What is a rental marketplace?
A rental marketplace is a platform where individuals or companies can rent different types of goods from one another. The best-known example of a rental marketplace is Airbnb.
When Airbnb first started, peer-to-peer sharing was a relatively new concept for consumers. Since then, the popularity of sharing websites has skyrocketed. Sharing all kinds of goods from baby gear and cameras to bikes, cars, and homes is replacing ownership for more and more people all around the world.
And why wouldn’t it?
E-commerce, marketplaces, and the sharing economy are huge trends with massive business potential. Renting expensive or infrequently used items instead of buying them is a lot cheaper and much more convenient. At the same time, individuals are more and more willing to list their own items on a rental marketplace platform to earn some money on the side.
Marketplace platforms have another huge business benefit: you can start a marketplace without any initial inventory.
Because providers create your supply, getting started with a rental marketplace doesn’t require a huge investment. Besides, rental marketplace software has become extremely affordable as well as quick and simple to use. For example, with Sharetribe Go, you can launch a fully functional rental marketplace in one day without writing a single line of code!
There truly has never been a better time to become a marketplace entrepreneur.
About the rental marketplace business model
So, if people use a marketplace website to rent items from each other, how does the marketplace entrepreneur build a profitable business?
Most rental marketplaces generate revenue through commissions. Commissions mean the marketplace makes money by taking a cut out of each transaction that takes place on the marketplace. This is the revenue model that Airbnb uses.
The commission model has one additional benefit: it can offer users extra security through functionality called escrow.
Escrow means that when a customer makes a booking to rent something—say, a cool bike—their credit card is already charged when they make the booking. However, the provider who owns the bike doesn’t get the money before the customer actually receives the bike. The marketplace holds the funds in the meantime.
There are other kinds of business models available for rental platforms. For example, some marketplaces charge a fee from users to join or to publish a listing. Other marketplaces make money by selling ads, or with premium services such as insurance or delivery.
However, the commission model is by far the most popular revenue model for rental marketplaces because it’s usually the most lucrative one. The website owner gets a share of all of the value that goes through the platform. The commission model also makes it easier to attract providers as they only need to pay a fee when they make money.
How to start a successful marketplace business
A marketplace can be a fantastic business with low risk and high growth potential. But building a successful business is always a challenge.
As the popularity of rental marketplaces grows, so does the amount of competition. You need to find a business idea that solves a real problem for your users. Then you need to build a platform that both your providers and your customers love to use.
But how do you know your idea solves a real problem? How can you find out what kind of website your users would love? By launching the first version of your rental marketplace website as quickly as possible.
Launching quickly is the best way to validate your business idea and start learning more about your users. No customer research, crowdfunding campaign, or competitor analysis can reliably tell you if people will really use your platform to complete transactions. The only way to know for sure is to build something, get it in front of real users, and start learning.
After you know more about what makes your customers tick, you can start developing your marketplace in the direction that works for your specific audience and niche.
Sharetribe’s products have been designed with this iterative process in mind. You can start a marketplace with Sharetribe Go in one day. You get all the essential features of a rental marketplace without writing a single line of code. When you’re ready to take your business to the next level, we’ve also got you covered.
Before you can start developing your marketplace, it’s important to understand what “essential features” actually means for rental marketplaces.