The marketplace business model, explained 🙂
The most common business model is:
- a monthly subscription, usually ranging from €20 to €50
- a commission on sales, usually ranging from 7 to 25%, with an average 15% (see below)
In Western Europe’s leading e-commerce countries such as UK, Germany and France, marketplaces are rarely willing to negotiate the pricing for their services.
In the fast growing e-commerce areas such as central and eastern Europe, due to historic competition of local partners, marketplaces are willing to sometimes negotiate marketplaces commissions.
So don’t spend time negotiating marketplaces commissions in Western Europe and instead, benefit from Plugmystore’s pre-negotiated agreement with several partners to bring 6 months free subscription at account start! And remember that some marketplaces like Amazon are charging a single monthly subscription for all 5 marketplaces: Amazon UK, Amazon Germany, Amazon France, Amazon Italy and Amazon Spain. Several other international players such as Ebay or Pixmania offer the same policies.
What are sellers paying for?
Marketplaces are running high traffic, high visibility sites. This needs development of new functionalities to follow e-commerce trends, maintenance, and services such as credit card payments which do cost you some % on your website. Some even provide advanced payment features to the end customer such as fragmented payment on Cdiscount (France). Some marketplaces have advanced features such as support of logistic networks such as DHL’s Packstation (Germany) or Mondial Relay (France).
Most of the spendings of a marketplace is toward online advertisement with gigantic SEO and BI to make sure that they are always placed first in search engines such as Google, driving most of the search traffic for e-commerce in Europe.
Finally, marketplaces are sometimes doing some push marketing on their own customer base and depending of the marketplace, this is something that may be charged in the commission or paid additionally.
Negotiate and lower marketplaces commissions?
Marketplaces in Western Europe often have an “Amazon-like” business model: 7% commission on electronics, and 15% on all the rest. From our experience, this is not something that you will be able to influence.
In eastern Europe, the Allegro group is driving most of the marketplace business (2016) and its historic conditions are slightly more profitable for sellers with marketplaces commissions ranging from 4 to 8% depending of the product category. The Allegro.pl platform in Poland drives itself over 50% of the e-commerce market in Poland. That’s certainly a good incentive for the marketplaces to negotiate marketplaces commissions in that market.
How low will you be able to negotiate a marketplace commission?
Well, first, remember to analyze what you pay for:
- Does the marketplace process credit card payments?
- What features do they offer?
- Do they offer advanced features (payment / logistics) that you are not able to offer on your website?
- Do they often rank first on search engines or before your own site?
What is your experience with negotiating marketplaces commissions? Share it with us in the comments?