Learning how to sell your products profitably is one of the exciting parts of being a business owner. This requires knowing where your target customers spend time and putting together a plan to reach them.
Often, this can be achieved by understanding different types of marketplaces. Each marketplace uses a marketplace business model, which is the framework showing why a business exists and how it accomplishes its goals.
But what exactly is a marketplace business model? Let’s begin with the definition of a business model, which is related to the marketplace definition.
Keep reading to find out what a marketplace business model is and how to pinpoint the right marketplace for your business.
Definition of Business Model
A business model is the structure or rationale driving how a business creates value for its customers. It describes the manner in which a product or service is created, how it’s sold, who it’s sold to, the products’ profit margins, and how the business is competitive in the marketplace.
Key Takeaway: Though they aren’t the same, a business model is similar to a business plan. A business model describes the nature of a business’s activities and purposes, and a business plan describes how those activities are accomplished.
Offline Marketplace Business Model
An offline marketplace business model is the marketing, sales, and operational framework used for running an offline business. Sustainable marketplace selling is contingent upon knowing buyers’ and sellers’ needs, price points, demographic characteristics, and preferences.
Your business model may include fixed and variable costs, labor costs, expected revenue, marketing channels, examples of unique selling proposition (USP), and other critical business information. Any offline marketplace business model should include attracting as many relevant, in-person buyers as possible.
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Offline Marketplace Business Plan
The target audience of an offline marketplace will dictate its business model and marketing approach.
For example, the business model of a flea market will differ from that of a retail store. In a flea market, one individual may be both a buyer and a seller. At a retail store, the manager oversees numerous vendors who sell products via the store to public buyers.
A flea market business model should include financial projections about how many people are likely to sell and buy, not just those who will buy. This gives the flea market owner realistic ideas for competitive rent prices, the revenue they need to generate to be profitable, and so on.
What is B2B? Explore the realm of business-to-business interactions and gain insights on how to excel in this dynamic sector.
The business model also includes how a company or event differentiates itself from competitors. Does your business sell a hyper-niche product? Is your product one of seasonal demand? Does your product have a novel feature? Does your business reach a specific demographic that other businesses have been unable to?
Answering these questions clarifies the strengths of your business model. Every company is similar to at least a few others, but you should be able to identify why your target market should choose your products over competitors’.
Online Marketplace Business Model
An online marketplace business model is the structure an Internet-based marketplace uses to attract buyers and sellers, sustain revenue, and remain competitive. It’s similar to offline business models in some ways and different in others. There are overhead expenses, eCommerce accounting tasks, eCommerce marketing strategies, and target audiences.
There are several ways to differentiate offline and online marketplace business models. One, customers bring different expectations to offline versus online shopping. At a retail store, customers know they need to take the product to their car with them. Online, consumers expect fast and low-cost shipping and handling. These consumer trends place less responsibility on the buyer and more on the seller.
Two, customers have a much broader range of products to choose from online. When you’re at a brick-and-mortar location, the only products available to you at that moment are what’s right in front of you. Online, you can be shopping in a completely different store within seconds. As such, your store must include at least a few high demand products that are listed at competitive price points.
Three, customers shop for different types of products online versus offline. Clothing, technology products, books, trips, and toys are examples of worthwhile products to sell online. Mattresses, cars, swimsuits, musical instruments, and furniture tend to sell better offline, largely because consumers want to try them first. Going with a marketplace business model based on your business’s niche is a wise choice.
Types of Online Marketplaces
If you’ve decided online marketplace business models are your thing, you then need to decide on the right marketplace to sell in. There are three basic types of online marketplace business models:
- Consumer to consumer (C2C). In this online marketplace business model, anyone who has products to sell or wants to buy goods can do so. You simply need to list the goods you’re selling or use the search bar to find what you’re interested in. This is called consumer to consumer, or C2C, because you don’t need a business license or specific credentials to sell. eBay is a great C2C example and one of the best marketplace apps for the best side hustles. C2C marketplaces are an inexpensive way to get started if you don’t have the resources necessary for large operations.
- eCommerce and retail sites (B2B and B2C). An online retail store is the essence of eCommerce--physical products being sold through a website. Business owners look for (or make) popular goods, list them on their website, and sell them to target markets. You can learn how to build an eCommerce website by reviewing eCommerce website examples and using an eCommerce website builder. Luckily, finding the best eCommerce website isn't too much of a hassle. If you want a top-tier digital presence with minimal effort, try BlueCart eCommerce. Our SEO-optimized platform handles your digital catalog, eCommerce payment processing, and store appearance for you.
- Wholesale marketplaces (B2B). A wholesale marketplace is where businesses sell supplies, raw materials inventory, or other products to businesses or consumers. Wholesale supply chains are a key part of understanding B2B meaning and what products go through before reaching retail channels. Make wholesale sales by listing popular wholesale items to sell, and don’t forget to include a minimum order quantity (MOQ) from your buyers.
If you’re looking for a dynamic online marketplace to sell on, look no further than BlueCart’s online marketplace. Our web- and mobile-optimized platform comes with bank-level security and built-in automation tools. There are over 95,000 buyers already on our marketplace looking for products like yours. Book a demo now to see what BlueCart can do for you.
Benefits of the Online Marketplace Business Model
There are multiple reasons why the marketplace business model has become popular. Allow us to share some of them.
- Additional revenue stream. Whether you’re a broadline distributor or sell both retail and wholesale coffee, online marketplaces can be a great additional sales channel. They allow companies to expand their target audience. In fact, one of the benefits of the online marketplace business model is it can be used to expand a business to international markets.
- Convenience for customers and businesses. Clients enjoy comparing different products and services. That’s a major benefit of the online marketplace business model – it allows customers to easily choose products and compare their characteristics. It’s convenient for businesses too. Most marketplaces allow companies to easily upload all their products. Furthermore, they have convenient options related to price management, discounts, and advertising.
- Marketing opportunities. The best examples of the online marketplace business model are famous for their extensive marketing tools. They allow businesses to drive more traffic to the platform and to their products. In addition, the overall marketing cost per purchase is usually better compared to other traditional marketing methods. This leads to increased ROI and better profit margins.
- Scalability. Marketplaces aim to make it easier for more businesses to showcase their products and sign up for the marketplace. That’s why they develop infrastructure and tools that allow businesses to increase their sales through the online marketplace business model. An additional advantage of marketplaces is that they make it easy for companies to sell their products internationally.
- Analytics and automation. Nowadays, the importance of automation cannot be overstated. Through data analytics and automation, businesses that sell products via the online marketplace business model can reduce various costs of processes like marketing, fulfillment, ordering, invoicing, and many more.
Frequently Asked Questions About Marketplace Business Model
What is an example of a marketplace business model?
An example of a marketplace business model is BlueCart Marketplace, an online platform that connects buyers and sellers for various products. BlueCart Marketplace facilitates transactions by providing a user-friendly interface and a secure vendor payment system, making it easier for people to buy and sell goods from all around the world.
What is marketplace model?
A marketplace model is a business model where a platform acts as an intermediary between buyers and sellers, facilitating transactions and interactions between them. The platform typically provides tools and services to enable seamless and secure transactions, and earns revenue through various methods, such as commissions, listing fees, or subscription commerce fees.
What type of business is a marketplace?
A marketplace is typically classified as an eCommerce business, as it operates as an online platform that connects buyers and sellers for the exchange of goods and services. Marketplaces can cater to different industries, such as retail, services, or rentals, and can be focused on B2C, B2B, or C2C transactions.
How does marketplaces make money?
Marketplaces make money through a variety of revenue streams, including:
- Commissions
- Listing fees
- Subscription fees
- Advertising
What are the 3 main types of online marketplaces?
The 3 main types of online marketplaces are:
- B2C (Business-to-Consumer) marketplaces
- B2B (Business-to-Business) marketplaces
- C2C (Consumer-to-Consumer) marketplaces
Can a marketplace be profitable?
Yes, a marketplace can be profitable if it effectively attracts a large user base of buyers and sellers, generates sufficient revenue through its various streams, and manages its operating expenses efficiently.
Building Your Business for Success
Laying the right foundation for your business often requires more work than you may realize. In addition to filling out paperwork and saving money for expenses, you need a keen awareness of both customers and your competition.
Choosing the right business model based on your company’s needs and goals is an important decision. After learning about fundamental business models in this blog post, you’re equipped to launch your business in an environment conducive to its success.