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I just finished setting up an online store that involves selling digital content, tangible items like clothes, events tickets etc. However, I have a little challenge on how to charge sellers to add their products in the store. Here are my options

  1. Charge sellers (customers) a high fixed annual fee to add product on the site (prepaid)

  2. Charge sellers (customers) a lower fixed annual fee + low % commission to be retained by my site.

  3. Charge sellers a higher (compare to No. 2) % commission to be retained by my site

  4. Charge sellers a fixed amount for each product they upload

Please which do you think is the best model and any other options you think might be good.

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2 Answers

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Each model has it's own pros and cons:

  1. pros: predictable cash flow for you, cons: might discourage smaller sellers, you can under-charge very high volume sellers

  2. pros: still some of the cash flow is predictable, get more money from your big sellers cons: still might discourage smaller sellers

  3. pros: easier to sign up (especially for smaller sellers) - if your customer doesn't sell anything he doesn't have to pay, cons: for you - if your customer doesn't sell he doesn't pay (personal note - as a small business this is my favorite model and the way I work with my e-commerce provider)

  4. Very similar to option 1, but it makes your offering more attractive to sellers with just one product and very unattractive to sellers with many products that each has a low volume.

So, if your target audience is big high-volume sellers go with option 1 or 2 (or 4 if you want to minimize the number of products per seller), if you want to sign up a larger number of smaller sellers go with option 3.

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Thank you so much for this reply. It's really useful to me. – Stanley Oct 12 '10 at 22:49
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Option 5. Run the marketplace for FREE. Build a management interface for sellers and buyers to interact (kind of a FREE EBAY, or YAHOO Stores, but in a mall fashion). Follow the Craigslist model. Ask your merchants to donate so that you can continue to develop and market. In the long run, sell your company to OverStock, ebay or any other Corp that doesnt like to have competition that offers a similar service for FREE>

:)

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