An online marketplace is an eCommerce website with multiple independent sellers. Marketplaces are always bigger projects than just a classic online shop. A marketplace launch demands not only business planning skills but also the understanding of how a multi-vendor eCommerce site actually works, it’s ins and outs, and technical aspects.
Still, marketplaces are insanely popular these days with both entrepreneurs and shoppers. Entrepreneurs start their own marketplaces to widen their product range, dominate in niches, and enter new markets. Buyers prefer marketplaces over traditional online shops and offline retailers because of low prices and way bigger assortment.
In CS-Cart, our new customers often ask us:
“So, I got CS-Cart for launching my marketplace. What are my next steps?”
In this marketplace launch checklist, we cover eight basic steps of launching an online marketplace. We assume that you’re starting on CS-Cart Multi-Vendor but the steps work for a marketplace built on any platform.
You will learn what you should start from and what you need to do next, where to find guides and instructions on every step, and who you can ask for help. This is not a detailed tutorial on how to start an online marketplace but a reference point that helps you move in the right direction.
Step I: Plan Your Business Model
A marketplace business model includes monetization model, cash flow arrangement, shipping model, customer and seller attraction and retention, and the business segment. Let’s take a closer look at these parts of your business model.
1. Choose a business segment you will be working in
There are three major business segments you can enter with your marketplace: B2C, B2B, and C2C. There are a number of more complex B2X2X segments but they are very niche and if you are starting in one of those, you probably don’t need this guide at all.
- B2C (Business-to-Consumer). The most popular segment for eCommerce marketplaces. B2C marketplaces sell products to end consumers. The world’s largest marketplaces such as Amazon, Walmart Marketplace, eBay, and others work in this segment. B2C shows very big competition, so it might be more difficult to grow.
- B2B (Business-to-Business). In B2B, marketplaces sell products to other companies. For example: a marketplace sells machine-tools to factories. Alibaba is a solid example of a B2B online marketplace. Surprisingly, the B2B market is two times bigger than B2C. And it outpacing B2C by 19% per year. But in the context of online marketplaces, B2B is still developing and is less popular than B2C in eCommerce.
- C2C (Consumer-to-Consumer). In C2C, individuals sell products to other individuals. See Craigslist and other classifieds websites. This segment is not that popular, so the competition there is not as strong as in the other two segments.
2. Choose the monetization model
Commissions are the main source of revenue of a marketplace. Generally, the marketplace takes a commission from the seller for every sale. A commission can be fixed for all the products or vary depending on the product category and seller status.
For example, the commission for selling products with high margins is usually bigger than for selling low-margin products. Also, privileged sellers on your marketplace can pay lower commissions.
There are also other way of monetizing your marketplace:
- Subscription plans—these are vendor plans with different conditions, such as the amount of monthly revenue, the max. number of products, availability of certain categories, etc. Vendor plans can give your sellers advantages—promotion of their goods, free advertising on the marketplace, and others.
- Freemium—the marketplace gets revenue from additional services: ad placements, sponsor mentions, special offers for buyers, etc. On Freemium, sellers don’t directly pay to the marketplace for doing business on the marketplace or pay for extra services only.
- Product placement fee—a seller only pays once for uploading a product to the marketplace. This is the best model for sellers who sell seasonal goods.
You can start from freemium or a small product placement fee to attract new sellers. Once you get the seller base, you will definitely switch to commissions and subscription plans. Once it happens, you will have to establish the money flow on your marketplace. Three ways you can organize cash flow:
|1. All the money goes to the marketplace first. Then the marketplace transfers sellers their part. Can be complicated to set up in terms of legal and bureaucratic routines.
|2. All the money goes to sellers first. Then they pay a commission to the marketplace. Convenient for the marketplace owner. Could be inconvenient for customers because they have to pay each seller separately.
|3. The money is split into two transactions automatically. One part goes to the marketplace, the other goes to the seller. The most convenient method for all the stakeholders. Requires connecting the marketplace to Stripe Connect or PayPal Commerce Platform.
3. Choose the shipping model
Marketplaces manage shipping in two major way:
1. Sellers ship products to customers. Sellers receive orders through the marketplace, pack them, and send packages to customers. The whole shopping process is on sellers.
2. Marketplace ships products to customers. Sellers send products to the marketplace warehouse and then the marketplace ships items to customers through its own or third-party delivery service.
If sellers take the shipping on them, they offer shipping methods to customers. It can be the seller’s own courier service or third-party delivery company. The products go straight from the seller’s warehouse to the customer. This is the best strategy for food products, fragile items, hand-crafted stuff, and so on.
If a marketplace is responsible for shipping, it first picks up ordered products from sellers or receives products from sellers in advance and keeps them in the warehouse. This is fulfillment by marketplace. One of its advantages is that customers can select a single shipping method for multiple sellers at checkout, and don’t have to pay for the shipping several times, even if they have products from different sellers in their order.
Step II: Think about what matters now—start the marketplace MVP
Starting to the full scale is not a good idea when it comes to a marketplace launch. What if your idea doesn’t work? What if there’s no market? You gotta check it and make sure your marketplace will live and become successful.
Start a marketplace MVP—a minimum viable marketplace website with very basic features. This would be a test version of your future marketplace. MVP allows you to test your idea in action without too much spendings. This is one of the most important steps on your way to the marketplace launch.
The key to starting a working MVP is speed. You have to start really fast to be ahead of your competition and understand if it’s worth growing further. The fastest way to launch a marketplace MVP is to build it on a ready multi-vendor software.
So, what does matter in the first place? Make sure the marketplace software you’re going to use for your MVP and the future marketplace meets these requirements:
1. Convenience for sellers. This is a must. The easier the marketplace for sellers → the faster they learn how to work on the platform → the faster they start selling → the more sellers join your marketplace.
2. Extendability without programming. MVP usually has the very basic eCommerce features: product catalog, basic vendor management tools, simple design features, some payment gateways, and checkout. These are enough functions to test your idea. But in the future when you launch to the full, or even for advanced tests, you’ll need more features. Make sure the platform allows you to extend its functionality with no-code solutions: add-ons, plugins, etc.
3. No-code user interface. No time to develop design and layouts. You need no-code tools to tweak user interfaces to run experiments and find out what layout and design work best. Make sure the marketplace software allows for designing without coding.
4. Scalability. MVP is only the beginning of your project. When you launch the production version of the marketplace, it will grow. At some point, you will understand that it’s no longer an MVP and you need to scale the business. Make sure the marketplace platform fits different niches and can work in different regions. Plus, it’s important that the platform can handle high loads.
5. Affordable ownership costs. The marketplace software price should be affordable for you so that you could launch the MVP fast. But the MVP costs are more than just the multi-vendor software cost. At this stage, it’s better to avoid marketplace development and design investments, and pricey hosting. These can dramatically slow down the launch and lead to risks. Choose the software that offers money-back guarantee.
6. Platform’s provider support. If you’re not tech-savvy, leave the technical job to the marketplace software provider. The provider’s support team can deploy the marketplace faster, update it, and resolve issues during the MVP period and on.
Step III: Fill your catalog with products
A big advantage of a marketplace compared to a classic online shop is that you don’t own any products and don’t keep them in your warehouse. The marketplace vendors do it for you. That’s why you can greatly expand your product range through vendors.
But at this step, you don’t have any vendors. And vendor’s won’t come to an empty marketplace. You need to fill it with some goods. If you already sell products—great! Upload them to the marketplace. You can then offer these products to your new vendors to sell. Here’s how it works in CS-Cart Multi-Vendor:
So, how do you and your sellers exactly add products to your marketplace catalog? There are usually two ways to upload products:
|Add products one-by-one manually
The advantage of this method is that a product listing will look as you expect after you add it to the marketplace. You upload images, write descriptions, and design the product listing manually. On the other hand, it takes more time to fill the catalog manually than you have at your MVP stage.
|Mass import products
This is a preferred method. You (or your sellers) get a .csv or .xml file with the whole product base and upload this file to the marketplace. Once the upload is complete, all the products appear on the marketplace with names, descriptions, images, and all. It’s way faster than the manual method but product listings may need minor edits after import.
We recommend using the mass import method, especially for MVP. Mass product import not only allows you and your sellers to fill the catalog in minutes but also update product data much faster and even schedule automatic import on a regular basis.
In CS-Cart Multi-Vendor, mass product import is based on import presets. Once you create a preset for a certain type of import file, you can use it all the time and share it with your sellers so they could import their product flawlessly. See how it works:
Step IV: Set up the basic marketplace workflow
Okay, you launched MVP and it shows signs of future success. You’re ready to move to the production stage. Keep in mind that the launch is not the hardest thing—it’s the easiest one. After the launch, you have much work to do: setting up the workflow, attracting sellers and carefully working with them, marketing, and more.
You want to start with the basic marketplace workflow setup. This is the functional skeleton of your marketplace—the required features and the right settings. At this stage, avoid playing around with the design—you’ll get to it later.
1. Understand your workflow based on user feedback
You have tested your marketplace MVP with a small segment of real target users (otherwise, how would you understand the idea works?). These are your early adopters. They can help you move with your project in the right direction.
Collect feedback from your early adopters:
- Ask them about their shopping experience in your marketplace
- Ask them what was convenient and what wasn’t
- Hear their ideas on how you could improve the marketplace
Here’s tips on how to ask good questions to get maximum information from interviewees:
- Ask open-ended questions
- Don’t ask binary questions
- Don’t ask hypothetical questions
- Don’t ask leading questions
- Don’t ask questions that make the interviewee lie
Use the feedback to understand what you need in your marketplace in the first place and get it done.
2. Set up the necessary functionality
Any modern marketplace software is likely to have some kind of onboarding process. It’s super cool if the multi-vendor platform offers you a setup wizard. A setup wizard guides you through the basic marketplace settings, which greatly saves your time and helps understand which parts of your marketplace you should focus on first.
CS-Cart Multi-Vendor has a convenient settings wizard, which helps you build the workflow base. It guides you through these areas:
- The company information setup
- The business model setup, which includes cash flow setup
- Vendor management setup
- Design configuration
- General settings
3. Add missing features
At the marketplace configuration stage, you may find out that some features don’t fit your business processes perfectly. Some specific features may be missing. That’s normal, there’s no marketplace software that fits perfectly any business needs. At this point, you need to adapt the existing functionality or add the missing features.
Remember we mentioned that the marketplace platform should be expandable without coding? That’s an important factor in choosing the right marketplace software. Ready-made extensions and add-ons greatly save your money and time at this stage.
CS-Cart Multi-Vendor has a marketplace of more than 2,000 ready add-ons and themes. Installing add-ons to the platform is as easy as installing an app on your smartphone. On the add-on marketplace, you’ll find more custom features and integrations with third-party business services, payment gateways, and shipping carriers. No coding at all.
Step V: Set up the marketplace design
You want your marketplace to stand out from your competition. One way you can achieve that is by making a marketplace design that will not only look fantastic but also be convenient for the customers.
When setting up the marketplace design, pay attention to two major components: looks and layouts. The former is all about the appearance of the storefront: colors, fonts, animations—all the visuals. The latter is more about the user experience: the size and positioning of content blocks, menus, products lists, etc.
Good or bad look of a marketplace storefront is a matter of taste. And it often depends on the region the marketplace works in. For example, in Europe and the US, online shoppers got used to browsing a clean minimalistic storefront while marketplaces in Asia look absolutely different.
How do you set up the looks of your marketplace? Well, all the modern marketplace platforms have built-in design themes and tools to edit them. There are also third-party themes for almost every marketplace solution out there.
By experimenting with positioning the content on your marketplace storefront, you can find the best layout for each marketplace page. For example, you can try different page layouts for checkout to figure out the most converting one.
It’s important that the marketplace software allows you to play around with layouts with no coding at all. Say you want to remove the block with shipping information from the checkout page because you only sell digital products. You definitely don’t want to spend a week making this change through a developer.
Many modern eCommerce platforms allow for no-code layout editing. In CS-Cart Multi-Vendor you can change the layout of any page by simply dragging and dropping blocks on the storefront:
Step VI: Set up payment and shipping methods
At Step II, you should’ve decided on the monetization and shipping models. They influence what payment and shipping methods and commission model you and your sellers will use on the marketplace.
Modern marketplace software integrates with popular payment methods by default. At least, PayPal is almost always there. CS-Cart Multi-Vendor integrates with more than 70 payment gateways out of the box, plus there are more integrations as add-ons. Let’s see the best payment options for different cash flow models:
|1. All the money goes to the marketplace first, then you pay sellers their part.
|You can accept payments from customers with any convenient payment gateway available out of the box. PayPal works just fine. Then, send money to the sellers via bank transfer.
|2. All the money goes to the sellers first, then they pay you your share.
|Define the most convenient payment gateways for sellers and allow them to use the preferred gateways. They will get all the money for orders and then pay you commissions via a built-in payment method. Look at PayPal, Stripe, and other proven payment gateways.
|3. All the money is split into two parts automatically in real time.
|This cash flow arrangement model only works with certain payment systems. Two of them are Stripe Connect and PayPal Commerce Platform. For sellers, Stripe is the preferred method as it features Stripe Express, which allows for quicker vendor onboarding.
Again, your marketplace software probably integrates with popular carriers. The shipping methods you will use on your marketplace depends on the shipping model: you can delegate shipping to your sellers or ship orders yourself.
|1. The sellers take the shipping routine on them.
|See what carriers are available in the marketplace platform and activate those that are convenient for your sellers. For example, if your vendors sell primarily in the UK and sometimes ship to the EU countries, activate Royal Mail, DHL, and FedEx and make these methods available for sellers and customers.
|2. You collect orders from the sellers and ship them to customers.
|In this case, use the fulfillment feature. Sellers will send you products in advance so that you store them in your warehouse. Then, you ship products to customers. You can either use 3PL or create your own delivery service (great for local delivery).
Step VII: Get legal documents ready
Important: Aside of the described documents, you may need more approval documents from your country authorities to run the marketplace officially. Please consult a lawyer.
There are papers you need to prepare before the launch and keep updated during your marketplace life. Not having the right legal docs can lead to delays with the launch and even to legal disputes. At this step, focus on legal documents you can’t start selling officially.
Online Marketplace Terms and Conditions
The Online marketplace terms and conditions document is one of the main documents for your marketplace. It’s an agreement between all the parties involved in your business. This document sets up the major aspects of the marketplace business with the focus on terms and conditions between stakeholders.
You as a marketplace owner describe roles and responsibilities of all the parties, define payments processing routine, registration, and other procedures. As there are more than two parties involved in doing business on the marketplace, you need to make Terms and Conditions clear and though-out to avoid confusion and legal disputes between the parties.
Make sure, your online marketplace terms and conditions cover these aspects (included but not limited to):
- Account sign-up for both buyers and sellers
- How buyers interact with sellers
- Payment processes
- Return, refund and exchange policies
- Shipping and delivery
- Order cancellation
- Buyer guarantees
- Dispute resolution
- Legal responsibility
If you focus on the EU market, your marketplace has to comply with GDPR. This is the regulation that protects personal information and allows users to take full control of it. If you work in the EU without being compliant with GDPR, you can face heavy fines. So, make sure your marketplace software supports GDPR requirements.
- What information exactly you collect
- How you collect this informations
- How exactly you use this information
Not all the visitors of your marketplace will become registered buyers. But the thing is that these visitors use your website just like registered buyers—they browse catalog, add products to cart, and interact with sellers. You need to legally safeguard yourself from consequences caused by the violation of website usage terms.
- Use of the website
- Intellectual property protection
- Limitations of your legal responsibility
You can’t avoid returns—that’s a normal operation on an eCommerce marketplace. But you can greatly reduce the number of returns and increase customer satisfaction with a clear return policy.
The purpose of your return policy is not just to protect you from excessive returns but also for making the return process easy and convenient for your customers. Make the return policy easily accessible on the marketplace storefront and user accounts.
Read a guide on how to handle returns and make a perfect return policy on an online marketplace.
Your return policy needs these essentials (included but not limited to):
- Time frame in which a customer can return a product
- Return criteria
- Refund methodology
Step VIII: Start attracting vendors and customers
In a perfect world, you find vendors before you even launch the marketplace MVP. You’ll need some audience to fill the marketplace with users and make it live. This approach also solves the most painful marketplace problem—the chicken and egg problem.
- Where to find sellers? To get experienced sellers, look for them on big established marketplaces and social media groups dedicated to doing business on marketplaces. Also, look for sellers on industry exhibitions and conferences, offline industry forums, business directories, hobby clubs, trade associations, offline stores, and workshops. And, of course—on LinkedIn.
- Where to find buyers? Collect email addresses of potential customers through landing pages and email-campaigns. Learn where your potential buyers are hanging around. These could be social media groups (start a discussion there mentioning your marketplace), reach customers through influencers, or create your own community with a blog, forum, social media, or even offline meeting.
Yan Anderson is the Head of Content Marketing at CS-Cart with over 10 years of experience in the eCommerce industry. He's passionate about explaining complicated things in simple terms. Yan has expertise in building, running and growing eCommerce marketplaces. He loves to educate people about best practices, new technologies, and trends in the global eCommerce industry.