Businesses employing the brokerage business model make money via brokerage services. This means they are involved with the facilitation, negotiation, or arbitration of a transaction between a buyer and a seller. The brokerage business model involves a business connecting buyers with sellers to collect a commission on the resultant transaction. Therefore, acting as a middleman within a transaction.
Understanding the brokerage business model
Brokerage businesses usually charge a commission or fee to one or both parties in exchange for services rendered.
Many such companies have also adopted a zero-commission policy, instead of making money from investments and the difference in price between what they charge buyers and what they charge sellers.
Advances in eCommerce have allowed the brokerage business model to thrive since virtually any product or service can now be ordered online.
Brokerage businesses are common in the real estate, finance, retail, travel, and online marketplace industries, to name a few.
Seven types of brokerage business model
In truth, there are many brokerage business model types across B2B and B2C businesses – although some types are more suited to one or the other.
With that said, we have taken the liberty to list seven of the most common below:
Buy/sell match model
Where brokers concentrate on the fulfillment of buy/sell transactions.
This model is routinely used by financial brokers, insurance brokers, travel agents, and brick-and-mortar businesses with an online presence.
Here, brokers bring together a group of buyers who share the common goal of receiving discounts on goods and services.
Merchants pay the broker a small percentage for each sale, which is often percentage-based.
These brokers charge a fee to an advertiser based on the time, location, size, or nature of an advertisement.
They may also offer search and rating services.
For example, the online classified platform Craigslist charges users for brokering sales of apartments, commercial real estate, cars, trucks, and furniture.
Virtual mall model
In this case, the broker creates a website and rents out virtual space to online retailers.
The broker may also offer advertising, marketing, search facilities, and business advice.
Online marketplaces such as Amazon and eBay are the most obvious examples.
Virtual mall intermediary model
A more bespoke version of the virtual mall model, where the broker locates multiple product suppliers and sells their products in a single online store sorted by department.
The broker also acts as an intermediary by taking care of billing, shipping, order tracking, and credit card authorization.
Brokers charge product suppliers a fee for setting up and maintaining their storefronts.
Chinese B2C platform Tmall is one example of a virtual mall intermediary broker.
Auction and reverse auction model
An auction broker offers goods and services from multiple resellers and receives a fee for every successful sale.
In a reverse auction, buyers name their price and the broker secures a seller who can facilitate a sale.
Directory and evaluator model
These brokers offer a directory listing for goods and services, evaluate relevant businesses, and offer value awards to companies based on consumer feedback.
Consumers themselves may also be rewarded with certain incentives for purchasing from broker recommendations.
For example, Nerdwallet is a consumer finance platform reviewing credit cards, bank accounts, personal loans, insurance, mortgages, and investment products.
- The brokerage business model involves a business connecting buyers with sellers to collect a commission on the resultant transaction.
- Advances in eCommerce have allowed the brokerage business model to thrive since virtually any product or service can now be ordered online. The model is common in the real estate, travel, finance, and retail industries.
- There are many brokerage business model types in the B2B and B2C space. Some of the more common include the buy/sell match model, buyer-aggregator model, classified-advertiser model, virtual mall model, auction and reverse auction model, and directory and evaluator model.
What are the types of brokerage business models?
What's an example of Classified-advertiser model?
A great example is Craigslist, which charges users for brokering sales of apartments, commercial real estate, cars, trucks, and furniture. Craigslist is a local posting website that enables people to post classifieds on the platform, primarily for free, except for some categories of ads and vehicle advertising on the website. Therefore, craigslist monetizes based on some premium categories of listings (like job postings or apartment rentals).
What's an example of Virtual mall model?
Examples of virtual mall models comprise marketplaces such as Amazon and eBay, with various goods in many categories, convenient pricing, and many offerings throughout the year. They replicate a real-world mall in the digital world.
Connected Business Model Types And Frameworks
Attention Merchant Business Model
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