Take rate: how marketplaces earn

A take rate is the slice of every sale that a marketplace keeps. A marketplace connects buyers and sellers and earns money for doing so, without usually owning the goods. The total value of the sales that pass through it is called gross merchandise value, or GMV. The part the platform keeps is its revenue. Take rate is revenue divided by GMV.

A taxi aggregator is an easy example. Passengers pay ₹200 for a ride. The driver gets ₹170 and the platform keeps ₹30. The take rate is 15 per cent. The platform's revenue is ₹30, not ₹200, even though ₹200 passed through its app.

The take can come from several places, and the mix shapes how the business behaves. The most common source is a commission, a percentage charged to the seller on each sale. Others are listing or subscription fees, advertising paid by sellers to be seen more often, convenience fees paid by buyers, delivery fees, payment processing fees and charges for extra services such as warehousing or financing.

Many Indian platforms combine several of these. A food delivery app may charge restaurants a commission, charge customers a delivery fee, and earn from restaurants who pay for promotion inside the app. All of that together, divided by the total order value, is the blended take rate.

• Commission: a percentage of each sale charged to the seller.
• Advertising: sellers pay to appear higher in search or on the home screen.
• Fees: delivery, convenience, payment and listing charges.
• Value-added services: logistics, credit, insurance and similar add-ons.

Competition is the first limit. If sellers can easily move to another platform, or sell directly to customers, they will push back against high commissions. Where a platform brings a lot of new customers that the seller could not reach alone, it can charge more.

The second limit is the value of the item. A low take rate on a high-priced item can still pay well. Platforms for cars, homes or jewellery often have low percentages but large rupee amounts per sale. Platforms for low-priced items, such as snacks, need higher percentages to earn enough per order.

The third factor is how much the platform does. A platform that only lists sellers earns less than one that also handles delivery, payments, returns and customer service. The more work it takes on, the more it can keep, but also the more cost it carries.

It shows how much revenue a marketplace turns each rupee of GMV into, and so how the business scales. A platform growing GMV quickly with a stable or rising take rate is earning more from each rupee. One whose GMV grows while its take rate falls may be growing by discounting or by giving sellers a better deal than it can afford.

Take rate also helps in comparing the headline numbers companies announce. A startup that claims ₹10,000 crore in annual GMV and one that claims ₹2,000 crore in revenue are not directly comparable. Dividing revenue by GMV shows how much of the large number the company actually keeps. See the guide on GMV versus revenue for more on this.

Raising commissions too fast can drive sellers away or make them raise prices on the platform. Customers then find the same item cheaper elsewhere and leave. Regulators and sellers' associations in India have also raised concerns about commissions and fees on food delivery and e-commerce platforms from time to time, so a company that depends on a high take rate faces business and policy risk.

A sound platform usually raises its take rate slowly, adds services that sellers value, and lets sellers see clearly what they pay for. A fall in take rate is not always bad either. Sometimes a company cuts commissions on purpose to attract sellers and raise volume.

Check what is counted in revenue. Some companies record only their commission, while others record the full value of goods they sell themselves. Check whether delivery fees and ad income are included. Compare the same measure across years. And remember that revenue is not profit: a platform with a 20 per cent take rate can still lose money if delivery, discounts and support cost more than that. Read take rate together with contribution margin. Nothing here is investment advice.