Marketplaces continue their popularity with B2B buyers. The B2B marketplace is increasingly where business customers research and evaluate products and finalize their purchases. Buyers love the ease of shopping at marketplaces, but marketplace operators face increasing complexity when meeting customer needs.
Marketplace operators must monitor metrics that indicate the health and viability of their marketplaces. If you’ve just started a marketplace or are looking for ways to determine marketplace success, use these KPIs to evaluate your marketplace. These KPIs are frequently used by marketplaces so read through them all and then pick the KPIs that work best for you.
What KPI Categories Should You Track?
Based on our experience with marketplaces, we identified the KPIs that measure B2B marketplace success. Then, we sorted them into broad categories by function:
- Liquidity metrics measure how well your marketplace brings together buyers and sellers.
- Profitability metrics measure your financial outcomes to determine if you are making or losing money.
- Usage metrics monitor your site visitors and their movements throughout the marketplace.
- Vendor metrics indicate how well vendors perform and the value users receive from their offerings.
You’ll need a mix of KPIs from each category, but you don’t need to use every KPI. Identify the KPIs you need and then prioritize and measure them according to your individual marketplace needs.
A marketplace is only effective when it facilitates transactions between buyers and sellers. Liquidity measures the percentage of listings that result in a transaction during a set period. It lets you know whether a seller can find a buyer or whether a buyer can find the product they need.
Buyer-seller ratio or buyer-to-seller ratio
The buyer-seller ratio represents the number of buyers that one supplier can serve within a specified time. In B2B situations such as franchise-franchisee marketplaces, this ratio can be 1:1, because providers and sellers are customers. The ratio is higher (between 1:3 and 1:6) for other types of managed and multi-vendor marketplaces. Calculate this ratio using one of these formulas:
Buyer-seller ratio = seller listings / bids by buyers
For example, if you average 500 transactions per buyer and 50 transactions per seller, then you have a buyer/seller ratio of 1:10.
Inventory turnover ratio, time to match, marketplace concentration
This KPI tells you how many times your inventory sells and replenishes over a certain time. While a high number represents robust sales, it can also mean sufficient inventory is not stocked.
Generally, low-margin goods such as fasteners tend to have higher inventory turnover than high-margin electronic equipment.
Fill rate, order fill rate, order acceptance rate, or buyer liquidity
The fill rate represents the demand you can meet without losing sales. Consistent backorders indicate that your sellers either have supply chain issues or are not carrying inventory to meet demand. Set industry-standard benchmarks.
For example, if you received 15 orders and only 10 shipped, the fill rate is 66%. If the benchmark is 75%, then you fell 9 points below the benchmark.
B2B marketplaces generate profit by charging buyers or sellers transaction fees or membership fees. You may also generate revenue from sellers or third parties for delivery or advertising. Before you can calculate profitability, you must determine the Gross Merchandise Volume (GMV) or the total sales of goods and services in the marketplace.
GMV by itself only tells you the scale of your marketplace, not how profitable it is. So, in addition, you should measure:
Take rate or rake
The take rate is the revenue your marketplace generates for facilitating transactions. If this KPI is too low, the marketplace is unprofitable. Set it too high and risk buyers and sellers fleeing the platform. The take rate also depends on your industry. Amazon and eBay marketplaces operate in a highly competitive environment. They must live with a take rate of 5-10%, Apple’s App Store can charge a take rate of 30% because it holds a monopoly on billions of iOS devices.
For example, a marketplace vendor may offer an item for $9 but the final cost to the customer is $10. The marketplace charges a $1 fee, so the take rate is 10%.
Customer lifetime value (CLV)
CLV measures how much profit an average B2B customer generates for your marketplace. It considers how long you retain a customer, how many purchases they make on the platform, and the average value of the transaction. To calculate CLV, you first must calculate a few other metrics:
Average order frequency rate (AOFR) = number of orders / number of customers
Average customer lifespan (ACL) = average days between first and last order / number of customers
Therefore, the CLV is:
CLV = AOV * AOFR * ACL
For example, if the AOV is $1,000, AOFR is 2%, ACL is 400, then the CLV is $8,000.
Customer acquisition cost (CAC)
Your CAC includes all expenses incurred in acquiring a new customer. B2B customer acquisition is generally higher than B2C, as B2B sales require more touches, onboarding, and support. In addition, you must also include costs for marketing, advertising, and trialing.
CAC may initially start out high as the marketplace opens and then decrease as the marketplace grows and matures.
For example, if you spend $500 on acquiring customers and your efforts bring in 50 new customers, your CAC is $10.
Customer lifetime value to customer acquisition cost (CLV to CAC)
The CLV to CAC ratio measures the efficiency of your overall business operations. For example, with a 2:1 ratio, you’re generating $2 for every $1 invested in the marketplace. If the ratio is reversed and CAC exceeds CLV, then your business is unprofitable.
For example, if your CLV is $500 and CAC is $250, then your CLV to CAC ratio is 2:1, indicating a profitable marketplace.
Monthly recurring revenue (MRR)
The MRR is the revenue you expect to generate each month. Many marketplaces supporting manufacturers and distributors have healthy MRRs because they serve businesses that purchase regularly.
For example, if you have 1,000 customers ordering fasteners for $500 on average each month, your MRR is $500,000.
Average revenue per account (ARPA) or average revenue per unit
ARPA measures marketplace revenue by taking the average revenue generated by account over a period of time. Similar to MRR, it demonstrates your marketplace’s ability to generate revenue and helps set targets for vendor sales.
For example, if your marketplace services 100 accounts and generates $100,000 in revenue per month, the ARPA would be $100 per account.
When more participants engage in even more marketplace transactions you increase marketplace value. So, monitoring how customers engage with the marketplace is essential to marketplace growth.
Integrate Google’s Data Studio with Google Analytics with your B2B marketplace platform to monitor your usage KPIs conveniently from a marketplace dashboard. In addition to these analytics, you should measure how customers interact with the marketplace.
Stickiness ratio (SR)
It’s not enough to know how many people come to your marketplace, you need to know how many people return time and again. Repeat engagement is a very strong signal that your marketplace provides value. Otherwise, people wouldn’t return.
To calculate stickiness, you must know how many people interact with the marketplace on a daily (DAU) and monthly (MAU) basis. While each of these metrics provides useful standalone data points, when compared to each other, they provide even great insights.
For example, if the DAU is 450 and the MAU is 45, the stickiness ratio is 10%. In other words, 10% of the people that visit the marketplace once a month also visit it at least once a day. Stickiness varies by industry, but overall 20% is considered good and 25% is exceptional.
Activation rate (AR)
AR measures how many users take a specified action over a defined period when compared to the total number of active users for that time. The action or milestone measured should be related to the onboarding process, such as creating an account or requesting a quote.
For example, if you had 100 visitors in a day and 50 of them took the defined action you are tracking (account creation or RFQ), your activation rate is a phenomenal 50%.
Lead to customer conversion rate (CCR), sales conversion rate
This metric compares the number of leads the marketplace receives to the number of deals closed on the marketplace. Tracking this KPI tracks the health of the B2B sales funnel.
For example, if your marketplace had 100 registrations and 25 of them purchased products, then your lead to CCR is 25%.
Average Order Value (AOV)
AOV measures the average value of orders placed on the marketplace over a defined period. You can increase AOV in your marketplace with upselling, cross-selling, and product recommendations. You can also introduce value-added services like financing, logistics, and installation. You may also find it helpful to calculate AOV by segment and traffic source.
For example, if marketplace monthly sales are $10,000 and customers placed 30 orders, the AOV is $333.
Order rate (OR), purchase frequency, transaction frequency, or order frequency
This metric measures the number of times an average customer places an order on the marketplace. Like GMV, it offers an overall picture of marketplace transactions. Used with the repeat order rate, it judges customer loyalty.
If your marketplace experiences seasonal buying behavior, you’ll want to look at this KPI over 12 months.
Repeat order rate (ROR), repeat purchase rate, reorder rate, or retention rate
This KPI tells you the proportion of customers that come back for another marketplace purchase. Similar to order frequency, it tells you that buyers find value in the marketplace, and will return for repeat purchases. This metric is used for short-term analysis. Customer retention, a similar KPI, is for long-term analysis.
For example, if you have 200 repeat orders out of 500 transactions, your ROR is 40%. Across industries, 21% to 37% is more realistic.
Customer retention rate (CRR)
CRR tells you the percentage of customers that continue using the marketplace over time. Where ROR tells you the likelihood of a customer buying again, CCR tells you the long-term value buyers see in the marketplace.
As this graph illustrates, just a small difference of 5 percentage points in retention can lead to large differences in revenue over time. When the marketplace creates high CRR, you can invest in customer acquisition with confidence.
For example, if you start with 1,000 customers and gain 50 but lose 20, your CRR is 98%.
Churn rate (CR)
Churn rate is the inverse of the retention rate. Both retention and churn share similarities and are measured over a defined period. This KPI tracks customer or vendor displeasure with their marketplace experience. The unhappiness can result from order cancellations, unhappiness with the experience, poor after-sales support, or lack of customer service. If you measure both customer and vendor churn, be sure to measure them separately.
For example, if you had 100 customers at the start and 95 at the end of the defined period, your churn rate is 5%.
Your marketplace only attracts and retains customers when you attract and retain vendors that add true value to the B2B marketplace. Monitoring vendors is as important as monitoring customers. Here are key KPIs to measure vendor performance and value.
How relevant are the vendor’s products to the marketplace? Are vendors offering what customers want? This metric separates vendors that contribute from those that do not. It’s also a way to identify vendors that take business off-platform.
If the marketplace makes 250 sales in a month and 50 of them came from a single vendor, that vendor has a relevance rate of 20%. That’s a vendor you want to keep happy.
Getting orders shipped and delivered on time and as promised is an integral part of a positive marketplace customer experience. Tracking delivery performance tells you if vendors deliver products according to their promises.
While customers may cancel orders for many reasons, vendors shouldn’t consistently cancel orders. High cancellation rates can indicate problems with the vendor’s supply chain or the inability to service customers as promised.
This metric demonstrates whether items sold meet customer needs by looking at the number of items that are returned or exchanged. It’s a good indicator of whether the vendor products are as described and meet customer expectations.
B2B Marketplace KPI Table Cheat Sheet
|How to calculate||What it shows|
|Buyer-seller ratio||Total buyers / total sellers||Marketplace constraints by supply or demand|
|Inventory turnover ratio||Products sold / average inventory||How fast inventory sells out|
|Fill rate||Number of orders shipped / total number of orders x 100||Ability of vendors to fill and ship as agreed|
|Take rate||Commission + Fees / Sales x 100||Revenue generated by the marketplace|
|Customer lifetime value||AOV * AOFR * ACL||Customer’s value during the lifetime of the relationship|
|Customer acquisition cost||(Cost of sales + cost of marketing) / new customers||Cost of acquiring customers|
|CLV to CAC ratio||CLV / CAC||Relationship between the customer acquisition cost and their total value|
|Monthly recurring revenue||Monthly average revenue per user * total monthly users||Expected revenue each month|
|Average revenue per account||Total revenue during period / total accounts during period||Average revenue generated by an account|
|Stickiness ratio||DAU / MAU||Repeat engagement with the marketplace|
|Activation rate||Users that took action / DAU or MAU||Success of the onboarding process|
|Lead to customer conversion rate||Leads that converted / total leads||Performance of sales funnel|
|Average order value||GMV / number of orders||Revenue generated by each sale|
|Order rate||Number of orders / number of unique customers||How often customers place orders|
|Repeat order rate||Number of repeat orders / total number of orders||Percent of transactions that are repeat orders|
|Customer retention rate||(Customers at end – customers acquired) / customers at start||Percentage of customers that stay with the marketplace|
|Churn rate||(Customers at start – customers at end) / customers at start||Percent of customers that leave the marketplace|
|Vendor relevance||Number of sales for the vendor / number of total marketplace sales||Relevance of vendor’s product to the marketplace|
|Delivery rate||Number of orders delivered / number of orders delivered late||Vendor’s ability to deliver as promised|
|Cancellation rate||Number of canceled orders / total number of orders||How often the vendor cancels orders|
|Return rate||Number of orders with a returned item / total number of orders shipped||How well products meet customer expectations|
Making Sense of The Data
Unless data informs decisions or tells you to take action, it isn’t worth tracking. So only measure the KPIs that tell you what you need to know about your marketplace health. Create a mix of KPIs on overall marketplace health as well as vendor performance and customer acceptance.
Take into account the length of the sales cycle for the products featured on your marketplace and select your KPIs accordingly.
Put your data to use. For example, if the marketplace receives healthy traffic and an acceptable activation rate but doesn’t convert those leads to sales, you may have friction points in the cart or checkout process.
If customers cancel or return orders frequently, you might have problems with vendor performance. Looking at those KPIs by vendor provides insights into the source of a problem.
Marketplaces are the next wave in B2B eCommerce. When you focus on metrics that matter to your business, you maximize the value for vendors and customers alike – you’ll create a successful and competitive marketplace.
Questions and Answers
How do you evaluate a marketplace?
The world is full of valuable marketplaces like Amazon, Walmart, Etsy, and Alibaba. To determine whether your marketplace is sustainable and profitable, you must evaluate the following four areas:
- Liquidity, to determine how your marketplace brings together buyers and sellers.
- Profitability, to determine whether your marketplace makes or loses money.
- Usage, to determine how customers conduct themselves on your marketplace.
- Vendors, to determine individual vendor sales performance.
What are some important KPIs for a marketplace?
Marketplaces share many KPIs with eCommerce businesses like gross merchandise value, customer acquisition cost, and customer lifetime value. However, there are also some marketplace-specific metrics you should track.
Since the primary job of marketplaces is to match buyers and sellers, an important metric is the match rate. It measures how successfully the buyer and seller can find each other, thereby sustaining marketplace growth. Measuring take rate (how much the marketplace “takes” from each transaction) and other metrics surrounding unit economics also demonstrate marketplace health. Lastly, you should keep an eye on vendor performance, including vendor retention.
What is an example of a B2B marketplace?
Some well-known examples of B2B marketplaces include Amazon Business and Alibaba. Marketplaces exist in many industry verticals. PartsBase is the world’s largest aerospace marketplace. Andikem is a chemical B2B marketplace. Tundra Restaurant Supply targets the restaurant industry. Toyota Material Handling uses a marketplace to assist dealers and end-customers.