How do online marketplaces make money ?(Amazon, e-bay, Flipkart etc.)

It is obvious that no one works for free. An online marketplace business generates a lot of profit for its owners. Amazon, eBay, Walmart, etc., are some of the most profitable companies globally, but the main question is how do these online marketplaces earn money? And what can we learn from their business model? 

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This article will look at the business models of some online giant marketplaces, which will eventually help you if you are planning to start your marketplace.

Ways from which online marketplaces make money?

Online marketplaces have many ways to earn profit. Some of the most popular methods are as follows:

#1 Listing fees from sellers

Listing fees is one of the most common and reliable ways of earning for online marketplaces. Giants like Amazon, eBay, Walmart, etc., charge a listing fee from sellers to list their products on their website. Listing fees provide a stable income to marketplace owners, which helps them increase their profit and helps them to sustain in the market for a more extended period. Listing fees is different on different platforms and generally very affordable for sellers.

#2 By charging a commission on the sale

The commission is the most common way of earning for marketplaces like Amazon and eBay.They charge some commission on every product which the seller sells from their platform. The commission is a scalable earning model due to which online marketplaces make billions of dollars every year. eBay uses this earning model on a vast scale and charges 2-12% commission on the selling value of every product.

#3 Advertising and other paid services

Advertising is a good source of earning for marketplaces and a great source of promotion for sellers. Advertisement is an excellent method to promote a product on any website, which eventually increases sales and helps in earning a lot of profit for sellers and marketplaces.

#4 By offering paid services to customers

Generally, online marketplaces offer paid services to their customers. They charge a fixed amount from their customers and provide them some premium services like 24×7 support, fast and free delivery, early access on sales, and many more benefits they don’t offer to their regular customers.

For example, Amazon offers its premium service Amazon Prime to its customers. It charges a fixed amount from its customers and gives them early access on sales, fast and free delivery, extra discounts, and access to its entertainment channel, Amazon Prime Video. Amazon prime video is an excellent source of entertainment, and many people buy Amazon Prime only for Amazon Prime Video.

Amazon also offers a premium subscription to its online reading platform, amazon kindle, and earns a lot of profit from it.

Amazon premium service is successful because it is providing value to its customers. So if you are planning to launch a premium service for your customers, you must provide something valuable to your customers; otherwise, no one will pay for your premium services.

#5 By charging delivery fees

Almost every online marketplace earns 10-20% profit on delivery fees. Delivery is the primary factor in the success of any online marketplace. They deliver early they grow. That’s why every online marketplace invests in delivery on a large scale, due to which cost per delivery reduces, and they earn a profit of 10-20% on every delivery. Although it does not contribute a lot to their overall earning but in the end earning is making.

#6 By Launching their product

Nowadays, many online marketplaces are launching their product to increase their revenue. Since they are selling their product on their platform, they do not have to bear any listing, advertising, and branding cost, which makes their product more profitable, and they earn a lot of money by selling it.

For example, Amazon has launched its product Amazon Alexa, Amazon Echo Speakers, etc. Flipkart has launched its fitness band, and many other online marketplaces also found their own branded products.

#7 By selling second-hand products

Selling second-hand products is becoming more profitable for online marketplaces. Nowadays, they are launching memorable exchange offers on many products to collect second-hand products from their customers and increase the sale of new products. After collecting second-hand products from their customers, they spend some amount on their repairs and afterward sell them on their platforms and earn a lot of money.

For example, Flipkart, a subsidiary company of Walmart, owns a dedicated platform for second-hand products. It sells all the products collected on exchange offer by repairing them properly and earns a lot of profit.

Conclusion

There are many ways of earning from the online marketplace business model. You can become a seller and sell your good and services on various e-commerce platforms like Amazon, eBay, Flipkart, etc. or you can start your online e-commerce website or an online marketplace business and earn a lot of money from listing fees, commission on the sale, advertisement, paid subscription from customers, by charging delivery fees, by launching your product or by selling second-hand products. Whatever you do but you can only earn profits by adding value to the life of your customer. So customer satisfaction should be your primary motive as the customer will only pay you if he finds satisfaction in your product or service; otherwise, he will tell his friends and family not to buy any product from your platform.

Frequently Asked Questions

Which paid services does amazon offer to its customers?

Amazon offers its premium service Amazon Prime to its customers. It charges a fixed amount from its customers and gives them early access on sales, fast and free delivery, extra discounts, and access to its entertainment channel, Amazon Prime Video. Amazon prime video is an excellent source of entertainment, and many people buy Amazon Prime only for Amazon Prime Video.

How does ebay use the commission model?

eBay use this earning model on a vast scale and charges 2-12% commission on the selling value of every product.

In how many ways do online marketplaces earn profits?

Online marketplace business and earn a lot of money from listing fees, commission on the sale, advertisement, paid subscription from customers, by charging delivery fees, by launching your product or by selling second-hand products.

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