How to make a profit from an online marketplace. Top 6 marketplace monetization models
Check out an ultimate guide to marketplace monetization models that will allow you to make a profit. Learn how to choose a revenue model for your project.
When building a marketplace, it is crucial to take into account various aspects, including scalability, high availability, performance, and security. Ensuring a seamless customer experience is another priority but to gain popularity, an organization has to attract vendors. If a company is able to engage large merchants, their audience is likely to follow them and register on a marketplace application.
Furthermore, consumers are not willing to connect to the system that does not satisfy demand in terms of goods, services, and prices. As the number of brands increases, so does marketplace appeal. In addition, since sellers do not risk anything when joining the platform, it is easier to connect them first. Therefore, drawing the attention of providers is a key task for marketplace promotion.
This article describes the best strategies for attracting vendors to your online marketplace. Let’s get started.
Top 7 strategies to attract vendors to a marketplace platform
1. Conduct competitor research and come up with better conditions
Before building a marketplace platform, it is important to analyze competitors and discover what terms they offer. After conducting this research, you will be able to come up with better conditions to sidestep rivals.
To engage merchants, you can get the following ideas for marketplace promotion:
- Set up a lower commission. When launching a marketplace in a highly competitive environment, it is reasonable to provide reduced fees in comparison with other apps. This way, sellers are more likely to choose your system.
- Create different pricing plans. Applying a combination of monetization models, you will enable sellers to choose the most convenient option, for example, commission per transaction, listing fees, and monthly/annual subscription. Thanks to this, you will fulfill the business needs of all sellers.
- Offer a free trial to try out marketplace functionality. When thinking about how to promote a marketplace, the first strategy that generally comes to mind is a trial period. By providing the opportunity to operate on a marketplace application without charge, you will manage to attract vendors much easier, boost their satisfaction, and increase credibility in an online marketplace platform.
2. Deliver functionality for business process automation
When creating an online marketplace, it is essential to deliver the features required for automating various business processes. These modules involve:
- A data visualization dashboard. A company should allow sellers to visualize data such as customer behavior insights, sales volume, as well as the number of product views and purchases.
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Order management. To attract vendors, you have to provide them with the possibility to generate invoices, process orders, and track payments. In addition, it is important to set up order sorting by date, coupon code, and payment method. With this functionality, companies streamline order management and improve efficiency.
In order to deliver this module, engineers can integrate marketplace software with an application programming interface (API), for instance, BigCommerce Orders or Salesforce Commerce Cloud. Check out third-party services—for enabling online payments, notifications, etc.—that you can use when building a marketplace.
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Inventory management. If you want to create a marketplace for retailers, manufacturers, or wholesalers, it is crucial to let them manage inventory through the system. With this aim in view, software experts can use an API, this way avoiding the need to implement this functionality from scratch and saving you costs.
For example, by using the Fulfil.IO REST API, organizations can track stock status in real time with RFID tags and barcodes. The tool also allows for automating business processes like procurement and warehousing. Hence, it is crucial to include this module when making an e-commerce marketplace platform, a digital pharmacy marketplace, or another type of solution.
3. Implement data analytics to analyze customer behavior
Data analytics is vital for gaining actionable insights into user behavior and improving the efficiency of advertising campaigns. By employing data analytics, vendors can monitor a wide range of metrics, involving lifetime value, consumer engagement rate, the number of product views and purchases.
Companies will also be able to identify buying habits and reasons for churn. As a result, it is possible to ensure a better customer experience and increase sales. Therefore, data analytics may become a governing factor for merchants when choosing a digital marketplace platform.
4. Provide ease of platform use
As it may be difficult to use a sophisticated software system, it is crucial to ensure ease of use to attract vendors. For this purpose, you need to develop an intuitive interface and provide smooth navigation. Thanks to this, people who do not have a technical background will be able to interact with a marketplace application without spending a lot of time on learning.
5. Assist vendors in sales maximization
When building a marketplace platform, you should provide vendors with the possibility to easily manage sales and draw the attention of customers. For this purpose, you can implement the following features:
- Promo codes. Allowing users to purchase certain products at lower prices, promo codes contribute to the improved shopping experience and increased sales.
- Sales labels. They serve for marking discounted goods or services to attract buyers.
- Special offers. With the view of boosting consumer engagement and raising the conversion rate, you should include product categories such as shares and discounts. In addition, software engineers can set up a notification system that will instantly alert users of discounts, happy hours, etc.
6. Reach out to vendors through various channels
With the object of attracting merchants to a marketplace app, it is reasonable to reach out to them on similar platforms, online forums, business listings, and social media communities. Another option is to visit offline events such as meetups and conferences.
When outlining a marketplace promotion strategy, you should create a list of merchants that will be potentially willing to join you and contact them. A good case in point is how Airbnb used Craigslist—a US classified ad website—to draw the attention of property owners and drive traffic to the marketplace.
Each time a new listing in their industry was published on Craigslist, the startup founders manually emailed hosts and suggested listing their services on Airbnb. Thanks to this approach, Airbnb was able to engage homeowners and increase the popularity of an online lodging marketplace.
Soon, Airbnb launched a Facebook advertising campaign to showcase to vendors the potential benefits of using the system and renting out their homes. What’s more, the team wrote a script to automatically inform people publishing new listings on Craigslist about Airbnb.
Since then, the company has been continuously improving its marketplace by extending functionality and making design revisions. At the moment, Airbnb is the worldwide leading vacation rental marketplace, which is used by 4 million hosts and over 900 million guests.
Find out how to develop a website like Airbnb, including cost, timeline, and top-priority features.
7. Create a blog to engage vendors and increase trust
Keeping a blog is another effective strategy to attract the attention of merchants. With a blog, it is possible to showcase expertise, inform about the latest news and new marketplace functionality, as well as publish relevant statistics, such as the number of customers and sales generated through the platform.
As a consequence, you will increase trust in your service. By optimizing articles for search engines, you will improve Google search rankings and drive traffic to a marketplace website.
Many well-known marketplaces make use of blogs to engage vendors, involving eBay, Etsy, Uber, Zocdoc. For example, businesses can find on eBay a range of topics, covering inspiring seller stories, announcements, financial and e-commerce news. The organization also writes articles demonstrating marketplace features and provides various reports.
Zocdoc is a popular online healthcare marketplace that employs a blog to share technical expertise. For instance, the company describes how to use data to deliver better solutions to patients and how to achieve high availability with the help of technologies.
Now, let’s consider a practical example of Airbnb to find out how this globally renowned company attracts vendors and builds trust with them.
A practical case: How Airbnb attracts vendors
To attract hosts, Airbnb employs a variety of techniques and approaches. For example, when the marketplace was initially released, the founders went to New York to personally communicate with homeowners and take high-quality photos of properties to upload them on a vacation rental marketplace. This allowed Airbnb to increase the trust in the platform while improving the customer experience.
Additionally, the startup launched advertising campaigns to draw the attention of providers and describe the benefits of registering on Airbnb. Soon, Airbnb decided to stage events that encouraged discussions and experience sharing between property owners. Now the organization continues cooperating with hosts to collect their feedback and meet business-specific needs.
Since risk is among the primary vendor concerns, Airbnb implements user identity verification via a phone number and email. What’s more, a marketplace application allows for checking out reviews for guests left by other keepers. If testimonials are positive, hosts can feel safe when renting out rooms to these travelers.
To raise credibility, Airbnb also offers compensation for property damage to protect service providers against incidents. With the view of facilitating the process of running a business, the company undertakes the responsibility for cancellation transaction management and rent payments, involving various surcharges and cleaning fees.
In order to help vendors maximize sales and generate revenues, the organization makes pricing recommendations based on their property characteristics and other prices set for similar accommodations.
Summing it up
To succeed in the market, it is essential to attract vendors. By drawing the attention of large companies, you will engage their audience that would likely to follow sellers and register on the marketplace platform. As soon as a marketplace application reaches a critical mass of merchants and their customers, a self-reinforcing cycle will be activated. Aiming to increase sales, new brands will come to the marketplace, as surely as consumers.
With the object of filling out a niche and outrunning competitors, it is reasonable to outline a marketplace promotion strategy before implementing a software project. Research the industry-specific needs of service providers and identify features that can satisfy them. It is also important to leverage a combination of monetization strategies and deliver functionality that will allow for easily operating on a marketplace.
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