While online multi-vendor marketplaces have been around since the early days of the Internet, they’re currently enjoying a period of unprecedented growth. The top 100 marketplaces combined for $3.2 trillion in sales in 2021.
There’s no one right way to set up a multi-vendor marketplace. In fact, the type of marketplace you offer can take on very different forms.
Those who want to build or expand an ecommerce business have a host of multi-vendor marketplace models to choose from, including selling direct to consumers (DTC) or targeting other businesses (B2B) and setting up as a horizontal or vertical marketplace. They can even combine two or more models for a hybrid approach.
One way for a multi-vendor marketplace to be categorized is based on who is doing the buying and who is doing the selling. Any multi-vendor marketplace will fall under at least one of the following three categories (and often more): B2B, B2C, and P2P.
A business-to-business multi-vendor marketplace brings together businesses whose customers are other businesses. B2B marketplace can involve a combination of manufacturers, importers, exporters, suppliers, and wholesalers.
B2B merchants often sell in bulk quantities, fulfill custom orders, and sometimes have unique contractual relationships with their customers (rather than a B2C market where every consumer gets the same pricing or terms).
Although B2B marketplaces were slower to catch on, more and more B2B multi-vendor marketplaces have been appearing for the past several years. B2B businesses that launched marketplaces in recent years are more likely to have grown than those that did not.
Alibaba is perhaps the most popular example of a B2B marketplace, but other players like Grainger and Honeywell and new companies like Convoy and Faire are stepping up.
When most people think of a multi-vendor marketplace, a business-to-consumer example is likely top of mind. B2C is the most common form of ecommerce, after all. In B2C marketplaces, retailers (or other merchants) sell products or services to individual consumers.
Amazon is the most dominant example of a B2C multi-vendor marketplace. But many other popular examples exist, from the online channels of department stores like Walmart and Target, to something like Thumbtack, which lets consumers hire professional services, from legal representation to plumbing.
Peer-to-peer (P2P) marketplaces are platforms that enable transactions between peers. The popularity of the P2P multi-vendor marketplace is part of the broader rise of what’s been dubbed the sharing economy.
Ride-sharing app Uber and short-term rental platform Airbnb are prominent examples of P2P multi-vendor marketplaces, but crowdfunding websites like GoFundMe and Kickstarter and education platforms like Skillshare show how much variety there is in the P2P category.
Facebook Marketplace — which Craigslist paved the way for — demonstrates how the model can be used to sell goods, as users upload their own listings and deal directly with prospective buyers.
These three buckets — B2B, B2C, and P2P — are very broad overarching types. Some marketplaces, like eBay and Amazon, span all three multi-vendor marketplace models. They can be broken down even further into horizontal or vertical marketplaces.
Not only do you have to make it clear who your buyers and sellers are by defining B2B, B2C, P2P, or a hybrid multi-vendor marketplace model, you also have to define the products or services you’ll be offering as a horizontal or vertical marketplace.
While the biggest multi-vendor marketplaces sit in the horizontal camp, there’s still lots of room to grow with a vertical marketplace.
Here’s how horizontal and vertical marketplaces differ:
The horizontal multi-vendor marketplace is a one-stop shop. Again, the most obvious example is Amazon, which is called The Everything Store for a reason — there isn’t much that can’t be purchased from Jeff Bezos’s ecommerce giant.
Here are two main advantages of arranging your multi-vendor marketplace horizontally:
Vertical marketplaces don’t try to cater to everyone. Instead, they have a specific focus, and it’s reflected in the products or services they sell. Vertical multi-vendor marketplaces embody a piece of age-old entrepreneurial advice: do one thing really well.
That doesn’t mean their catalogs don’t have room for expansion. P2P marketplace Etsy, for example, sells lots of different items — but everything is handmade, vintage, or a craft supply, as per its seller policy.
Here are some examples from Bessemer Venture Partners of vertical industries that a B2B marketplace can enable:
Vertical multi-vendor marketplaces also have their own clear advantages, and here are a couple of big ones:
Remember: multi-vendor marketplace models can evolve over time. Amazon began by selling books, perfected its processes, and expanded again and again, becoming increasingly horizontal over time.
No matter what type of marketplace you’re building — be it a horizontal B2B, a vertical B2C, or any other combination you can think of — there’s no limit to the various industries or segments you can try to enter.
Even beyond simply B2B, B2C, P2P or horizontal vs vertical multi-vendor marketplace models, there are a whole host of industries you can disrupt or enable with a multi-vendor marketplace.
Here is a short list of multi-vendor marketplaces across industries compiled by Version One:
Even with so many marketplace opportunities, some are better than others. Here are three ways to identify the best markets for possible multi-vendor marketplace models:
1. Make sure buyers would want to use your marketplace often. That’s part of what makes online food-ordering marketplaces like Grubhub and SkipTheDishes so successful — most people eat multiple meals every single day. In many cases, however, less-frequent but high average order value (AOV) purchases still have a place in marketplaces — think home or car buying. The high AOV makes up for the low-frequency in terms of marketplace profitability.
2. See if technology can add value. Real estate marketplaces have shown how new tech effectively attracts customers and, in turn, merchants. Companies like Zillow and Trulia disrupted a static industry — one that had long kept info like previous selling prices under wraps — by introducing data-empowered tools to analyze local market dynamics and property histories.
3. Seek out fragmented markets. In a fragmented market, no single organization has garnered enough influence to dictate how a given industry operates on a day-to-day basis. This leaves the door open for a marketplace to try and gain favor with one of the market’s fragments, since there isn’t yet an industry-standard solution.
The future of commerce is going to be more connected with an increasing number of businesses leveraging the multi-vendor marketplace model to enhance reach and revenues. Whether you choose to launch a disruptive marketplace or use your expertise to enable your industry, cross-selling and collaborative online sales are going to continue to rise. The time is now to build your multi-vendor marketplace!
