how-does-offerup-make-money

How Does OfferUp Make Money? OfferUp Business Model In A Nutshell

OfferUp is a mobile-first C2C marketplace allowing consumers to sell used goods. It makes money by collecting a minimum fee of $1.99 or 12.9% of sellers’ sales price. It also makes money via promoted listings for sellers and a Verified Dealer Program allowing car dealerships to sell on the platform. 

Background

OfferUp is a mobile-first C2C marketplace that competes with companies such as Craigslist, Facebook Marketplace, and eBay.

The OfferUp mobile app allows consumers to buy and sell a range of used goods. For buyers, products are displayed in a feed according to their location. This encourages face-to-face interaction between both parties and fosters a sense of community in the local area.

For sellers, products are listed for sale immediately after upload. The seller can then sort inquiries according to the highest bid and arrange a time and place to meet the successful individual.

Once the product has changed hands, the buyer then has 48 hours to inspect it and initiate completion of the purchasing process.

OfferUp mission and vision

As highlighted by the company its vision is to “empower people to connect and prosper” and its mission is to “reimagine the model for local, peer-to-peer commerce… on a mission to become the simplest, most trustworthy local buying and selling experience.”

OfferUp revenue generation

For the first five years of operation, OfferUp was free of charge for the seller.

There are a couple of reasons for this decision. First, company founders wanted the platform to be able to compete with Craigslist and Facebook Marketplace – who do not charge sellers to list. The founders also wanted to attract buyers to Offerup and this could only occur once sellers had created enough supply to lure them in.

In 2016, OfferUp began charging sellers for using their service.

Let’s now examine the OfferUp business model in more detail. How do they make money?

Seller fees

When a seller sells an item that needs to be shipped, OfferUp collects a minimum fee of $1.99 or 12.9% of the sales price.

The company has a partnership with the U.S. Postal Service, but it also applies a service or shipping fee depending on which state the product is being shipped.

It’s important to note that the item in question must meet a stringent set of guidelines to qualify for OfferUp shipping. As noted earlier, the company prefers the transaction to be conducted in person.

Offerup gives sellers the option to promote their listing via the Promote and Promote Plus features. These features allow the seller to have their product shown in the top 50 listings in their area. For those who want to go straight to the top, OfferUp offers a so-called “Bump” service.

For sellers who want a longer-term option, Promote Plus is offered for $19.99/month.

Verified Dealer Program

OfferUp has also taken advantage of the shift toward selling used cars online.

The OfferUp Verified Dealer Program allows car dealerships to sell on the platform using AI-powered top lead indicators, automatic DMS importation, and a click-to-call button.

Pricing for this service is based on the size of the car dealership and the number of features it wants to utilize.

Key takeaways:

  • OfferUp is an online marketplace with a focus on face-to-face interactions to encourage a sense of community.
  • Once the platform reached critical mass, OfferUp began charging sellers to list their products. For products that need to be shipped, OfferUp takes a percentage of the sales price in addition to a small shipping fee. Sellers can also pay to have their listings made more visible to buyers.
  • OfferUp also makes money by catering to used car dealerships. Under the Verified Dealer Program, these dealerships can sell cars on the platform using a range of customized tools.

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