The Ultimate Guide to Choosing a Multi Vendor Marketplace

Marketplaces are continuing to take over ecommerce, and the rise of multi-vendor marketplace platforms is only accelerating the trend.

Historically, companies looking to launch a marketplace only had one option— to build their back-end from scratch. Luckily, the emergence of new marketplace software is making launching a marketplace more turnkey than ever before.

There are several routes you can take when it comes to your multi-vendor marketplace platform. And with choice comes decisions. This article will review how to decide on the best marketplace platform for your business. We’ll answer questions like:

• What is a multivendor marketplace platform?
• The key features of a multi vendor marketplace platform
• How to choose the best multi vendor platform for your ecommerce business

First, What is an Example of a Multivendor Marketplace Website? 

Before we dive into marketplace platforms, let’s get clear about what a multivendor marketplace website entails. 

A multivendor marketplace is a platform that offers products/services from multiple vendors on a single website. Some of the most popular multivendor websites include: 

• Amazon: 4.8 billion visits/month
• Ebay: 1.2 billion visits/month
• Rakuten: 563 million visits/month
• AliExpress: 525 million visits/month

But to be a marketplace, you don’t need to be a behemoth like the ones listed above. There are countless smaller, vertical marketplaces that are extremely successful. Take Minted, for example. Minted is a design marketplace that crowdsources designs from artists and sells them online. While the idea is niche, it’s been incredibly successful, with revenue increasing nearly 40% year-over-year into the low hundreds of millions. 

With the advent of multivendor marketplace technology, launching a multivendor marketplace website is becoming increasingly accessible to founders everywhere. Which brings us to our next point — multivendor marketplace platforms. 

What is a Multivendor Marketplace Platform?

Put simply, a multi-vendor marketplace platform is the technology behind an online marketplace. 

Just as there are platforms for single-vendor ecommerce stores, there are emerging platforms, with multi-vendor capabilities, to create marketplaces.

You may be wondering, why does a multivendor marketplace platform look different than a single-vendor ecommerce platform? 

The backend of a multivendor marketplace is a lot more complex than that of first-party ecommerce. For example, there are two sides to a marketplace: the buyer side and the vendor side. That means a customer making a purchase is only the tip of the iceberg. Marketplace platforms also need to be able to handle a myriad of logistics like giving vendors access to respective order details, keeping tabs on whether orders have been fulfilled, paying out vendors, and so much more. 

🔵 Get a free trial of Nautical’s multi vendor marketplace platform 🔵 

What are the Key Features of a Multivendor Marketplace Platform? 

The features of a multi-vendor marketplace platform need to consider the experiences of three main stakeholders:

1. The operator 
2. The sellers
3. The buyers 

Let's dive into what features to consider for each to ensure an optimal marketplace experience. 

The operator 

The marketplace operator is the facilitator. They are orchestrating both sides of the marketplace to help remove friction for sellers to sell and buyers to buy. Here are some examples of key marketplace features for operators:

• Vendor onboarding: Basic vendor onboarding capabilities are critical. While at the beginning it may be feasible to do more vendor hand-holding, automating the onboarding process will be essential as you scale. 
• Contract management: To protect yourself as an operator, you need to have a bullet-proof system for managing contracts with all your vendors.  
• Product approval: For managed marketplaces, you want the ability to approve listings to ensure products being listed meet your standards. 
• Payment processing: It’s critical to accept and process a range of payment options through your multivendor marketplace platform to ensure seamless checkout and that you get paid. 
• Vendor payouts: To take on vendor payouts manually gets complicated quickly. An effective marketplace platform should have a payout system built in. 

The Sellers 

Your vendors are the heart of your marketplace. The right features can make or break their experience. The most important features are the ones that remove friction and build trust.

• Product uploads: Your platform should allow vendors to easily upload the products they’d like to sell on your marketplace. 
• Order management: Since sellers don’t own the marketplace platform, they need a way to see and manage their respective orders, from the point of purchase to potential returns. 
• Reporting: It’s helpful for vendors to have access to reporting to see which of their products are doing well and the ebbs and flows of business. 
• Payments: A multivendor marketplace platform needs to be able to route payments to vendors in an accurate and timely manner. This is where fintech capabilities become paramount. 

The Buyer

You’ve probably been a marketplace buyer, but are you aware of the specific capabilities that lead to a positive customer experience? These things are normally invisible to the customer but have become table stakes for every marketplace. 

• PIM (product information management): The product data available and how it’s organized play a huge role in searchability (aka buyers finding what they’re looking for) and building trust with marketplace buyers. 
• Multi-vendor checkout: A key feature of a marketplace is allowing buyers to checkout products from more than one vendor in the same cart. 
• Order and return updates:  Keep buyers in the loop on both their orders and their returns to maintain trust. 

Other Core Capabilities of a Marketplace Platform 

Below are some more general, but important, feature considerations to take into account for long-term success. 

• 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.

How to Choose the Best Multi Vendor Marketplace Platform for Your Ecommerce Business 

When it comes to choosing the best multivendor marketplace platform for your ecommerce business, there are several options. 

1. Build it from scratch

Some 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 you complete control over every single element of your marketplace. However, the downsides can quickly 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.

In an interview about their experience building Minted, a popular design marketplace, Mariam Naficy, Founder and Executive Chairman shared:

“We hand-coded the site at first because the problem was the customization app was not available from anyone[...]And now we're replacing pieces of it piece by piece, painfully going through all of that[...]I just wish you'd [Nautical] been there a long time ago because that would have been a lot easier.” 

2. Choose a bolt-on solution

‍Other companies take an ecommerce platform that’s intended for a single-vendor online store and bolt on 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

Companies that choose an end-to-end multi-vendor marketplace platform sidestep the issues associated with the other two approaches. A multi-vendor marketplace platform has many benefits, including: 

• They’re far less expensive than custom builds.
• They’re quick to set up — in fact, with Nautical’s marketplace software, you can launch a minimum viable project (MVP) marketplace in as little as 90 days.
• Depending on the setup, they require little to no maintenance since the platform creator provides updates and fixes. 
• They let businesses focus on their main businesses rather than the tech side of the equation. 

To help assess what option is best for you— and how to choose the right technology tools– we’ve compiled a list of questions to consider before making your decision. 

5 Key Questions to Guide Your Selection

👉 What are your nice-to-haves vs. must-haves?

You don’t need to (and shouldn’t) wait until you have the perfect version of your marketplace to launch.

Matt Holder, Founder of Loop Golf, shares: 

“What often happens is there's a failure to start somewhere. And I get it, it's high risk.[...] you’re investing a lot of time and emotion into it. [...]what didn't exist in these previous marketplaces when they started were tools that you could employ out of the box to accomplish some of the initial things that just make it easier to get started. Once you get started, it's a lot easier to keep going despite the negative feedback or things not working.”

The marketplace platform you choose for the first iteration of your marketplace doesn’t need to be your forever solution. That being said, having a clear understanding of what your business needs vs. wants will allow you to weigh your options, taking into account both your MVP and long-term vision. 

👉 Do you have an existing ecommerce site? 

Or are you launching one from scratch? Your current circumstances play a role in deciding the best marketplace platform for your business. 

For example, if you’re not interested in re-platforming your existing first-party commerce business, you might consider bolt-on options in the short term. On the other hand, if you’re launching from scratch, we recommend considering a platform purpose-built for multi-vendor commerce. 

👉 Do you have a development team? 

Different marketplace platforms require different levels of technical know-how. Thinking about the technical expertise you have access to — whether that be in-house or outsourced— is a critical consideration in your marketplace platform decision. Otherwise, you risk a lot of unanticipated costs.

👉 What is your budget? 

No matter what multivendor marketplace platform you choose, it costs money. Knowing your budget is valuable to plan for scalability, and helps ensure costs align with marketplace growth. It also helps prioritize essential features without overspending and considers the total cost of ownership over time.

👉 What are your goals? 

Always be clear on the goals and mission of your marketplace business. If you’re struggling to decide the best multi-vendor marketplace platform for you, return to your founding goals and what you’re trying to achieve. Starting here can bring a lot of clarity! 

🔵 Have more questions than answers? Join marketplace bootcamp 🔵 

Choose The Best Multi Vendor Marketplace Platform‍ With Confidence

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

​​🔵 Get a free trial of Nautical’s multivendor marketplace platform ​​🔵

Additional Resources:

• Check out Nautical's glossary of terms to help navigate marketplace conversations
• Download the marketplace key decisions checklist as a guide for critical questions to ask yourself before launch
• Read the Forrester Opportunity Snapshot we commissioned to dive deeper into the data on maximizing the ROI on your marketplace