This pandemic has put us five years ahead of the curve in digital transformation. With more people turning to the internet to find goods and services, online marketplaces are becoming increasingly popular as places to buy and sell anything.
Tenders, auctions, food delivery, logistics, education, and job search are available on marketplaces for selling and exchanging items, renting, booking, and transportation services, as well as tenders, auctions, food delivery, logistics, education, and job search. And new types appear from time to time. After all, given the online marketplace industry’s profitability, why not?
The number of digital buyers will have surpassed 2.14 billion by the end of 2021, with global e-commerce retail sales approaching $4.2 trillion. Online marketplaces account for more than 40% of product sales for well-known commerce behemoths. In comparison, they account for 100% of revenues for some relatively new businesses, occasionally exceeding a billion dollars.
The numerous advantages that online marketplaces offer to all parties involved: customers, sellers, operators, and integrations such as logistical businesses, account for most of their appeal.
So, suppose you want to start an online marketplace or digitize your business. In that case, this article will explain the significant factors to consider when calculating the cost of running an online marketplace. But first, we’ll figure out why we need it.
Why should we compute the cost of running an online marketplace?
- Provides us with an estimate of total expenses
- Aids in optimizing the financial budget
- Aids in adequately allocating funds to various divisions of your online functions.
The most important factors to consider when calculating the cost of running an online marketplace:
Cost Of Subscription
A subscription-based pricing model allows a consumer or organization to purchase or subscribe to a vendor’s SaaS services for a specified price. Subscribers typically pay for services on a monthly or annual basis.
Subscription-based pricing is becoming more popular for establishing your white-label online marketplace. Customers who use a subscription-based approach frequently pay in advance for SaaS services. Prices are commonly determined by the subscription length, with a more extended subscription resulting in a lower cost.
Management Cost
Management of the online marketplace refers to managing daily operations and operating on and behind the admin dashboard. Regularly updating and maintaining your site is critical to ensuring it operates at peak efficiency.
Websites, like anything else, require maintenance to function correctly. Proper site maintenance helps to ensure site security, increase the number of new visitors, increase return traffic, and more. And, especially if you are an online marketplace growing your business, assisting and retaining your merchant and customer flock on your website is critical. So there are several factors to consider when attempting to calculate this cost head, such as
- Keeping Up With Changing Audience Expectations
- Making Provisions for Changing Value Propositions
- Technical Modifications to Keep Your Website Running
- The Risks of Website Downtime
To make these actions run smoothly, you may need to assemble a team of technical and non-technical managers based on your geographic and divisional requirements. And that becomes a significant portion of this cost head.
Customer/Merchant Acquisition Cost (CAC)
Customer acquisition cost (CAC) is a popular metric that has grown in popularity as more Internet businesses and trackable web-based advertising campaigns have emerged.
Many web-based businesses can now run highly targeted marketing and track people as they progress from potential customers to long-term customers. In this context, both corporations and investors use the CAC indicator.
CAC is the cost of persuading a potential consumer to buy a product or service.
In the case of operating an online marketplace, the customer may be referred to as the merchants who must be added to the platform on commission or any other basis.
Costs of Delivery Management Platform Integration
When you own an online marketplace, you must have a dedicated delivery management platform to control the ease of the end-to-end delivery process. The company has two options under this, namely.
- Hire an outside third-party delivery management company to manage all order deliveries with specific cost plans.
- Alternatively, you could integrate a combined delivery management platform with your online marketplace and manage it as a captive.
Final Thoughts
Establishing an online marketplace comes at a price, but you need to consider how much it will cost to maintain once you’ve found one. Companies often neglect this factor when calculating how much they are willing to spend upfront, but understanding these factors becomes crucial for financial reasons.
Faisal Abidi
