Increased internet penetration and connectivity have significantly changed how consumers behave and shop. Most modern buyers start their purchase journey online and expect to finish it there.
In fact, online shopping continues to grow, and e-commerce sales worldwide are expected to increase by 56% over the next few years, amounting to USD$8.1 trillion by 2026. That’s why brands invest more in having a solid online presence to connect more with buyers and promote their products. One of the latest trends is leveraging online marketplaces to expand reach and drive sales.
An online marketplace provides a centralized platform for buyers and sellers to interact and exchange goods. Ideally, many online shoppers are attracted to marketplaces because they offer convenience, variety, value, and an overall easier shopping experience. Therefore, building an online marketplace is an excellent move as it’s one of the business models that can scale so well.
Notably, you’d want to implement proper monetization strategies to create additional revenue streams in your online marketplace. Here are some tips to consider:
- Consider advertising
Selling ads targeted at your users is an excellent way to boost your marketplace profitability through ad revenue. Mainly, retail media is one of the advertising approaches that can help you increase overall marketplace revenue. It involves serving highly relevant ads from advertisers to consumers within your digital marketplace.
That includes sponsored products ads aimed to promote specific product listings and drive vetted traffic. This way, shoppers can find relevant products they’re searching for and are more likely to convert. And on your end, you’ll generate additional revenue since advertisers will pay you for the extra visibility, clicks, and sales.
Essentially, brands are spending more on digital ads to attract more qualified leads in a tailor-made manner and drive market share. Global ad spending worldwide was about USD$781 billion as of 2022, and the figure is expected to increase, reaching USD$885 billion by the end of 2024. Therefore, this is the perfect time to monetize with ads as an extra revenue stream.
- Apply the commission model
A commission is a small fee charged for every transaction directly carried out on your digital marketplace. It can be a fixed amount or a percentage of the order value. The following are different ways to apply commission fees:
- Charging vendors for transactions completed on the website
- Charging buyers for each successful payment
- Charging both for every transaction on the platform
Therefore, the revenue generated depends on the number of transactions on the platform and their amount. Fortunately, this monetization model scales easily since you earn interest whenever a seller and a consumer have a deal.
And since sellers only incur the costs after getting the value, that is, once transactions are completed, it’s an ideal way to attract new clients to your marketplace. Even so, you must consistently provide user value to encourage more transactions on the platform. Otherwise, online businesses and consumers may connect directly instead of using your marketplace as an intermediary.
- Charge subscription fees
You can charge users subscription fees for using the marketplace. It can be annual or monthly fees to access specific features such as bonuses. However, when using the subscription model, you must deliver superior benefits to marketplace users, which they might not be able to get on other platforms. Essentially, customers may be hesitant to pay a membership fee if they think your website will not offer exceptional value.
Here are some tips to consider when using this strategy:
- Create value that exceeds the subscription costs.
- Offer users a free trial to try out your marketplace functionality; when they’re impressed, it’ll result in increased registrations and subscriptions.
- Provide various subscription plans to accommodate multiple users. Also, you can offer discounts for advanced subscriptions. A recent study shows that over 95% of consumers’ purchase decisions are subconscious. Therefore, discounts are a great way to motivate users to use your marketplace for a better value at a slightly lower price.
- Balance the amount you charge since a high fee may drive away users, and a low price will reduce your income.
Also, you need to track performance metrics like customer satisfaction rate and lifetime value to determine if the strategy is working. This is essential to prevent churn.
- Consider the freemium revenue model
The freemium model entails providing essential services to users for free as an introduction and later suggesting premium or advanced services at a fee. It enables you to deliver the core value of your platform and thus drive more users who may later pay for advanced features essential for their online brands. Notably, the paid services you provide must be attractive and beneficial to users for them to be eager to upgrade.
Conclusion
As an online marketplace owner, you’d want to monetize your platform value to generate extra income and boost profitability. Therefore, the above are some strategies to consider to scale activity and drive revenue. Also, it’s essential to choose the monetization techniques that can create additional income and, at the same time, keep the churn rates low.
