Today’s consumers not only start their buying journey online, they expect to be able to complete it there as well. In fact, online shopping has grown even more than originally expected — U.S. e-commerce sales are expected to surpass $1 trillion for the first time in 2022, a milestone that was originally forecasted for 2024. This trend is not just about B2C buyers — B2B marketplace monetisation is increasingly important in this landscape. In fact, TechCrunch reports that B2B marketplaces will be the next billion-dollar e-commerce startups. According to a calculation by IFH Cologne, a quarter of all wholesale sales are expected to be generated online by 2025.
Yet many B2B marketplaces face challenges: Because there are fewer marketplaces, they are also less advanced and do not offer the same level of user experience (UX) consumers are used to from B2C e-commerce. Whether the product search is inadequate or the payment solution is clunky and outdated, B2B marketplaces are worth the investment because they tend to be more profitable than their B2C counterparts.
Digital Commerce 360 says that in 2021, online sales through B2B e-commerce sites, log-in portals, and marketplaces increased 17.8% to $1.63 trillion. That number is still growing — predicted to hit $4.6 billion by 2025. With these stats in mind, it’s clear that B2B marketplaces are set for major growth, and finding the right monetisation model could mean the difference between being the biggest name in B2B and being an also-ran. But with a variety of monetisation models available in B2B marketplaces, it’s worth getting to know the different models available and how they work. First, let’s explore the most basic question.
Rise of marketplaces
Before we dive into the different business models employed by B2B marketplace operators, it’s important to outline what a marketplace is. Put simply, marketplaces are digital platforms that connect buyers and vendors, enabling them to conduct business transactions in one place. While the concept isn’t exactly new, their relevance has never been more pronounced.
Just a decade ago, there were only a handful of B2B marketplaces across Europe and the UK. There are now hundreds, and this trend shows no signs of slowing. Facts & Factors projects that the global B2B e-commerce market will more than double from $7.35 trillion to $18.57 trillion between 2021 and 2026.
While big name players like Amazon and Alibaba dominate the market of so-called generalist marketplaces, B2B marketplaces often serve niche verticals. As the competition heats up, these B2B marketplaces are racing to offer the best value possible for buyers and vendors, establish their brands, and find a revenue model that is sustainable as an operator.
Overview of B2B marketplace revenue models
Marketplace operators face a unique challenge: they have to provide value for the parties at both ends of the business transaction. Buyers need to be convinced that the vendors’ products meet their standards, while vendors need to be convinced that a marketplace has enough interested buyers before they commit to investing time and resources on the platform.
Part of making a marketplace attractive to both buyers and vendors depends on how an operator chooses to monetise their marketplace. Let’s explore some of the most common revenue models, as well as the advantages and disadvantages of implementing them.
- Commission
- Subscription
- Ads & featured listings
- Listing fees
- Hybrid
Commission
Commissions or transaction fees are arguably the most straightforward channel for monetising a B2B marketplace. In this setup, an operator collects a small fee (either fixed or a percentage of the order value) for every transaction made on the platform. The fee can be charged or split by both the buyer and vendor, depending on the fee model chosen. Because the cost of using a marketplace is only incurred once a transaction is completed, this revenue model is great for attracting new users, particularly if your marketplace isn’t yet well-known within your industry.
The challenge for operators, though, is to provide value on both sides of the transaction throughout the entire customer journey, particularly as it relates to payment and order tracking. If that process is deemed too complex by the parties involved, they may decide to use the platform to connect but privately execute the transaction before an operator is able to collect the commission. According to Sameer Singh, “The effectiveness of this model depends on the combination of complexity and asymmetry. Transactions need to be fairly straightforward or participants should have limited options to circumvent the marketplace.”
Subscription
In a subscription model, buyers and vendors pay a monthly or yearly fee to gain access to a platform. This setup is great for operators because it provides a consistent revenue stream to rely on.
The challenge, however, is convincing buyers and vendors of the value of the platform in the first place so they commit to investing in a subscription. Additionally, a platform needs to continue to generate enough leads and transactions over the course of the subscription in order to fully deliver on the benefits it initially advertised. In this sense, established marketplaces are better suited to implement this model than platforms who haven’t yet made a name for themselves.
Ads and Featured Listings
While many vendors see value in listing their products on a marketplace, some may be wary of the competition such a platform fosters. Ads and featured listings provide an opportunity for certain vendors to gain an advantage over their competitors through increased visibility, while unlocking another revenue stream for the marketplace operator.
This presents two main challenges for operators. Firstly, it can be difficult for operators to find the right pricing structure for featured listings – the size, vertical, and competitiveness of their platform all have a significant impact on the value of such advertisements. Secondly, allowing ads on your platform may undermine trust among buyers and damage the overall reputation of the marketplace. It’s up to the operator to accurately gauge how best to strike the balance between catering to vendors while continuing to offer value for buyers.
Listing fees
Listing fees generate revenue via vendors and (like commissions) can either be fixed or a percentage of product’s value. Additionally, they can be calculated individually, depending on how long a product is posted by a vendor.
In order for this model to be implemented, a marketplace needs to boast a significant enough number of buyers for vendors to be convinced of its value. Some operators choose to charge listing fees only on certain products so as not to scare off users, and few marketplaces rely on listing fees as their sole source of revenue.
Hybrid
For many operators, the best strategy for creating value is implementing a hybrid of several different revenue models. A freemium model, for example, may rely largely on commission fees while also offering tiered subscriptions for users who want to set themselves apart. Similarly, an operator might offer featured listings or charge listing fees to vendors, but only after they’ve established a user base that’s large and loyal enough to be receptive to those features.
Relevance of BNPL-solutions in checkout
In addition to the monetisation opportunities available to marketplaces as a source of revenue, the actual task of an online shop must not be overlooked: Selling products to customers. Without a high number of products sold, a marketplace cannot prevail against the competition in the long term. An important factor is therefore the conversion rate, which is crucial to the success of any online shop. The average checkout abandonment rate is 70 percent. To avoid this, the payment process must be smooth. The decisive factor here is the selection of popular payment methods and a high acceptance rate among existing and new customers.
While almost three-quarters of marketplaces offer payment through their platforms, only half offer invoice payment, despite it being by far the most common payment method in offline B2B transactions. This stands in stark contrast to customers’ payment preference – 95% of B2B customers want invoice payment when transacting online. So an attractive payment process can be a real market advantage for you:
- Higher conversion rate: Buy Now, Pay Later (BNPL) solution “invoice purchase” remains the most popular payment method among B2B merchants, according to a survey by IBI Research. Direct Debit also remains very popular with B2B webshops. BNPL is so popular because it has a positive impact on companies’ cash flow. It allows merchants to place an order first and pay at a later date.
- Bigger shopping card values: In addition to a higher conversion rate, BNPL also leads to larger basket sizes. Marketplaces benefit enormously from this financially. Especially if they work with a percentage commission.
- More new customers: BNPL solutions attract new customers, which in turn makes the marketplace interesting for merchants. In contrast to marketplaces that only offer payment in advance or expensive cash on delivery, comparable marketplaces with modern BNPL solutions have a clear market advantage.
Easily monetise your marketplace with Mondu
Mondu gives you the ability to integrate Buy Now, Pay Later solutions into your checkout without the administrative hassle. Mondu’s solutions – payment upon invoice, Installments and Digital Trade Account – can be easily integrated into your store system and offer an acceptance rate of 90 percent for existing and new customers. You can concentrate on your core business while Mondu takes care of invoicing, dunning and collection procedures.
Mondu also offers you the possibility to monetise your marketplace individually. With a simple contract setup, you can get started quickly and easily with Mondu and measurably increase the financial growth of your marketplace. Benefit from flexible commission and fee structures between you, your buyers, and your vendors. Whether you want to charge your vendors and participate in the adoption of payments on your platform or charge your buyers for payment flexibility, with Mondu, we are prepared to support your setup. Easily grow your business capital in a secure, hassle-free way.
Interested in learning more about Mondu’s monetisation options? Get in touch – It would be our pleasure to assist you in growing your business.
