or Panjo.com.

Geographical Scope:

• Hyperlocal Focus: This emerging trend caters to a specific geographic area, connecting buyers and sellers within a smaller, defined location.
• Global Reach: Some marketplaces, like eBay or Walmart, operate internationally, allowing you to sell and buy products across continents.

Types of Revenue Model-Based Online Marketplace Models

Having understood the B2B, B2C, and C2C marketplace business models that operate under the fundamentals of vertical, horizontal, and global marketplace. Let us now have a detailed look into the 7 marketplace business models based on revenue generation.

There are many marketplace software that offer these revenue models. Here are the types of marketplace revenue models to consider as per your profit generation needs and requirements.

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1. Commission Model

This is one of the most common forms of revenue-based e-commerce marketplace business models. The marketplace model provider charges a commission for every transaction made. This is a typical commission revenue model for businesses and is widely used in B2C online marketplaces.

For example, if you order your food from Uber Eats, the platform charges a fixed rate or a certain percentage of the transaction amount. The restaurant will pay the commission amount from your entire order amount. This model marketplace can give high-income profits to businesses with huge sales in the B2C online marketplace space.

2. Subscription/Membership Model

This subscription/membership marketplace model is often used as a very common form of B2C online marketplace. In this, a subscription is required to access the goods & services offered by the marketplace business model. Both buyers and sellers may have to pay a certain amount to use the marketplace.

This marketplace model helps a gradual income growth and builds a trusted consumer community. A classic example is the Apple Music subscription or Spotify, OkCupid subscription plan. Once subscribed, you have access to the premium membership benefits commonly seen in model marketplaces.

3. Freemium Model

Another common marketplace business model is where basic services are offered for free and for added features and experience, the platform charges a premium service fee. The subscription model may seem similar to the freemium model, but both are different marketplace models.

One of the main features of this model marketplace is that consumers can try a product or service before paying for the premium services offered. This marketplace model helps gain a larger consumer base due to the free basic services on offer. Some of the brands that use this B2C online marketplace model are YouTube, Grammarly, Netflix, and so forth.

4. Listing Fee Model

This marketplace business model mainly requires a vendor, seller, etc., to pay a certain fee for every product listing. The model marketplace charges an amount every time a seller lists an item for sale on the platform. If you use classified ads, then the listing fee marketplace model will suit you the best.

Listing fee marketplace models can help businesses earn a quick buck, but huge listing fee requirements can slow growth rates. One of the best examples of this B2C online marketplace is Craigslist, which allows anyone to list anything they want online in return for a small fee or charge.

5. Featured Listings Ads Model

This is an online marketplace model where companies put up featured product listing ads across the website, apps, or landing pages. The marketplace business model offers targeted ad listings for a price tag. This marketplace model offers higher visibility and higher chances of sale conversion on the B2C online marketplace.

A good example of this marketplace business model is Etsy and Zillow. While Etsy offers commission-based marketplace business models, it also offers paid featured ad listings on their platform. Targeted listing ads can quickly help consumers find what they are looking for on a model marketplace.

6. Lead Fee Model

This marketplace model is generally used to gather contact information of consumers from other businesses. This model comes somewhere between the commission and listing models where a consumer lead is accessed for a paid amount. This business model is good for gaining new customers and profiting from them.

It is a good option for companies to invest as per their consumer lead requirement and make a profit out of them by selling targeted products and services. For instance, HomeAdvisor is a good example of this model case. Another example is Thumbtack which offers a B2C marketplace for skilled individuals and artists' requirements.

7. Mixed Marketplace Model

In simple terms, this mixed model uses every online marketplace technique to generate profits. Every model discussed above can be used as per the company's needs and demand. For every revenue-based strategy, this marketplace is used. This revenue generation has many funnels with reaching a larger consumer base and making higher sales.

Remember this model includes all B2B, B2C, C2C, commission, subscription, etc every revenue-based business model. A great example in this regard is Amazon Handmade and Amazon Pharmacy etc.