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How does an online marketplace make money?

Kilka Seller Case Study_Nov 2022
Published on October 23, 2019
Kilka Seller Case Study_Nov 2022

This phenomenon was no sleeping giant to slowly awaken – online marketplaces were born big, bold and immediately open for business.

Indeed analysts predict that by 2020 (so not even a year away), online marketplaces will account for 40 per cent of global online retail^. With already half of Australia’s retailers now selling through such a model* it is clear this is the way for retail both now and into the future.

From the operator’s perspective this model is so compelling because there is not one solitary way to yield return. There are in fact at least half a dozen, each of which is a significant revenue stream in its own right.

So how can your online model ensure it is monetised to its maximum commercial potential?

Commission on Items Sold

The most obvious and prolific of revenue streams comes via a clip from sales. If your platform is eCommerce enabled and a retailer makes a sale, you may take a commission (the rate is variable and depends on your industry).

Seller Subscriptions/Memberships

Income is generated here by charging retailers to be part of the platform. By offering varying tiers of engagement (e.g. gold/silver/bronze) your model is relevant and attractive to a broad scale of operators; from start-up single storefronts to established mutli-store sellers. This stream allows for a lot of flexibility and ensures you can offer a bespoke package.

Lead Generation Revenue

The value of a lead should never be underestimated. Every sale must start from somewhere and monetising leads can be a powerful source of revenue. The model is very accommodating in how you choose to do this.

You may prefer a cost per lead – so charging $x for any email, phone call or store visit your model solicits for the seller.

Alternatively you could implement a fee structure based on the value of leads generated. This concept assumes that the value of a lead equates to the value of the product prompting the enquiry. So an email about a $200 wall print would be valued at $200, a phone call about an $80 shirt would be $80.

Imposing a tiered monthly fee based on a sliding scale threshold of leads can deliver very attractive returns. For example, at no extra cost a retailer can be active on the platform and generate $x value of leads each month. However, the moment they go surpass that lead threshold they need to essentially upscale. This of course then opens the door to even more leads for them, and more revenue for you.

Private Listings (C2C Sales)

This stream enables you to charge private sellers a flat-rate so they may classify their pre-loved product for sale. Private sales transact off the platform and therefore no commission can be charged. Traditionally this revenue stream is monetised later in the piece – in your model’s infancy you will likely welcome private listings at no cost. This helps leverage traffic and data, which of course are valuable currencies for you in their own right.

Display & Media

Once your platform starts to achieve scale then you can consider lucrative revenue streams by way of display and media channels. Don’t forget your blog here – by packaging up full-content offers (banners, feature adverts, and advertorials or added-value editorial) you’re starting to get creative, clever and genuinely bespoke in supporting advertisers, and therefore charging premiums.

Data & Insights

This is your big-picture ace card, and can be used when you have achieved scale and your platform is thriving. By now you are established as the industry’s online destination and with that comes a level of intel that can be highly prized indeed. Over time you have gathered data – how consumers are behaving, what they’re looking for, when they’re looking for it, etc. Sharing this data either via a one-off report or a monthly summary can make smart sellers – or advertisers – on your platform truly savvy.

Of these various revenue streams, subscription and commission appear on face value to impose a bit of a crossroads. Are you going to implement one, or the other? The answer is either, or both. It all depends on the industry and the price points within it. The true beauty of this model is that it can – and must – be shaped in a way that best reflects, serves and stands to benefit its industry. No two platforms should or possibly could be identical and for this reason alone, Marketplacer provides a Commercial Workshop.

What is the Marketplacer Commercial Workshop?

This select group comprises Marketplacer’s most senior and experienced members, including representation from the Financial Department. The team skillfully takes you through what is essentially a reverse-brief process designed to best understand your industry and the eligibility of your business. The team combines this industry-specific intel with its platform expertise to prepare a three-year capital budget model and a full financial strategy to launch your platform.

We strongly recommend this blueprint for best possible success – get in touch to find out more about the workshop or anything relating to an online marketplace.

^Ecommerce Foundation and Nyendrode Business University
*CommBank Retail Insights Report, Edition 8

Published on: October 23, 2019

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