Subscription Fee

Subscription Fee: Definition, Types & Benefits

What is subscription fee? Learn about the types of subscription fees in eCommerce marketplaces and the benefits of subscription fee-based models.

A subscription fee is the fee one pays to regularly access a product or service. In eCommerce, sellers often utilize online marketplaces to advertise and sell their products. In such cases, they are liable to pay a subscription fee.

We explain the subscription fee-based models, how it works in marketplaces, its types and benefits in detail.

What is Subscription Fee on Online Marketplaces?

A subscription fee for online eCommerce platforms is a fee paid by sellers for access to an online marketplace and its features. It is a recurring payment made by the seller to the marketplace in exchange for continued access to the platform.

The subscription fee model is a common revenue model used by online marketplaces. The subscription fee itself can be charged on a monthly, quarterly, or annual basis.

Marketplaces that offer subscription-based services include Amazon, eBay, Alibaba, and Etsy. Some stores also provide marketplace services such as Walmart. There are also some service-based marketplaces that provide a platform to buyers and sellers of services; for example, Airbnb, Fiverr, Uber, and Upwork.

With marketplaces, sellers find a flexible opportunity to integrate into an existing eCommerce ecosystem and set up an online store at affordable costs. Since these marketplaces are already established and known amongst consumers, sellers can begin selling their wares fairly quickly, improve their reach, and build brand awareness.

Many retailers now turn to online marketplaces and sign up to use their platform for a fee. Depending on the marketplace they choose and the services they use, sellers incur different types of subscription fee.

Types of Subscription Fee Marketplaces

Different marketplaces charge fees under various names, according to services that a seller uses. Generally, the types of subscription fee include:

Membership fee: Also called subscription fee, this is the due sellers must pay to simply join an online marketplace. Some platforms such as Amazon and eBay may allow sellers to sign up for free. However, to access additional features and customization, sellers may find they need to upgrade to a paid membership account.
Listing fee: This is the fee sellers must pay when they list a product on a marketplace. While the initial listings may be free, later, a fee is charged on the basis of each item that a seller lists. It does not matter whether or how much a product sells; if it is listed, marketplaces will charge a fee for it. Additional charges may be levied on the usage of services such as premium accounts or advertising.
Selling Fee: This is the fee a marketplace charges when a product listed by a seller is sold. The amount of selling fee can change, based on the product, the category it belongs to, and the selling plan a customer uses to buy that product. Marketplaces such as Amazon fix a selling fee since they permit sellers access to millions of customers familiar with and using their platform.
Order fulfillment fee: Those marketplaces that provide fulfillment services – such as storing, packing, shipping, or product returns – charge an order fulfillment fee. By paying this fee, sellers can avoid the money and time that in-house fulfillment demands. However, by outsourcing fulfillment to a marketplace, they will have to adhere to their requirements pertaining to product category, size and weight, and shipping distance.

Some other types of fees that a marketplace may charge include referral fees, payment processing fee, and commission fee. However, the rate of these charges depends on the kind of marketplace a seller subscribes to.

Benefits of Using Subscription Fee-Based Models

Some benefits of a using subscription fee-based online marketplaces include:

Large customer base: Through subscription fees, sellers can access marketplaces that often have a global base of customers. This permits them to reach beyond local boundaries to market and sell their products to a wide consumer base.
Streamlined operations: Marketplaces that charge a subscription fee provide a range of services including marketing, advertising, storage, selling, and fulfillment. They work as a one-stop solution. Sellers no longer have to manage all ends of operations by themselves and can simply outsource the processes for a fee.
Availability: Marketplaces do not shut down after a certain number of hours, unlike brick-and-mortar stores. Sellers can benefit from the fact that their listed products are visible and purchasable round the clock in different parts of the world, and accessible for international buyers without time constraints.
Social shopping: Through a fee, sellers can reach out to customers on a developed digital eCommerce platform. For customers, the shopping experience offers added benefits where they can see and compare products and pricing. Moreover, the interactions are transparent, which allows trust to build between sellers and customers.
Lower costs: By paying a subscription fee, sellers access a new channel for selling their products. Moreover, they are also able to use the marketing and advertising services of a marketplace. These services are available at affordable rates.

Key Takeaways

A subscription fee for marketplaces is the fee sellers pay in order to access an online eCommerce platform and its features.
Examples of online marketplaces that charge a subscription fee to sellers in return for access to their platforms are Amazon, Alibaba, and eBay.
A subscription fee may be charged on a monthly, quarterly, or annual basis.
Typically, the types of subscription fee sellers may have to pay for using a marketplace include membership fee, listing fee, selling fee, and order fulfillment fee.
By paying a subscription fee for marketplaces, sellers streamline their operations on a single platform. They gain an international customer base and offer their products round-the-clock. Such platforms also provide lower marketing costs and opportunities to build customer relationships.

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