Multi-vendor marketplace platforms are on the rise. In this article, we explain some of the terms associated with this trend, the various types of marketplaces, the top platforms, and the ways to get involved in this expanding industry.
What is a “multi-vendor marketplace platform”?
Even if you haven’t heard of a “multi-vendor marketplace” before, you’ve probably bought something from one.
Have you ever ordered a book on Amazon so you could receive it the next day? Or you wanted a very specific kind of print to decorate your home, so you found the perfect one on Etsy? These companies are examples of multi-vendor marketplaces, large-scale ecommerce sites where multiple sellers can compete in the same digital space.
So then how does a “multi-vendor marketplace” differ from a “multi-vendor marketplace platform”? The marketplace itself refers to the companies that host such sellers–in this case, Amazon or Etsy-like companies. However, the platform refers to when a company provides the technological infrastructure for another company to become a marketplace. For example, an enterprise specializing in home decor may want to augment their product catalog with multiple vendors providing a variety of different home decor products; to create this, it may turn to a multi-vendor marketplace platform to integrate this type of system into its business.
Types of marketplaces
Now that we have defined the “marketplace,” it is useful to know the different types, particularly for a company trying to decide what type of marketplace it may want to start (one can also manage more than one type). There are two main axes for organizing marketplace types. First, marketplace types can be broken down into three categories: B2B, B2C, and P2P. Second, such categories can be further segmented into horizontal and vertical marketplaces. We cover these axes below.
The three multi-vendor marketplace models: B2C, B2B, and P2P
This is probably the most well-known type of marketplace, likely because it heavily involves the consumer. Business-to-consumer (B2C) marketplaces provide a variety of products from multiple vendors to consumers. In this type, consumers are the main buyers. Examples of this type of marketplace include Amazon and Etsy. A company that may want to become this type of marketplace may use a multi-vendor marketplace platform service to start its sales.
Another common form of marketplace is B2B—the business-to-business marketplace. B2B marketplaces enable businesses to conduct business and connect with organizations in one place, buying and selling various products and services to other businesses. Buyers and sellers include a number of players including distributors, manufacturers, suppliers, wholesalers, and other businesses. Examples of B2B marketplaces include the likes of Alibaba, Grainger, or Faire.
Finally, there is the P2P marketplace model (also known as the peer-to-peer marketplace). P2P marketplaces enable peers to sell products and services to one another. This type of marketplace has become a part of everyday life. A part of the larger “sharing economy” trend, some notable P2P marketplaces include Poshmark, Uber, GoFundMe, and Craigslist.
Horizontal vs. Vertical
The first axis (B2C, B2B, and P2P) indicates the buyers and sellers of a marketplace. The second axis (horizontal vs. vertical) focuses on the product or services the marketplaces sell.
Horizontal marketplaces are not limited to a specific category in one they provide. They sell everything in one place. The most notable example of a horizontal marketplace is Amazon. Ebay is another example because sellers can sell essentially any item.
In contrast, Vertical marketplaces focus on providing products in a specific category. An example is Etsy; though Etsy does provide a wide variety of products, its seller policy ensures that such products must be “handmade goods, vintage items, and craft supplies.”
Other common characteristics
We have covered the two different axes for organizing multi-vendor marketplaces. There are additional marketplace models that have becoming more popular, including “recommerce” and multi-brand businesses.
Recommerce - the green approach
Thrifting and second-hand buying are growing in popularity—both because they offer lower prices to buyers and because they less negatively impact on the environment. The recommerce marketplace approach also enables more people to join the business space by selling their own second-hand products. While there are P2P recommerce businesses like Poshmark, many brands are realizing the importance of launching their own recommerce marketplaces instead of simply relying on secondhand sites to list their brands.
According to Forbes, the potential benefits of recommerce marketplaces include making the transaction process easier for sellers, ensuring “safety and security” for consumers by enforcing the good condition and authenticity of products, and customizing the experience for customers, even in the resale space. Some examples of recommerce marketplaces include Lululemon’s Like New and The RealReal.
Multi-brand businesses - all your brands, one place
Companies that own multiple brands have the opportunity to cross-sell products by launching a multi-brand marketplace. Instead of relying on the reach of one single brand, they can leverage the brand loyalty of multiple brands on the same site.
How can you build your marketplace?
If you would like to transform your company into a marketplace, you have options. According to Nautical Founder and CEO, Ryan Lee, there are three main options: the first is a custom-built platform; the second is plug-ins on top of a commerce platform; and the third is a multi-vendor marketplace platform. Ultimately, the decision on starting your marketplace depends on if you would like to build or buy the underlying technological infrastructure. So which option is best?
The “custom-built platform” enables you to build the platform in the exact way that you want with all of the features you want to include. However, the time-to-market is significantly longer. It takes a substantial amount of time, effort, and skill to build such a platform. Furthermore, as you add more features, test the iterations, and make alterations to the platform, this option can become increasingly expensive.
Adding plug-ins on top of a commerce platform is another traditional option, enabling you to build on existing systems for e-commerce. However, some of these underlying systems are not suited for marketplace functionality. For example, there may be issues with buying from multiple vendors in one transaction, an essential component of the digital marketplace. There can also be limits on warehouses, APIs calls and users. Furthermore, you will likely work with multiple plug-ins, making this option more complicated than working on your own or with one group like a platform.
Finally, a multi-vendor marketplace platform provides universal marketplace functionality, with a much faster time-to-market. As a marketplace operator, you can focus on your generating demand and finding high-quality vendors while the best marketplace practices are already built-in. There may be some features unique to your marketplace that you may need to add in, but, overall, this is often the simplest and most time-efficient option.
Ultimately, if you want to build your own marketplace, you need to weigh the pros and cons of each of these options for your business.
Any business, any marketplace - one platform
If you would like to transform your business into a marketplace or start a new business using a marketplace model, you may consider launching with a multi-vendor marketplace platform.
Nautical is a unique multi-vendor marketplace platform in that it offers the underlying marketplace infrastructure to quickly launch a multi-vendor marketplace. To learn more about launching your marketplace on Nautical, chat with a marketplace expert at Nautical.