Marketplace Infrastructure

The Ultimate Guide to Multi-Vendor Marketplace Platforms

headshot of Nautical Commerce team member Nicole Kahansky
Head of Marketing
notebook open with pen beside it

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:

What is a multi-vendor marketplace platform?

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.

What are the key features of a multi-vendor marketplace platform? 

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.

Product management

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.

Logistics management

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:

  • Shipping integrations: Integrations for sellers with shipping providers like ShipBob, ShipStation, or Shippo to allow for seamless communications between sellers, buyers, and the marketplace operator.
  • Warehouse inventory management: Shipping from many different warehouses around the world (many regular ecommerce platforms place too many limitations on the number of possible warehouses).

Vendor management

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:

  • Self-service vendor onboarding
  • Vendor contract management and commission calculation
  • Payout accounting and adjustments
  • Vendor portal for product uploads and inventory management
  • Communications tools
  • Ecommerce tool integrations

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 🔵

Payment management

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 🔵

Business Models Supported By a Multi-Vendor Platform 

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:

Service Marketplaces

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.

Digital Marketplaces

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. 

Internal Marketplaces

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. 

How to choose the best multi-vendor marketplace platform

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.

1. Build it from scratch

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:

  • Costs quickly add up with each line of code, and overruns are common and could easily reach into the hundreds of thousands — or even millions of dollars.
  • It can take upwards of two years to launch a custom-built marketplace, and during that time your competition could get a leg up.
  • You’re making a major investment before you’re able to process a single transaction.

2. Choose a bolt-on solution

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: 

  • Scaling will be difficult, since you’re limited by whatever functionality the plugins you cobble together allow for.
  • Many processes, such as vendor onboarding, aren’t typically automated with bolt-on solutions and therefore demand a higher headcount to manage.  
  • More plugins, more problems (you may find that your Frankenstein solution of stitching together different integrations is prone to bugs).

3. Use a purpose-built multi-vendor marketplace platform

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: 

  • They’re far less expensive than custom builds.
  • They’re quick to set up — in fact, with Nautical’s B2B marketplace software, you can launch a minimum viable project (MVP) marketplace in as little as  90 days.
  • They were built with the complexities of B2B multi-vendor marketplace transactions in mind, so your infrastructure won’t be tangled up with countless plugins that bolt-on solutions require. 
  • Depending on the setup, they require little to no maintenance since the platform creator provides updates and fixes. 
  • They let enterprises focus on their main businesses rather than the tech side of the equation. 

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. 

Core Capabilities of a Marketplace Platform 

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. 

  • Scaleable: To avoid re-platforming down the road, ensure your marketplace platform has the ability to handle increasing levels of users, transactions, and data without sacrificing performance. Don’t think for today, think for tomorrow. 
  • Customizable: Customization refers to the ability to tailor the marketplace platform to the specific needs of the organization or industry. Every marketplace has unique requirements. So the ability to customize the platform to your specific business needs is crucial. You want your platform to work for you, not the other way around.
  • Integration capabilities: Can your platform work well with others? Integration capabilities enable the marketplace platform to extend its functionality by integrating with emerging technologies, APIs, or services. This future-proofs the platform and ensures it can adapt to changing market trends and requirements.

Choosing the right Multi-Vendor Marketplace Platform

The founders of older marketplaces like Amazon and eBay, or 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. 

Additional Resources:

Interested in launching your own company-operated marketplace?

With Nautical, you can quickly launch a marketplace alongside your existing business without replatforming. Speak with a Nautical marketplace expert today!
Learn More →

Ready to get started?

Nautical Commerce dashboard graphic