How Much Commission can I Charge on my Marketplace?
The Ultimate UK E-commerce Vendor Network
- January 18, 2023
Creating your own marketplace can be incredibly lucrative. When it comes to starting your marketplace or adding third-party sellers to your existing eCommerce business, one of the first questions to consider is what level of sales commission to charge. The general rule of thumb is to charge a commission of 10-20%, as this range typically allows for a comfortable profit while still making it an attractive option for vendors to sell through your marketplace – no sale, no fee. However, there are exceptions and different ways to charge for the opportunity you are giving sellers.
Many marketplaces break down fees into commissions, listing fees, fulfillment charges, per category fee, and more. For example, Amazon charges a referral fee of between 7.14% for tyres and 20.4% for jewelry, and even 45.9% for Amazon device accessories. Plus, there may be fulfillment charges and extra charges for advertising that are considered necessary to be successful on their platform.
You can see why many sellers are seeking alternative marketplaces – yours could be one of them.
Service marketplaces such as Uber, Lyft, and Airbnb often have higher commission rates in the 20-30% range. Services industries can often support higher commission rates as the margins are often much higher than in the physical goods space.
We recommend keeping commission charges simple at the beginning which might mean charging a straight commission, or a listing fee, or a per enquiry fee for services
It ultimately depends on your business objectives:
- Increase revenue
- Increase customers
- Reduce risk
- Reduce time
Are you looking to extend the range of products you’re offering your customers or increase the average order value? Perhaps offering a lower commission rate to third-party sellers can increase sales of your own products and extend your existing market. Or offer a per enquiry fee for a service provider who will compliment your products.
When deciding on your commission rate, consider also the platform you’re using. SuperStore makes it easy to set different rates for each vendor and change them on the fly, which is particularly helpful when starting a marketplace or adding your first third-party sellers to an existing eCommerce site. Offering promotional rates to the first vendors to sign up or key vendors can help kickstart your marketplace, you don’t have anything to lose.
Overall, deciding on the commission rate to charge is one of the most important decisions for the success of your marketplace and will depend on various factors such as your industry, market positioning, and level of service provided to vendors. Make sure the platform you choose allows you to easily manage commission rates, and reach out to Grant Stark, SuperStore Systems’ Client Success Manager, for a no obligation discussion about the correct rate for your marketplace and how a marketplace strategy can boost your eCommerce revenue.
About SuperStore Systems:
SuperStore Systems is a leading provider of innovative e-commerce solutions, empowering businesses to thrive in the ever-evolving digital marketplace. With a commitment to seamless integration and customer satisfaction, SuperStore Systems is revolutionizing the world of online retail.