When talking about successful marketplaces the same cohort of unicorn companies always comes to mind: Uber, AirBnb, Amazon and Farfetch (along
When talking about successful marketplaces the same cohort of unicorn companies always comes to mind: Uber, AirBnb, Amazon and Farfetch (alongside a couple of others). After all, they are valued at $1B+ for a reason and fellow platform entrepreneurs could (and should) learn from them.
The other marketplace cohort that might not be as well known globally but definitely worth drawing inspiration and learning from is China’s platform leaders: the Alibaba group marketplaces (Taobao, Tmall, Alibaba, Juhuasuan, 1688, Aliexpress) and JD.com. I want to draw your attention to how they monetise their marketplaces, and hope you get some inspiration and make more money as a result of it (lofty goal but one can hope!).
First, let’s lay some foundations. Multisided platforms, Chinese or not, generally monetise one or more sides. Some of the most widespread marketplace monetisation strategies are the following,
Given marketplaces' relatively thin margins (that we discussed last week) it doesn’t take a rocket scientist to understand that the most successful marketplaces adopt hybrid (aka multiple) revenue models to finance their growth. For instance, Amazon (referring to the marketplace part here) takes 6-20% sales commission, heavily commercialises on advertising/promos, charges pro vendors listings and membership fees, and also offers warehousing and fulfillment solutions at extra costs. That’s quite a solid marketplace commercial strategy right there.
If you look at the Alibaba Group marketplaces or JD.com though then you will discover an even wider and more interesting monetisation menu. As a rule of thumb, Chinese marketplaces charge lower sales commission compared to their Western counterparts but make money on other things. For instance, if we look at Alibaba marketplaces they make money via 20+ revenue streams,
JD.com is less creative than Alibaba when it comes to monetisation, however they also offer a couple of interesting commercialisation options,
Adopting multiple revenue streams not only generates more money for marketplace operators and diversifies risk, but it frequently offloads heavy charges from one side of the marketplace and offers greater flexibility and alternative “payment” options to all parties involved.
Do you know of other interesting ways to monetise a marketplace? Share in comments!
A simple vendor onboarding process is essential for the success of online marketplaces