Offering the best possible shopping experience is essential for any successful ecommerce operation, but there are additional demands facing marketplaces and their operators.
Unlike a single-vendor online store, marketplaces serve not only buyers but sellers as well. That means that on top of focusing on the customer, these businesses also require a smooth vendor onboarding experience.
So what is vendor onboarding? Put simply, vendor onboarding is the process of getting third-party vendors or suppliers set up so they can sell goods on your marketplace.
This article reviews:
Marketplaces thrive in part by channelling the flywheel effect. The flywheel effect describes a process of self-perpetuating growth whereby a growing customer base attracts more vendors who in turn bring even more customers — and so on. In short, vendors contribute to your marketplace’s growth as much as customers do.
Given the significant role that your vendors play in this equation, a painless vendor onboarding process is directly linked to your future revenue. You’ll want to spend time reducing the friction not only to buy but also to sell. Here are three important things to consider when thinking about the vendor onboarding process:
3. Dedicate resources. Put in serious effort early on to create a positive vendor onboarding experience before any problems arise. That way, you can save time, effort, and money later on.
The vendor onboarding process is without a doubt one of the most important marketplace features. A negative vendor onboarding experience can kneecap growth, as it will discourage vendors from continuing to participate in a multi-vendor marketplace — not unlike a dissatisfied online customer abandoning their cart.
To make sure you’re getting vendor onboarding down pat, follow these tried-and-tested best practices.
Communication during vendor onboarding is key.
Here are five tips for marketplace operators to communicate with vendors clearly and effectively:
Automation can produce efficiencies in the vendor onboarding process. Where possible, automate low-return and time-consuming manual tasks.
By doing so, marketplace team members can concentrate on higher-level items that contribute more to your bottom line. Your suppliers will also appreciate some level of automation since it typically means they can tap into a suite of self-service tools for convenience — and start selling faster.
A few examples of vendor onboarding tasks that are ripe for automation:
While automation can trim a marketplace’s hard and soft costs, operators should remain flexible. They can’t afford to lose sight of the fact that human intervention is sometimes required. For instance, team members may need direct involvement with suppliers during any vendor onboarding friction points that arise.
One of the primary mistakes marketplace operators make is not doing their due diligence during vendor onboarding. This poses a huge reputational risk, as it could mean anything from low-quality items flooding the market to unscrupulous vendors operating under your company’s umbrella.
A business’s reputation is directly tied to the reputations of its sellers. When a customer receives a faulty product or inadequate service, they’re inclined to blame the operator rather than the third-party seller.
On the flip side, a good reputation helps a marketplace build trust. And building trust on your multi-vendor marketplace is a cornerstone for success in this fast-growing segment of ecommerce. When buyers and sellers trust a marketplace, the flywheel effect can take off.
Although vendor onboarding should be straightforward and intuitive, you’ll still need to offer all new third-party sellers some degree of training so they can navigate your marketplace.
Keep in mind that this training doesn’t end once a vendor is approved. Training is ongoing throughout a vendor’s lifecycle. It shouldn’t just be limited to getting started on your marketplace. Marketplaces should instruct their vendors on things like expanding their presence or increasing revenue over time.
You’ll also want a multi-vendor marketplace platform that offers seamless integration for vendors. And while the vendor onboarding process ends before the first sale — that’s when a vendor enters the vendor management phase — they’ll still want to know what kind of tools are available to them when they’re in operation.
Features like a clean and advanced dashboard and automated inventory management, which spare vendors from having to manually track the availability of certain products, can compel vendors to complete the onboarding process.
The vendor onboarding workflow includes five stages: registration, verification, agreement, approval, and instruction. Here’s what each entails:
There are two common approaches to registration during vendor onboarding. Either vendors sign up themselves, or the marketplace operator initiates the process with the vendor, often manually adding them to the system. Self-signup generally becomes the default the larger a marketplace becomes.
Collect verification documents. These vary depending on the marketplace and can include fundamentals like business name and contact information right down to specifics such as estimated sales volume, proposed return policy, and more.
(Tip: store these documents where they’re easily accessible for future reference.)
Also, be sure to confirm each vendor’s tax identification number.
Set a marketplace agreement that includes the appropriate commission rate.
The marketplace agreement needs to be clearly defined and feature detailed terms and conditions to address a variety of possible scenarios. Here’s where you can outline prohibited products, set rules about external URLs (many marketplaces bar these from product descriptions), establish seller payment terms, and more.
Only once the vendor accepts the marketplace agreement should the operator grant approval to sell on the marketplace.
The approval process should be set out ahead of time. Make sure you have clear criteria set around which sellers you approve and which you don’t to help establish fairness and efficiency.
Once a seller is approved, ensure they receive communication notifying them of their approval and next steps.
Continue to guide new vendors with easy-to-understand instructions via the seller’s dashboard.
What do the next steps look like? Here’s a high-level overview of an onboarding checklist for vendors, once they've been approved.
Streamline your vendor onboarding and remove friction to sell with the above tips and best practices. Remember that both the process itself and the technology you use to onboard sellers contribute to a marketplace’s ability to quickly scale. Knowing how to find a vendor is only one part of the battle.
Even once you crack the vendor onboarding code, you’ll need to continually invest resources to keep up with the demand that comes with growth. Automation becomes increasingly important as a marketplace grows, so make sure you have a multi-vendor marketplace platform with the right tools for the job.
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