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Online Marketplace Business Plan

08-13-2021 04:03 PM CET | Business, Economy, Finances, Banking & Insurance

Press release from: YourRetailCoach

Online Marketplace Business Plan

Online Marketplace Business Plan

Understanding the revenue model of a marketplace.

A marketplace business model ( ) is a platform that connects buyers and sellers. They provide a platform for the two parties to interact and complete a transaction. A marketplace model has a buyer and a seller. The buyer can be a business entity or an end customer, and the seller can be a business entity or an end customer depending upon the model of the business.

How are online marketplaces generating profit? ( ) What are ways to monetise an online marketplace? What is the revenue model of a marketplace?
Since it is a platform, how do marketplace businesses generate revenue?

· Sign Up fees to Sellers

o Generally, once the website has gained traction, they can charge the sellers a fee to sign up. It is called onboarding fees.

· Subscriptions

o Subscriptions or membership fees can be charged to consumers/buyers in lieu of some features or additional services
o Very similar to this is a freemium model approach. The website is free to register, but with only a limited set of features visible to access, the buyers or sellers could become premium members to access the entire website.

· Listing Fees to Sellers

o Generally, the marketplace model may allow a few SKUs to be listed in exchange for some fees and post that limit charge per SKU to be listed. This is something which is common in giant supermarkets.

· Commission on Sales

o The chunk of revenue comes from this portion Commission on sales. Per transaction, the marketplace generally charges a commission, which is their core area of revenue. The commission may vary as per category to category- depending upon the general margin structure.

· Payment Gateway fees

o Though uncommon nowadays, the marketplace business may charge a payment gateway usage service fee to the sellers (in general). Digital payment methods have become a norm nowadays, and without them, it is difficult to do any transaction.

· Selling Ads (promoted brands, banners for display etc.)

o The second most core source of revenue for a marketplace business is selling ads. There are tons of sellers offering similar services and products. To compete, one would like to be visible right at the top. These “slots” are paid ad slots that could be purchased from the marketplace to get a better “visibility”. They are generally denoted as “Ad” or “Promoted” to be transparent to a customer.
o Apart from visibility slots, the marketplace can sell banner ads – this is generally useful for new sellers/brands that want to create a brand image. These banner ads are also known as carousels or Tiles.

· Featured Stores

o You would have seen “stores” on Amazon. Dedicated stores to that brand – which is done in collaboration with the marketplace. This special visibility of assortment generally comes at a premium to the seller.

What are the areas to be considered while writing a marketplace business plan? And How do you validate your Marketplace business idea?
Writing a marketplace business plan ( ) is a must. To start an online marketplace, It should cover:

· Researching your target Audience: Identify your audience. Both sellers and buyers. You would need to do a demand analysis study to identify which segments of the audience are lucrative enough to target. Apart from segmentation and demand analysis, you also need to do competitor analysis to identify your threats and differentiating factors. This is the step that helps you understand the viability and feasibility of your marketplace business idea.
· Revenue Model: As stated earlier, identify what your revenue sources are going to be.

This is a key area of any marketplace business idea. The options are :

o Sign Up fees to Buyers
o Listing Fees to Sellers
o Commission on Sales
o Payment Gateway fees
o Selling Ads (promoted brands, banners for display etc.)
o Featured Stores
o Membership plans to buyers offering a set of differentiated services

· Financial in Place: Having a marketplace financial model is the stepping stone to success. A sales projection for the next five years is required. It will help you in understanding

o Your Cashflows
o Breakeven points
o Allocating money for branding and promotion
o Capital required

· Operations: Identifying the building blocks of the business. It includes

o Sellers: What would be your business strategy ( ) to acquire them and keep them satisfied
o How do you make their onboarding smooth and easy?
o How do you verify the credibility of their documents and business?
o Operation and Product Aspects
§ What Product range is to be listed (catalogue management)
§ Which Payment gateway to be used?
§ Order flow management features
o Marketing: The strategy around promotions as that is what is going to get you both the sellers and buyers
o Customer Relationship Management
o Maintaining and managing the software/code

· Marketplace Features

o Another reason for failure is building and spending time and effort on features that consumers do not use. Start basic, only with essentials. And develop gradually. Start your differentiating factor. You need to consider essential elements from a buyer, seller and marketplace side- all three sides.

· Launch: the last step is the actual launch to consumers and sellers.

o Plan for launch
o Roll out a fundamental and essential version
o Collect feedback and improve
o Ensure experience to both buyer and seller
If you have a market business plan idea in mind- get in Touch with YRC, and we shall help evaluate it and come up with a concrete business plan.
Get advise for Retail Business Consulting :

Pune, India–411016
Phone: +91-9860-426-700

YRC is a Management Consulting Company, especially for the B-C Sector.
Our expertise lies into designing of Standard Operating Procedures (SOPs), Franchise Development, Strategy & Operations services, Process Audits & Training.
We help companies to organise their operations and expand through best management practices.

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