Multi-Vendor Marketplace Websites: What It Is and How To Make it Work for You

Online stores like Multi-Vendor Marketplace Websites are giving mortar and brick stores a run for their money. 

According to the US Department of Commerce, in the year 2020 alone, e-commerce sales increased a whopping 32 %, while in-store sales surged by only 12%. 

Are you planning to dip your toes into the e-commerce business? Then this is a favorable time to start a multi-vendor marketplace website. 

A multi-vendor marketplace website is a great business model for all parties involved:

• Vendors get an established platform to showcase their products. 
• Customers get more options to choose from 
• Platform owner earns revenue without getting involved in the production or managing inventories.  

Want to know more about how to create a multi-vendor marketplace website and the nitty-gritty of this business model? 

Read on.   

What Is a Multiple-vendor Marketplace Website? 

A multiple-vendor marketplace, simply put, is a platform where vendors can create their accounts and showcase their products. Here, customers can view all the vendors and browse through all the listed products.

Think of it as an actual marketplace converted into an online one. You can replace shops with different vendor accounts and foot traffic with inbound web traffic.  

In a multiple-vendor marketplace website, the marketplace owner is responsible for 

• Attracting customers
• Taking care of logistics 
• Facilitating transactions

While the vendors (or sellers) take the responsibility of showcasing the right products and ensuring quality. 

You are probably familiar with platforms like Amazon, Etsy, and Flipkart. Those are perfect examples of multiple-vendor marketplaces. 

How To Build a Multi-vendor Marketplace Website: A Primer

Before you start building your own Amazon, some facts and best practices should be taken into consideration. Let’s start by weighing challenges and rewards. 

Rewards : 

• Having fewer hats to wear increases productivity– Sellers focus on inventory management and product quality. And marketplace owners promote the store and build up web traffic. 
• Customers get way more options– This enhances customer satisfaction, which in turn attracts web traffic.  
• Easy to expand– Once the good word spreads, vendors and customers flock to try your marketplace for better service and products. Profit margins, then, can soar pretty fast.
• Building a brand is easier-  Once reputed vendors join your multi-vendor market, it becomes easier to create a brand reputation.

Challenges:  

As lucrative as it seems, operating a multi-vendor marketplace comes with a set of challenges. Here are the most common ones: 

• Generating qualified traffic (visitors with purchase intent) through effective marketing is a challenge in the beginning. 
• Maintaining a high product and service quality is difficult when you have many listed vendors. It takes a strict adherence to product quality standards and keeping all the vendors on the same page. Also, even a handful of bad customer experiences can sabotage your reputation. 
• Setting up a platform from scratch is complex and expensive. On top of that, you need a team for handling logistics and administrative works. Hiring also swells up the cost. 
• Direct competition from both other multi-vendor sites and boutique e-commerce stores. 

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Pick the Right Business Model 

As you plan to create a multi-vendor marketplace website, the first thing you want to do is determining who your target customers are.  

You might want to read: How Much Does It Cost To Build Your Online Marketplace?
The Beginner’s Guide to Build a Multi-Vendor Marketplace – E-book

Depending on your answer, you will choose any of the following business models: 

• B2B: In this model, both the vendor and the customer are businesses. A good example of B2B multi-vendor marketplaces are IndiaMart and Amazon (B2b).  
• B2C: Here, vendors directly sell to consumers. Example: Jabong, Myntra. 
• C2B: It is a consumer selling products/services to a business. Think of a photographer selling his high-quality photographs to a magazine or news company. 
• C2C: A single consumer selling a product/service to another consumer. Etsy and Craigslist are great examples of marketplaces based on the C2C model. 

Once you determine your business model, pay attention to the pain points and motivations of your target audience. Do extensive audience research and come up with customised marketing strategies to target different audience segments. 

Determine the Best Revenue Model: 

The next big question to ask is how to generate revenue once you set up your marketplace. 

Let’s talk about a couple of routes you can take: 

• Membership Fee: Charging your vendors a monthly or yearly subscription fee is one of the most popular ways to generate revenue. 

Consider this before you set the fee: A too high subscription fee will drive your vendors off. Go too little, and your revenue will take a hit. Solution? Your subscription fee should match the value your vendors are getting. 

• Commission: Another option here is asking for a commission once your vendor makes a sale. There are two ways to do it. Either charge a flat fee per transaction or ask for a certain percentage of order value. 
• Listing Fee: You can charge sellers for listing their products on your website. The fee can be calculated based on the price of the product or the time it will be live on the platform.  Olx or eBay follow this model. 
• Advertisement: If some of your vendors want to push their products to the top, you can allow them to advertise on your platform in exchange for some fees. 

Please note: These are the most popular models. If you think something different would work even better, by all means, experiment. 

Finalise the Elements of Your Multi-vendor Marketplace Website:  

Every multi-vendor marketplace website is different. What is essential for one may not be that important for the other. 

Nonetheless, there are a few elements that make up the core of any online marketplace operation:

• Easy Onboarding: An effective multi-vendor platform makes vendor onboarding effortless. The vendors should have options for separate profiles and stores where they can list their products and store info.  
• Feedback: Customers insist on reading reviews before making a purchase decision. 86% of people take online reviews like a friend’s advice. Any decent multi-vendor platform should provide options for leaving product and vendor reviews. 
• User-friendly search option: Having the option for finding desired products and vendors is a must. Easy search option enhances user experience, which in turn boosts customer engagement. 
• Price Management: Due to the presence of a large number of sellers on the platform, differences in the price of the same product occurs. This is not good for customer satisfaction or revenue, especially if there is a commission on every sale. For this, variable commission rate can be used depending upon sales of the particular vendor. 
• Payments: Since there are multiple vendors and a single shopping cart, order total is sent to the administrators. Running a multi-vendor platform involves keeping the vendors happy. And keeping them happy means paying on time. This can be ensured by having a platform with features of scheduling payments or a method that directly sends payments to vendors when the order is processed.

The above-mentioned list, by no means, is an exhaustive one. Figure out which elements should be on the top of the priority list. After that, allocate your resources accordingly for the best results.  

Think About the Technology: 

After all the planning, it’s time to build your marketplace. Ideally, you don’t want to go all-in at first. Start with a minimum viable product (MVP) and add more features as your business grows. 

To develop your website, you can take any of these approaches: 

•  Develop your platform in-house: You can hire developers and build your online marketplace in-house. Since it is being developed from scratch, you can expect custom features, clean code and tight security. Languages like Ruby and Ruby on rails are popular options. 

However, the cost can be an issue if you have a limited budget. Any multiple-vendor marketplace website would cost you anywhere from $15000 to $25000{1]. Additionally, maintenance and additional features would require some more cash.    

• Use e-com store builders: Sometimes, e-commerce store builders like Shopify can get the job done. However, you need to rely on apps as store builders like Shopify don’t offer any website marketplace features. Those apps often have limited features and might not be 100% reliable. 

• Zero-code marketplace builder platform: Zero-code platforms could be a great option. Hence, take the example of Yelo. It helps you create a well-designed, fully customised platform in no time without writing any single line of code. In addition to this, developers at Jungleworks made sure  marketplaces built on Yelo are super secure. Backend coding is clean, efficient and bug-free. 

And the best part is, it is cost-effective. Yelo’s standard plan’s annual price is almost three times cheaper than even the cheapest in-house app. It is a quick, affordable, yet a quality option.

Core Features That You Can’t Do Without: 

Here are some “must-have” features of any multi-vendor marketplace website: 

1. Responsive design:  This is a must for a great customer experience. 

It offers a seamless browsing experience across all devices. 

2. Safe payment gateway: Safer the process, the more customers will purchase. Further, your site should be built on a robust framework with multiple safeguards for data protection. Usually, customisable marketplace building platforms like Yelo take care of the security beforehand so that you have one less thing to worry about. 
3. Profile: This is to keep all the user info in one place. Keep different profile types for vendors, administrators and customers. 
4. Dashboard: Each vendor should have a personalised dashboard where he can view transaction history, product listing, profile info, shipping info, etc. 
5. Ratings and review: Customers trust reviews, and they read reviews before purchasing anything. Additionally, rating and review feature is a must. 
6. Multi-vendor order management: A buyer can purchase different products from different vendors in a single order. Further, the administrator should be able to make sure all parties get their share of payment. 
7. In platform advertisement: Your vendors might want to promote a few products. In-platform ads allow them to reach more customers better. 

Conclusion: 

Once you set up your multi-vendor marketplace website, start attracting your target audience. Remember, your success lies with customer (and vendors’) happiness. Offer them the best experience, and you would be scaling fast. 

If you want an affordable yet powerful base to build your marketplace on, feel free to give Yelo a try.