A multi-vendor marketplace is a type of online marketplace where multiple sellers or vendors have to collaborate together to sell their products to various customers. In a typical multi-vendor marketplace system, numerous sellers will be present who will sell their products in a marketplace owned by an administrator. There are mainly three entities involved in this system:
A Multi-Vendor Marketplace
In the present time, the E-Commerce marketplace has gained immense popularity because it has profitable growth from various regions. By replacing old manual processes with automated electronic procedures and boosting the number of potential trading partners, e-marketplaces claimed to improve the efficiency and effectiveness of procurement activities.
Unlike traditional brick-and-mortar stores, the online marketplace is viewed as a cost-effective option, and as a result, the majority of business owners are focusing their efforts on developing a realistic and feasible marketplace for clients to purchase their everyday items. The marketplace operates as a middleman between merchants and customers, enhancing the buying experience by offering a wide range of products.
Working of Multi-Vendor Marketplace
- A vendor registers in the marketplace through paid and or free registration.
- After a vendor registers and uploads the products, the customers can begin purchasing from them.
- The store admin of the multi-vendor marketplace development can charge a small fee on each transaction.
- The payments made are mostly transferred to the store admin and from there to the respective seller.
- Delivery of the product is handled by the vendor itself or by the admin.
- Communication on faulty products is conveyed to vendors or to the store admin, which the seller handles.
Flowchart of Multi-Vendor Marketplace
Reason for more store owners moving from an E-Commerce website to Multi-Vendor Marketplace
- Variety of Products – A multi-vendor marketplace’s products are featured by a variety of merchants. Any e-commerce store with a large product selection is guaranteed to attract more traffic and sales. eBay would not be where it is now if it had only focused on one vendor.
- Takes away most of the headache – It requires a lot of time and works to manage deliveries, inventories, product descriptions and upgrades, pricing, and other aspects of running an online business. In a multi-vendor marketplace, these major problems are shifted to individual vendors.
- Lesser Expenses – For managing the shop no one needs to be paid to manage the shop because each seller will be running the stop independently. More amount of time will be available to be devoted to answering important scaling and marketing questions.
- Flexibility – Vendors using multi-vendor e-commerce systems can manage product information, prices, and shipping areas, as well as add and update products as needed.
- Cash flow through Commissions – Because a multi-vendor marketplace might have a large number of suppliers, it makes money by charging a commission on each transaction between sellers and customers.
- No need to maintain inventory – Any e-commerce firm can be hampered by warehousing and human resource costs. Starting a multi-vendor store will prevent this from happening because sellers will handle all inventory-related issues.
This gives a clear picture that Online buyers are gradually moving towards Multi-Vendor Marketplace.
We all know Amazon is one of the world’s largest multi-vendor e-commerce marketplace platforms. According to statistics, Amazon made $386.06 billion in revenue in 2020. In addition, Amazon has 95 million prime members in the US.
Growth of Amazon over the years
Merchants are also favouring Multi-Vendor E-Commerce Store.
Various merchants and businesses also find online marketplaces a better option when it comes to sales and revenue generation.
- Readymade Traffic: A well established multi-vendor market store will attract huge traffic and sales opportunities. Creating an online store and then investing in marketing will require huge investments and very little chance of attracting traffic.
- Suitable for sales-minded people: Multi-vendor e-commerce systems are preferred by-product makers and sellers who are more concerned about profit than with building a brand.
- Small Set-Up Cost: Thousands of dollars are spent on creating a website to sell the products and then investing in advertising. Leaders in online marketplaces may get the marketplace up and running for as little as a few dollars per month and a minimal selling fee.
- Flexibility: Multi-vendor e-commerce platforms allow merchants to manage product descriptions, prices, and delivery zones, as well as add and update products at their leisure. This adaptability comes without the need for technical understanding.
Key Benefits of an Online Multi-Vendor Marketplace Platform
- More Products and hence More Customers: A multi-vendor eCommerce marketplace usually has a diverse range of sellers selling a variety of products. Customers benefit from the convenience of being able to purchase a variety of things under one roof.
This attracts a larger number of customers than if the marketplace only sold one type of product.
Multi-Vendor Attracting Customers
- No need of maintaining Multi-Vendor Inventory in the Marketplace: An eCommerce start-up is unlikely to be able to afford the costs of maintaining a fully stocked warehouse. However, in a multi-vendor marketplace, each vendor is responsible for keeping track of their inventory.
This relieves the start-up of a significant financial burden, which is crucial in the early stages and allows them to concentrate on scaling up their firm with precision and speed.
- Lower Operational Cost: There’s no need to spend time or money on product design, inventory management, or logistics management when starting a multi-vendor marketplace. All of these are the sellers’ responsibilities when they use the marketplace.
As a result, the marketplace may focus on social media marketing, scaling operations to meet the needs of worldwide clients, and website upkeep.
Operational Cost is Reduced
- Benefits of making money easier: Marketplaces can earn significant sales long before they could if they focus on only one type of good due to the wide diversity of products and clients. Each sale completed by each vendor earns them a commission.
Vendor earning through Online Selling
- Price Wars: While having a large number of suppliers ensures that buyers have a variety of options, it also leads to a significant price war because each product has various replacements. This could lead to a fierce pricing war among vendors as they compete for greater market share. As a result, the commission earned by the marketplace from sellers on each sale made on the platform decreases.
82% of Amazon consumers consider price to be a very important factor when selecting a product, demonstrating that price drives consumer purchase decisions.
- Delivery Management: The marketplace must nevertheless keep an eye out for deliveries. This necessitates effective logistics in order to transport products securely and on time. Managing this logistics is sometimes a time-consuming and expensive endeavour, especially if the marketplace caters to multiple states or nations.
A dynamic e storefront that allows the marketplace owner to track all deliveries from all vendors under one roof can often solve the problem.
Customer keeping track of delivery
Business Benefits of Online Marketplace Business Models
E-commerce owners are now showing more interest in building online marketplaces because of their efficiency and commission earning.
Some of the benefits are listed below:
- Powered by world’s leading e-commerce platform – Magneto
- A Multi-Vendor store with a very high security level.
- Responsive and customizable e-commerce platform.
- It is User Experience (UX)-Centric and conversion-focused design.
- It is evolving with the latest industry trends.
- Robust report generating features.
So, it is observable that the Multi-Vendor Marketplace is a platform with lots of benefits for the business. But we do have to keep in mind that every new enterprise comes with a risk. Several factors, such as the focus, opportunity, revenue-generating mechanism, and so on, are used to classify different sorts of online markets. For an organization to build its marketplace or sell on one, it should research both the benefits and the drawbacks. If they can overcome the obstacles, an internet marketplace could be the key to developing a large, lucrative business with a long-term influence.
Ronak Meghani is a serial entrepreneur & eCommerce Consultant who has worked with small-medium-large companies. He is a co-founder of Magneto IT Solutions and has been closely working with eCommerce ventures since 2010. He has helped 200-plus international brands for building/improving their online ventures in the area of UI/UX, development, launching, revenue enhancement, marketing strategy, magento development, eCommerce support and much more, and 90% ventures are generating very good revenue. He’s enthusiastic about start-ups, entrepreneurship, sports, home decor ecommerce, automotive ecommerce, gems & jewellery ecommerce, electronics ecommerce and all things marketing.