The multi-vendor commerce model has dominated the market for a long time due to lower operating costs, more straightforward, centralized customer management, and up-and-running order fulfillment. In 2021, Amazon made $469.8 billion, and Etsy reported a market value of $21 billion. Most sellers opt for a marketplace instead of investing in their independent stores — for instance, nine out of 10 top US retailers are marketplaces. Before the unprecedented pandemic-induced e-commerce boom, online marketplaces accounted for 58% of global online sales.
Of course, this attracts commerce-savvy entrepreneurs and enterprises with e-commerce potential to dip their toes into the marketplace model. With the market so heavily saturated and full of tried-and-tested offers, what can you expect? Let’s explore the biggest challenges.
What is a multi-vendor marketplace and how is it different from e-commerce platforms?
Usually, a marketplace isn’t directly affiliated with manufacturers, goods providers, or vendors and acts as middleware. A multi-vendor marketplace can have tens of thousands of sellers consolidated in a single place, sometimes offering goods and services that fall under similar categories like electronics, art, or industry-specific equipment. Sometimes, the multi-vendor platforms are all-encompassing, like Amazon or Taobao.
From the customers’ point of view, the algorithm for choosing the vendor and purchasing process stay relatively similar. However, the main difference from a traditional e-commerce single-brand store is in the internal requirements. Owners of multi-vendor marketplace are obliged to:
- Build a solution that is scalable for its vendors. Even in the most niche markets, the manufacturers and sellers might have thousands of products and work with both B2B and B2C models. Any scale limitations, qualitative or quantitative, that contradict their business model might scare businesses away.
- Ensure unified yet flexible logistics and shipping standards. The complexity may cause chaos and difficulties while architecting and developing the platform. Leaving the shipping options limited
- Validate all vendors joining the platform. While working with business entities, you would need to acquire and process much more information to accept them into the marketplace than you would need with an individual.
- Ensure compliance with the fintech provider for every registered vendor. Depending on what region or economic sector you serve, you will have to account for their target audience’s needs. For example, B2B vendors might need bank transfers compliant with the existing regulations.
- Provide high load capacity. This is a standard requirement for any digital commerce entity, but for multi-vendor platforms expectations skyrocket. During high season, such as on Black Friday or the Christmas sales, many retailers struggle to operate as usual due to high demand. Imagine this situation, but scaled to tens of thousands?
Challenges of developing multi-vendor platforms and their management
All of the above pose potential challenges. But before tackling them, many mid-size and large enterprises face their first stumbling point — a lack of internal resources and in-house expertise for fully-fledged marketplace software development and support. Which issues can it cause in the planning and architecting stage and later during platform management?
1. Commerce: buying and selling experience
Besides all commerce components needed for driving online sales and promotions, like catalog checkout, SEO tools, and various marketing integrations, a multi-vendor marketplace is expected to be equipped with robust product management, return workflows and a mobile-first experience (preferably with advanced web app functionality).
But these are all solvable and integrable technicalities, and there are successful examples on the market. What you will have to think about to make your offer appeal to vendors is customizable price tiers (since B2B buyers might order in bulk) and variable postal fees (mainly if your marketplace is not limited to a single product category).