The take rate often refers to a fee collected by a marketplace, payment provider, or service provider for facilitating a transaction between the buyer and seller.
Understanding take rates
Take rates are certainly nothing new and have probably existed for as long people have come together to conduct business in marketplaces.
In this more traditional scenario, the take rate is usually a fee collected by an intermediary for connecting the buyer and seller.
Today, however, take rates have become more prevalent and multifaceted.
In most instances, the take rate is a fee that a marketplace collects from a third-party seller or service provider for transactions on their platform.
Calculating take rate
To calculate the take rate, we’ll return to the example of a product-centric marketplace such as Amazon.
The calculation itself involves simple arithmetic, but it is sometimes more difficult to find the relevant data in the company’s financials.
What’s more, in the case of Amazon, the take rate also varies based on the product category.
Nevertheless, take rate can be calculated by dividing the:
The Gross Merchandise Volume (GMV) by the total referral fees (commissions).
If an eCommerce company had a GMV of $500 million and $50 million in referral fees from the sale of electronics in 2022, the take rate for that product category would be 10%.
For payment providers and related services, the calculation is more simple.
If a consumer uses PayPal to buy a new camera for $1000, the payment provider may pay the seller $970 and keep the remaining $30 (equivalent to a 3% take rate).
Further applications of take rate
More broadly, take rate can be used to reference the number of users who perform a certain action.
The metric is used in traditional marketing funnels to reflect the fact that these funnels contain multiple stages.
For instance, take rate may refer to the percentage of prospects who clicked on an ad or signed up for a newsletter.
This should not be confused with conversion rate, which commonly refers to the percentage of users who performed one of the aforementioned actions and then went on to purchase the product.
Outside of a standard marketing funnel, a meal subscription company’s take rate may be the percentage of its customers who ordered a particular meal out of all the meals on its menu.
It may also define the take rate to be a measure of how many meals were purchased in a specific time period as a percentage of the total number of orders over a week, month, season, etc.
- Most often, the take rate refers to a fee collected by a marketplace, payment provider, or service provider for facilitating a transaction between the buyer and seller.
- Take rates are also a critical source of revenue for service-based platforms such as Airbnb and Uber, with the exact rate dependent on the average order value and frequency. For product-based marketplaces, take rate depends on the product category and Gross Merchandise Volume (GMV).
- Take rate can be used more broadly to reference the number of users who perform a certain action. These actions may pertain to the various stages of a traditional marketing funnel or any other action of the company’s choosing.
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