Unsure how to evaluate a marketplace? Try these 3 key metrics.

Marketplaces these days come in all shapes and sizes.

On one hand, there are big players like Uber who have made huge waves in the scene. On the other, we have newer kids on the block such as Sendhelper. As these marketplaces can be so different, there is simply no universal yardstick to measure its success.

So how do you know if your marketplace is a yay or nay?

Regardless of the type of marketplace, we found these three key metrics to be extremely helpful in evaluating the success of a marketplace.

Overall metrics

Gross merchandise value (GMV)

GMV refers to the total sales dollar value of goods sold or services purchased through the marketplace over a certain time. In case you are confused, GMV is not the same as revenue. The latter is a percentage of GMV.

GMV = Number of transactions * Average order value (AOV)

It is crucial to track this key performance indicator (KPI) on a regular basis: it’s a telling sign of the volume of transactions that is one of the main engines of growth for a marketplace.

Liquidity

Liquidity refers to  the volume of transactions that take place across the platform with a minimum number of producers and consumers hopping onto the marketplace.

Essentially, a high liquidity signals high matching efficiency between the buyers and sellers on your platform. Take Uber for an instance, more liquidity is being generated as the number of passengers and drivers being paired on the marketplace rises.

You can keep track of liquidity by monitoring the conversion rate of listings into transactions within a stipulated period of time. If your marketplace listings are not easily converted into transactions, it will be hard-pressed to see an additional amount of user sign-up or listings contributing to the success of your marketplace. Sooner or later, users drop your marketplace for others with better listings.

In sum, liquidity is like the momentum that keeps your marketplace going. Once critical mass has been attained, the existing number of sellers (buyers) will attract even more buyers (sellers), further ramping the level of liquidity. This sets off a virtuous cycle of increase in sellers and buyers, making your marketplace easily scalable and of course successful.

2. Buyer’s metrics

3. Seller’s metrics