A take rate is the fee charged by a marketplace on a transaction performed by a third-party seller or service provider. The take rate is a determining factor in a marketplace’s revenue as reported on its income statement: Take rate * GMV (gross merchandise volume) = revenue.
Take rates usually vary between 5-20% for product marketplaces like Amazon or eBay whereas service marketplaces like Uber or Airbnb usually charge a higher rate between 15-25%. See below for a list of take rates by leading marketplace businesses.
The average order size and transaction frequency also are a factor. Platforms that facilitate frequent, lower-cost transactions tend to charge a lower take rate, like Uber.While platforms that facilitate infrequent, high-cost transactions, like Airbnb, charge a lower take rate on a higher order value.
Take rate and GMV are unique to marketplace and platform business models. Retailers like Walmart or service providers like a cleaning service would report on revenue and profit. The profit margin was very low because the revenue represented the total throughput through one of Walmart’s stores. To accurately measure total throughput on Amazon, GMV is the appropriate metric to monitor, not revenue. Amazon’s revenue from third-party sellers is a function of its GMV and take rate. Linear businesses don’t need to consider a take rate, because they don’t facilitate third party transactions.
A transaction performed by a third party is unique to a platform business model, particularly product and service marketplaces which facilitate transactions on behalf of third-party sellers or third party service providers. The take rate can vary based upon the service or product offering. For example, Amazon charges different take rates based upon the type of product being sold like electronics or household goods.
The marketplaces listed below are consumer facing, B2C, and therefore charge a higher take rate since the average price of the transaction is lower than a B2B transaction.
You’ll also notice that many marketplaces have a hybrid revenue approach: both take rate revenue derived from third-party sellers and linear revenue. Linear revenue is traditional revenue derived from reselling products that are held on balance sheet as well as the marketplace creating its own branded product line. The former CEO of eBay famously hit back at Amazon Founder, Jeff Bezos, on Twitter for Amazon being conflicted in its treatment of third-party sellers when he said “We [eBay] don’t compete with our sellers. We don’t bundle endless services to create barriers to competition.”
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|$0.99/unit + 8-20%
|$0.20/unit + 5%
|Yes, Off White
|$5 + 9.5%
Here are a few B2B marketplaces and their respective take rates. Because the average order size is much higher than in B2C, you tend to see lower take rates.
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|$39.99/mo + 8-20%
Service marketplaces facilitate the exchange of services like ridesharing, food delivery, handyman services, cleaning services and booking a vacation or apartment.
Service marketplaces with lower average transaction size like ridesharing or food delivery tend to have higher take rates than product marketplaces because of lossage, in-person transaction risk, and human error. If a mistake is made on a product marketplace, the product can be returned without the marketplace bearing too much cost. On a service marketplace, if a mistake occurs, the cost to remedy the situation is usually much more costly to the marketplace.
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Now that you have an understanding of take rates and how they work. The next question is who pays the take rate? Marketplaces have two customers: the consumer and the producer (third-party seller or service provider).
On Airbnb, for example, both the consumer and producer pay a take rate to the marketplace. On Uber, the producer pays the full price of the take rate to the marketplace. On Amazon, same thing, the third-party seller is charged the take rate and not the consumer.
Charging the seller is most common. However, in an industry like short-term rentals, charging both sides of the transaction was already the norm, so Airbnb was able to get away with its dual take rate and charge both consumers and producers/
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