eCommerce is a popular way to make business. Multi vendor marketplace business model is a branch of eCommerce, which today is one of the most promising areas today.
In this article, we will look at marketplaces, their advantages, analyze how to create your own marketplace business, and why many entrepreneurs tend to open a marketplace instead of a regular online store.
How does the multi vendor business model work?
There are several roles that are directly involved in the business relationship on a marketplace.
- The administrator is the owner of a marketplace or his representative who regulates the relationship between buyers and sellers on the marketplace and also makes important decisions in the development of the marketplace platform.
- Sellers—also called vendors—are providers of goods and services. They may have an additional separate website as well as not have it at all and use their offline store and a marketplace as main traffic channels.
- Buyers are all customers who make purchases or order services through marketplaces.
Note: depending on the type of business model, sometimes buyers and sellers can exchange roles like in peer-to-peer marketplace.
Buyers place an order, it is processed by sellers or a marketplace itself, and it is sent through the internal delivery service of the marketplace. If a seller is responsible for the delivery, then in this case they provide the delivery himself.
Profit to the seller comes from the sale of their goods and services. The profit for the marketplace administrator comes from fees, which can be up to 25% depending on marketplace policy and what it sells.
Basic classification of marketplaces:
There is a wide classification of marketplaces. We will go through the basic points.
By business model:
- B2B—business-to-business—takes place between two legal persons. Businesses provide products and services to businesses.
- B2C—business-to-customer—businesses sell products and services to customers.
- C2C—customer-to-customer—the relationships happen between two or more individuals.
By the types of products to sell:
- Product—such marketplaces offer physical goods
- Services—providers offer useful services. The market of services can be divided into several categories:
- Booking services such as carsharing or hotels
- Subscription type for books and films
- Marketplace of special skills professional creative and household help related to money transactions
By product categories:
- Vertical—there is only one type of product. They may vary according to features or prices. For example, a marketplace of knives or books.
- Horizontal—there are several product types but they have one common feature. For example, a marketplace of electronics. There you can find a vacuum cleaner and mobile phone, but these are electronic devices.
- Global—There are a lot of products of different categories. The prime example is Amazon.
Ideas of what to sell on a marketplace:
The choice of products to sell depends on the area and country you are going to focus on. We distinguished some prospective fields of products and services to sale:
- Clothes and fashion items
- Health and beauty products
- Tech products
- Pet supplies
- Second-hand items
- Hand-made items
- Educational courses
- Products for baby care
Why are many retail owners moving to a multi vendor marketplace business model?
If you compare multi vendor business models with other eCommerce branches, you find out that marketplaces are very profitable, but it is not the only appealing side. For entrepreneurs, marketplaces look very attractive because they have several important features:
- A large number of different products—this variety allows you to make up- and cross-sells, which increases the total purchase amount and helps a buyer to order several desired products at once.
- Attracts a large audience—a marketplace is a very convenient model for buyers because it provides services in a convenient format. One category of goods has a large number of options that differ in characteristics, they can be conveniently compared with each other and delivered at a requierable pick-up point.
- Partially relieving employment—a multi vendor business model frees up time because marketplace and sellers share business tasks. The marketplace administrator does not need to think about suppliers and transportation of goods. They need to provide fast delivery and good services.
- Win-Win Solution—The marketplace runs ads, ensuring the popularity of the products of its merchant partners, while sellers tell their third-party buyers that they are on a particular marketplace, thereby discreetly advertising the marketplace. This is a convenient strategy in which everyone wins.
- Products related to chosen items—a marketplace for those entrepreneurs who already have an online or offline store helps to add similar products or products related to their product to an order, thereby making their services even more convenient.
How do I start a multi vendor business?
To create your business successfully, you need to go through several important steps which are basic in multi vendor marketplace business model:
- Creation of a business concept—you need to determine the business model that you will adhere to, determine the marketing strategies that your competitors use, and put forward hypotheses that you will explore in the practical part. This is the stage of theoretical research of your idea.
- Testing MVP—MVP implies a simple and fast solution. In terms of eCommerce, it may look like a marketplace created on a no-code platform with a minimum amount of resources spent. The most important thing is that users can place goods there and make orders. All other processes at this stage can be handled manually.
- Attracting sellers. This is one of the most difficult and important stages of creating a marketplace. There are some sources where you can find vendors:
Thematic forums and conferences
- A personal meeting
- Search from competitors
- Internet surfing
- Attracting buyers—you should start a marketing strategy that you thought over at the very beginning, here you can test hypotheses to select “golden bundles” and remove irrelevant marketing ideas.
- Automation and optimization—when all the previous stages have been successfully completed, you can start optimizing business processes. It is very important to choose a reliable contractor and other specialists with whom you will cooperate. At this stage, It is also necessary to integrate several automation systems such as CRM, ERP, CMS and some others.
- Maintaining the result—an essential part of the business development is the improvement of customer services and improving business processes.
- Scaling—this is an optional stage that is optional. The idea is that scaling may not always be good for the business. In some cases, the success of a business depends, for example, on a certain location, and capturing a market outside this territory can turn into a failure.
Which platform is best for multi vendor marketplaces?
One of the most significant steps is to choose a software for marketplace launch. There are a lot of reliable softwares in the market. We recommend you to start your business with CS-Cart Multi-Vendor. For this multi vendor shopping cart software business model does not matter since it is suitable for all types of marketplaces.
It is a nice platform suitable for all business types. It is a nice combination of no-code user-friendly technology and code-based advanced parts. Due to this specificity it suits for all business sizes from small and hyperlocal businesses to global enterprises. It is an on-premise platform, so you should download and install it.
- On-premise platform
- One-time payment
- Open code
- 2000+ add-ons
- 26 languages
- API for enterprises
- Mobile app for IOS and Android
Rate 4.8 out of 5
How does multi vendor marketplace work?
Sellers can place products or services on a marketplace while buyers can find the required products easily and fast. An administrator of a marketplace benefits from a fee for a purchase which should be paid by sellers.
How do I attract vendors to my marketplace?
To find vendors you can explore your competitors, search in forums, online and offline discussions, and visit events related to your product.
What products to sell on a marketplace?
There are some prospective types of products and services to sell on a marketplace: educational courses, health and beauty, baby care, jewelry and clothes, pet care products, the ones related to technology.
How does the multi vendor marketplace business model work for store owners?
Vendors can sell their products and benefit from free shipping, order processing, and an additional traffic channel which provide a marketplace. It is a mutual benefit for all sides.
How does multi vendor marketplace work for a marketplace owner?
Administrators get a fee for each purchase made on a marketplace. A fee can vary up to 25% for each transaction. They also take on some issues related to delivery and marketing.
All in all, marketplaces are a profitable business. In this article, we reviewed the basic classification of how marketplaces attract users, explored the features of marketplace software, and found out where to find vendors for a startup.
Of course, in addition to the steps presented, you need to solve a lot of legal issues, find specialists in each of the areas, and probably find infestors in order to follow a multi vendor business model. These are all small but important parts that should also be considered when starting your own business. No matter what business you are going to open, these issues will have to be addressed for any business model.