The take rate is the percentage of sales that a platform or marketplace takes as a commission in exchange for providing a service such as transactions processing, hosting, or other value-added services.
This is a fundamental aspect of any ecommerce business, as it directly impacts your profit margins and can vary greatly depending on your platform and pricing strategy.
As a platform business, marketplaces rely heavily on take rates to make money. Unless you’re relying on a different monetization lever, the take rate you agree upon with vendors greatly affects your revenue.
The trick is striking the right balance between maximizing that revenue while delivering great value to both vendors and buyers.
Users are inherently price-sensitive, and your business’s take rates will influence their perception of your platform's value and experience. A judicious take rate helps ensure competitiveness within the industry by avoiding market share loss to competitors offering better value.
The next logical question to ask is: who should pay the take rate?
Marketplaces have to appeal to two separate groups, buyers and vendors, but the degree to which individual marketplaces cater to one or the other will vary.
Uber drivers and third-party sellers on Amazon, for example, pay the entirety of the take rate to the marketplace operators. This is the norm for most marketplaces, but there are some exceptions. Airbnb, for example, is able to charge both renters and hosts a take rate because their business model is based in the short-term rental industry, where charging both parties is typical.
Setting an optimal take rate is a meticulous process. There’s no one size-fits-all number, and if you pick a rate that’s too high for your particular business, then suppliers won’t be interested in selling with you.
Here are some questions to ask yourself when determining your take rate:
Recognize that the take rate is just one component of your pricing strategy. Factor in other costs your users are paying, such as subscription fees, listing fees, or charges for premium features when determining the optimal take rate for your business. For example, if you are charging a subscription fee, you may take less commission on each order as you’re less reliant on that income.
Start by comprehensively analyzing the competitive landscape and take rates charged by industry peers. This benchmarking exercise provides crucial insights into whether your take rate aligns with industry standards. If you want to charge a higher commission than competitors with similar offerings, you need to consider what value you’ll provide in return.
Evaluate the entire spectrum of operational costs associated with your marketplace metrics, such as running your platform or providing services. From technology infrastructure and customer support to marketing and administration, factor in these expenses. Strive to set a take rate that not only covers operational costs but also ensures profitability and supports future growth.
Gauge the value that users derive from your platform or service. Conduct market research, analyze user feedback, and evaluate platform usage patterns to understand how users perceive the value you offer. This understanding allows you to set a take rate that resonates with user expectations.
Consider the frequency and size of transactions to establish an appropriate take rate. Service marketplaces facilitating frequent, lower-cost transactions usually opt for lower take rates, while platforms like Airbnb, enabling higher-cost, infrequent transactions, may charge higher take rates on more substantial orders.
Marketplace platforms shouldn’t prioritize maximizing their take rate, since a higher take rate often results in lower transaction volume. Depending on what stage your marketplace is in, opting for a less sustainable take rate could be to your strategic advantage.
For example, OpenSea, an NFT marketplace, charges a 2.5% take rate. This is extremely low compared to most marketplace take rates, which are typically between 5-30%. This low rate has helped foster a relatively new NFT industry, while allowing them to corner over 90% of the market.
This strategy can also be beneficial to businesses in fiercely competitive markets with winner-take-all dynamics. Such marketplaces will end up maximizing their long-term profits by taking a long-term view of balancing take rate, transaction volume, and user value, starting with lower take rates to gain market share before steadily increasing them.
Depending on the type of marketplace you’re operating, different take rates are standard. This is in large part due to the differences in margins between marketplace business models, such as subscription, commission, and list fee-based models.
Individual platforms might also apply different take rates to different products or sellers. It’s not uncommon for vendors that make above a certain threshold income to be subject to a higher take rate.
Physical goods marketplaces, like Etsy and eBay, rely on third-party sellers to list and sell their tangible products. The marketplace facilitates a limited level of interaction between the buyer and seller during the transaction. The take rate for these marketplaces is typically between 5-20%.
For example, eBay’s take rate is (in most product categories) 13.25% of an item’s sale price, plus a flat fee of $0.30 per order. If someone buys an item from an eBay seller for $200, the platform collects $26.80. However, this take rate is on the higher side of average (5-20%), and this has opened eBay up to competition from newer marketplaces such as Etsy, which charges 6.5% and $0.20 per order.
This illustrates the importance of finding a good balance between setting a competitive take rate that attracts sellers without losing sight of your business’s financial future.
Service marketplaces like Uber and Airbnb facilitate the exchange of services rather than physical goods. Unlike product marketplaces, selling services often involves human interactions within the marketplace, such as chatting with a host or tracking your driver. These incur additional associated costs to the marketplace, and the take rates for service marketplaces are typically higher than average.
For example, Uber charges a take rate that typically ranges from 20-28% of the fare paid by passengers and delivery customers. If a passenger pays $100 for a ride, the platform retains $20-$28 while the rest goes to the driver. This take rate accounts for Uber's role in facilitating the transaction, ensuring driver earnings, and maintaining the platform.
Digital marketplaces, such as the Google Play Store and Steam, sell intangible goods like mobile apps and games. The take rate on these platforms is typically much higher because these products are infinitely reproducible, and the margins on apps and games are larger than for physical goods.
For example, Steam charges developers a 30% take rate on each sale of a game made on the platform, with lower rates applying once the seller hits certain income thresholds. If a buyer were to purchase a game for $15, the marketplace would take $4.50 from the total sale.
Once you’ve settled on a take rate, it’s important to remember that online marketplaces are dynamic. You should continuously monitor user feedback, market trends, and competitor pricing to identify any necessary adjustments to the take rate you’ve chosen.
That said, to avoid future disputes, it’s essential to sign an agreement setting out your established take rate when onboarding new sellers. Keeping these commercial terms streamlined is a critical piece of vendor management.
Ultimately, your business’ chosen take rate will play a crucial role in the financial health of your marketplace, impacting revenue, competition, and user satisfaction. Properly adjusting that rate as needed is also essential for maintaining your platform's long-term viability.
