Marketplaces are continuing to take over ecommerce, and the rise of the multi-vendor marketplace platform is only accelerating the trend.
The marketplace business model isn't new. The world’s first ecommerce company, the Boston Computer Exchange, was also a marketplace. By the mid ‘90s, Amazon and eBay had joined the fray, changing ecommerce forever by bringing the marketplace model to the masses.
Flash forward to today, when the top online marketplaces are selling more than $3 trillion annually combined. While not every industry has fully embraced the marketplace model, new examples are appearing every day, even in the change-adverse world of B2B sales. B2B enterprises are realizing that the next generation of B2B buyers want Amazon-like shopping experiences.
To meet shifting demands in buyer expectations and increase sales and customer reach, B2B enterprises are increasingly turning to a multi-vendor marketplace platform, which is a faster, more cost-effective, and reliable alternative to building a marketplace entirely from scratch.
In this article, we’ll cover:
Put simply, a multi-vendor marketplace platform is the technology behind a marketplace. In technical terms, it’s an end-to-end software-as-a-service (SaaS) option that powers an online marketplace.
Just as there are out-of-the-box platforms for single-vendor ecommerce stores, there are emerging platforms, with multi-vendor capabilities, to create marketplaces.
Since the marketplace model is at the intersection of commerce, fintech, and logistics, a multi-vendor marketplace platform must manage all three with ease. Although a single-vendor ecommerce platform handles some fintech and logistics, those tasks are nothing compared to the demands of a marketplace. This is especially true for a B2B marketplace, where average transaction values are much higher, catalogs can include thousands of SKUs, and custom prices and orders are commonplace.
And don’t forget: many conventional ecommerce platforms are based on 20-year-old technology. That means they were developed in the pre-cloud and pre-mobile era — hardly ideal in an age when most ecommerce transactions are initiated on a mobile device.
The key features of a multi-vendor marketplace platform can be broken down into four categories:
1. Product management
2. Logistics management
3. Vendor management
4. Payment management
Let's dive into what each looks like.
With many vendors, and many products, it's not hard to see how easily a marketplace can become unruly. That's why a marketplace is only as good as its inventory. On an ideal multi-vendor marketplace platform, it’s simple for sellers to upload their entire product catalogs. Without hand-holding, sellers should also be able to input detailed product descriptions, images, specs, and categories.
With effective product management, customers can easily search for and find the products they're looking for.
Many ecommerce platforms overlook logistics, but they form an integral part of the multi-vendor marketplace experience.
One convenient advantage of a marketplace is that a business can operate the marketplace without actually holding any inventory. They can simply list products or services from other vendors, who are responsible for shipping or delivery.This asset-light approach nonetheless requires many logistical capabilities, including:
For a B2B marketplace’s success, it’s critical to make it easy for vendors to join and sell. A multi-vendor marketplace platform should include these vendor-friendly features:
The multi-vendor marketplace platform you choose should enable vendors to sell on your marketplace with minimal effort.
🔵 Read more about vendor management best practices 🔵
The importance of a multi-vendor marketplace’s fintech capabilities can’t be overstated.
Both your buyers and seller expect a seamless experience when it comes to orchestrating payments.
A multi-vendor marketplace platform doesn’t just have to process payments one way— it must also pay out vendor commissions, which are sometimes split within a single transaction.Plus, it needs to ensure regulatory compliance according to each vendor’s location, unlike a single-vendor online store where taxes are simply based on the head office’s location.
🔵 Read more about marketplace payments 🔵
Marketplaces aren’t just for physical goods. There are several businesses supported by the multi-vendor marketplace model. While what they offer buyers differs, the features required to operate the back-end are very similar. In addition to product marketplaces, below are some other types of marketplaces that can be built with a multi-vendor platform:
This is a platform for third-party services. There are many marketplaces that solely offer services (whether digital or physical), and many that offer both products and services. An example of the latter can be seen in one of the first digital marketplaces ever — Craig’s List — which listed everything from events, services, and goods.
There’s no doubt that services marketplaces are an emerging opportunity. After all, the US services industry is worth $9.7 trillion and only 7% of those transactions or currently digitally enabled. This leaves a huge gap to be fulled, with online marketplaces as a perfect fit.
iTunes, Audible, Udemy, Shutterstock — these are all examples of digital marketplaces.
With no production costs, warehousing costs, or shipping logistics, digital marketplaces have their fair share of advantages and provide more flexibility over product assortment, availability, and geography.
Organizations with multiple brands under one roof are often inclined to combine the disparate sites into one backend. While it’s valuable to have them live as their own sites externally, given different target audiences, product offerings, etc., having a separate back-end for each brand can get unruly. By streamlining all the data in one place, business can significantly improve operational efficiencies.
Once upon a time, companies looking to launch a marketplace only had one optional to buid their own backend. Now, there’s technology available that’s more turnkey than ever before.
B2B enterprises looking to launch a multi-vendor marketplace generally have three main options: build from scratch, choose a bolt-on solution, or use a purpose built platform.
Some B2B companies build their marketplace infrastructure in-house or hire an outside developer to handle the heavy lifting. At first blush, undertaking a custom build may be tempting. After all, doing so can give a B2B company complete control over every single element of their marketplace. However, the downsides far outweigh those positives:
Other B2B companies take an ecommerce platform that’s intended for a single-vendor online store and bolt on a number of plugins to try to achieve the necessary marketplace functionalities, such as being able to process transactions involving more than one vendor. A faster (and theoretically much cheaper) option than a custom build, bolt-on solutions also have their drawbacks:
B2B enterprises that choose a best-in-class multi-vendor marketplace platform sidestep the issues associated with the other two approaches. A multi-vendor marketplace platform has many benefits for B2B businesses, including these top five:
B2B enterprises should especially consider platforms that enable a headless marketplace, meaning the front and back ends are separate, providing a better user experience and more flexibility for operators.
Regardless of whether you buy or build, below are some important considerations to take into account for long-term success when deciding which option to choose.
The founders of older marketplaces like Amazon and eBay, or Alibaba.com on the B2B side, didn’t have a multi-vendor marketplace platform at their fingertips — but they probably wish they did. It could have saved them time and money.
After all, opting to go with a multi-vendor marketplace platform lets B2B enterprises launch and scale marketplaces much more quickly than they’d be able to with a painstaking, years-long custom-build project. They’ll also avoid the limitations of a bolt-on solution; when the marketplace gains momentum, the operator won’t be scrambling to increase headcount or MacGyver an ecommerce band-aid solution.
