The marketplace business is one of the most profitable business models. After all, as a marketplace owner, you don’t have to pay for inventory or spend time running services. Instead, it provides a platform and Iceland Phone Number receives payments based on all transactions or as direct payments. Income increases exponentially as the market begins to expand.
It’s not saying that the marketplace is easy. According to Harvard Business Review , one of the main reasons marketplace platforms fail is that they don’t know which user base to charge and which user base to subsidize.
Not understanding how to price your market may mean that your business will be defeated by all the competition there. Take advantage of one of the first ride-sharing services, the sidecar. It grew slowly and steadily without much external funding.
You know what happened next … Uber and Lyft took over because they knew how to attract both sellers and buyers with their pricing strategies. Sidecars never became as popular as these ride-sharing companies.
Here’s how to choose the right pricing strategy for your marketplace:
Or look at Etsy. Fees are strategically lower than Ebay and other competitors (often 10%) (5% before 3.5%). For Etsy, it makes sense to price such commissions in order to establish themselves as a creative champion.
Therefore, it is very important to understand your pricing strategy. The success of your market literally depends on it.
Which market price strategy is right for you?
There are various pricing strategies in the marketplace based on business model , competition , and so on . The most common pricing strategy is fee-based pricing. Reduce all transactions. However, there are other options, so I’ll briefly explain all of them.
Various market price models
Commissions consist of chunks of transaction prices. Fees are relatively easy to implement and are one of the most common market pricing strategies. Most large platforms, such as Airbnb, Etsy, and Upwork, require a fee.
You may create different commission levels. Premium sellers may be subject to reduced commissions and other benefits. For example, Upwork offers different commission levels depending on the lifetime value of the project. Airbnb offers superhosts different types of perks.
You can request a subscription, which will mean that people pay you monthly to use your platform. The most well-known service (though not a full-fledged marketplace) that works with subscription fees is Amazon Prime.
You can charge for the list. For example, Etsy charges a list fee for each product list.
Your customers can pay for advertising to get more visibility on your platform. One of the marketplaces that does that is Yelp. This allows businesses to purchase ad lists to increase search counts.