In this digitized 21st century, technology has undoubtedly provided us with convenience and efficiency ranging from our individual lives to macroscopic societies. With the impact of technology, one of the fundamental conventions of our society, “trade,” has also been revolutionized through the introduction of Online Marketplaces in the late 19th century. Nowadays, Multi-billion dollar companies such as Amazon, Facebook, and TikTok all hold elements of Online Marketplaces as a feature in return for revenue.
What are Online Marketplaces
Online Marketplaces are third party based websites or softwares that acts as a platform between customers and sellers. They allow transactions and purchases between the customer and manufacturer through the Internet. Different Online Marketplaces are also designed for different target audiences which may range from single individuals trying to sell their second handed products all the way to multi-billion dollar companies licensing their new product. However, marketplaces generate their profits in various ways.
How do online marketplaces generate profit?
The commission Model
One of the most common business models of all E-commerce is facilitating a small commission fee (Either a percentage or Flat fee) from all transactions made on the platform.
Memberships
Also known as the subscriptions model, customers and sellers can access locked features or promotions for a more satisfactory experience by charging a recurring fee. (For example, discounts, removal of ads, free promotion, etc.)
The Listing Fee Models
This model is targeted to sellers by charging a fee for every product the seller lists on the platform.
Advertisement
Sellers may pay the platform for further advertisements or promotions in sponsoring their product.
Data Monetisation
For Marketplaces with large amounts of purchases and user count, Marketplaces can sell anonymized data to particular researchers or media that seek statistics.
Reference List
Bloomenthal, A. (2023). Ecommerce Defined: Types, History, and Examples. [online] Investopedia. Available at: https://www.investopedia.com/terms/e/ecommerce.asp.
Builderfly. (n.d.). How are Online Marketplaces Generating Profit? - Analysis. [online] Available at: https://www.builderfly.com/how-are-online-marketplaces-generating-profit-analysis/ [Accessed 30 Jan. 2024].
Sana (n.d.). What is an online marketplace? | E-commerce terms. [online] Sana Commerce. Available at: https://www.sana-commerce.com/e-commerce-terms/what-is-an-online-marketplace
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