Marketplace Best Practices

Top Tools to Build Your Multi-Vendor Marketplace

Head of Marketing

Interest in the multi-vendor marketplace is growing as enterprises and entrepreneurs witness the model’s repeated success.

The concept is simple. Multiple vendors “gather” in an online marketplace to sell products or services. Think Amazon or Uber. If executed correctly, a multi-vendor marketplace offers consumers more choices and gives merchants a broader potential customer base. 

Meanwhile, marketplace operators can fill gaps in their catalogs and unlock new revenue streams, like vendor commissions, advertising, and subscriptions.

The multi-vendor concept continues to prove itself. Last year, Walmart’s marketplace almost doubled in size, attracting nearly 5,000 new third-party vendors per month to bring the total to 130,000. Marketplaces are becoming the dominant online sales format. A third of US business is now online, with 63% of transactions stemming from marketplaces. 

Corporate megaliths like Amazon, eBay, Walmart, and others may have paved the way for the multi-vendor marketplace, but smaller organizations are now vying to carve out their own niches. They just need the right tools — and a way to unite them.


What Tools Do You Need to Build Your Multi-Vendor Marketplace?

The multi-vendor marketplace may be simple in concept, but its execution is much more complex than a single-vendor store’s. An assortment of merchants means lots more moving pieces. 

For instance, how do you split an order so that a consumer can purchase items from more than one vendor in a single transaction? It’s something online shoppers love about marketplaces, but that convenience isn’t something an off-the-shelf ecommerce solution is built to enable.

The many different tools required to set up a multi-vendor marketplace may seem overwhelming.

Don’t worry, though. Virtually all of the tools that a multi-vendor marketplace operator needs to get started can be broken down into six main categories: marketing, ecommerce, payments, taxes, customer support, and shipping. 

To help you build your multi-vendor marketplace, we’ll go over each category and what’s required (including some of the top tools).

Marketing

Marketing is a huge part of launching any new ecommerce venture, and a multi-vendor marketplace is no exception. A multi-vendor marketplace must take a two-pronged approach to attract both vendors and shoppers.

Here are the four main groups of tools you’ll need for marketing:

1. Email: You’ll need an email provider as well as an email marketing platform, like Mailchimp, SendGrid, or Klaviyo, to execute online campaigns and send notification emails for order updates.

2. Analytics: Like with any online business, analytics help with strategic choices. For a multi-vendor marketplace, analytics will help better understand the sellers and products bringing in the most demand. Analytics also provides the most relevant display ads and offers appealing cross-vendor bundles.

3. Social: Establish your multi-vendor marketplace’s presence across all major social-media channels, then use a tool like Hootsuite or Zoho Social to centrally manage them, schedule posts, and more.  

4. Affiliate Management: If you are using affiliates as an advertising channel, you will need a platform to manage codes, track commissions, and send payouts. Some multi-vendor marketplace platforms, like Nautical, have this built-in.

Ecommerce 

There are masses of ecommerce tools to choose from, but a marketplace must specifically have two different types of ecommerce tools to function properly.

1. Ecommerce Platform Integrations: A marketplace operator needs to reduce the friction to sell on their platform. One simple way to do this is to allow sellers to import existing product descriptions, images, and inventory from the ecommerce platforms they’re already using. Integrations into Shopify, WooCommerce, BigCommerce, and Magento will enable you to better serve your sellers. 

2. Storefront:  A storefront builder is a cost-effective and efficient way to deploy a multi-vendor marketplace without a heavy IT investment. However, you’ll need something that’s been tailored for multi-vendor transactions. Traditional ecommerce platforms, like Shopify, offer storefronts, but they aren’t able to handle multi-vendor checkout, limiting your ability to scale as a marketplace.

Ensure that your ecommerce tools don’t slow down your customer experience. Many marketplaces built with a plugin on top of ecommerce platforms see incredibly slow load and checkout times. Choose how you build your marketplace storefront carefully!

Payments

The owner of a typical online store accepts payments. Multi-vendor marketplace operators need to push payments to suppliers, distributors, partners, affiliates, and sellers — and in the way that each prefers.

The complexities related to these transactions have limited the number of out-of-the-box solutions available. We highlight two popular choices in our Marketplace Payments & Taxes report: 

1. Stripe Connect: As a payment provider, Stripe is intuitive, fairly easy to integrate, and well-designed.

2. Adyen for Platforms: Marketplace operators who want wider international coverage may want to try Adyen for Platforms, although it’s somewhat trickier to integrate with your tech stack. 

You will also need a provider to accept payments. Popular choices include Stripe, Braintree, Adyen, and Authorize.net. 

Taxes

In recent years, tax compliance has become increasingly burdensome for marketplace operators. 

Starting in 2022, the IRS requires US operators to issue a Form 1099-K to every vendor who earns more than $600 in annual sales. 

Also — thanks to a landmark 2018 Supreme Court ruling — marketplace operators are no longer only required to collect and remit sales taxes in states where they have a physical presence. Above certain thresholds, which vary from state to state, marketplace operators must collect and remit sales tax on all transactions.

These rule changes further complicate a system that can already be tough enough to navigate. Unpredictable challenges like credit card chargebacks, which occur when a cardholder disputes a charge, can prove costly.

Here are two options (also in our Marketplace Payments & Taxes report) to help marketplace operators stay tax compliant in an ever-changing regulatory environment:

1. Avalara: A popular provider of tax-automation software, Avalara has solutions for marketplaces of all sizes. 

2. TaxJar:  To cater to marketplaces, TaxJar has developed an API (application programming interface) to enable operators to collect sales tax.

Shipping

Since many multi-vendor marketplace operators don’t actually store or deliver any products or services, it’s easy to forget about shipping and logistics in the planning stage. However, marketplace operators need to make it frictionless for vendors to ship their products and services and share shipping details back to the marketplace.

One way to achieve this is to create a marketplace where it’s easy for merchants to integrate with popular shipping providers like ShipBob, ShipStation, or Shippo. Marketplace vendors can then share delivery details back to the marketplace operator, who will keep the buyers up-to-date.

Customer Support

Marketplaces are built upon trust. Buyers need to know:

  • Where they can find items on the marketplace
  • When to expect the items to arrive
  • Access to an easy return/exchange process if there is an issue

Amazon has won the market by instilling consumer trust. In fact, Amazon is the second most trusted brand in the US, behind USPS. Consumers can count on their delivery timelines and convenient returns process. 

When (not if) something goes wrong during a marketplace transaction, your buyers will be coming directly to you as the marketplace operator to remedy the issue. So you need to have the tools to handle customer support, like Help Scout, as well as reviewing tools, like Yotpo, to allow your buyers to give feedback on items.


A Multi-Vendor Marketplace Platform Is a Must

The tools mentioned above are just a few options to power your multi-vendor marketplace. The possibilities are endless, but it’s not recommended that you fill up your marketplace stack with as many tools as possible. 

As you add more tools, your site may start feeling the load and slow down your customer experience. Additionally, managing all of these different tools in a cohesive way will cause scaling limitations.  

You need to leverage a marketplace ecommerce platform like Nautical Commerce to streamline your marketplace stack. Single-vendor ecommerce platforms aren’t built to handle the logistical and fintech challenges of a multi-vendor marketplace.

A proper, purpose-built marketplace platform automates workflows between all of the different third-party tools that come together to power a fully functioning multi-vendor marketplace. And, if it’s a best-in-class solution, the platform also includes a suite of in-house tools for marketplace operators. 

Contact us to learn more about Nautical’s multi-vendor marketplace platform, which orchestrates your marketplace ecommerce stack array of tools to create seamless marketplace experiences. 

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