People are now reaping the benefits of modern technology and moving away from traditional brick-and-mortar stores.
Ecommerce is accumulating a significant part of the market share with a positive growth rate each year.
In 2020, retail e-commerce sales worldwide amounted to 4.28 trillion US dollars and e-retail revenues are projected to grow to 5.4 trillion US dollars in 2022.Source: Statistica
Online marketplaces like Amazon, AliExpress, Etsy, eBay, Flipkart, and others have gained massive popularity and trust among buyers. Ecommerce stores are becoming successful, at the same time, the online shopping trends are changing rapidly.
You need to align with this change and other things to consider when creating a multivendor marketplace.
Why Open a Multivendor Marketplace?
Multivendor marketplaces come with the potential of selling in huge volumes. Many merchants have their stores and many others sell using a platform owned by a mediator(admin). They can sell both physical and digital products or services through online marketplaces.
58% of retail sales will be influenced by digital by 2023
Multivendor platforms are beneficial for all stakeholders including merchants, customers, and marketplace owners. The following list explains why you should create a multivendor platform.
- Customers can choose their desired items from a wide range of products
- Vendors get a large and potential customer base
- Marketplace owners get a brand name and earn commissions from each sale
Now, let’s dig deep into the essential factors you need to consider when creating a successful multivendor marketplace
7 Things to Consider When Creating a Multivendor Marketplace
The following list has all the considerations required to open a successful multivendor marketplace.
1. Choose the product types you want to sell (niche selection)
There are several types of products to choose from the available options. You need to find out which products you’re passionate about. At the same time, these products must have the potential to help you earn a substantial amount of profit.
Analyze your competitors working on a similar niche and find out their successful and failed strategies. Take inspiration from the successful ones, learn from their mistakes, and try to innovate fool-proof strategies for your marketplaces.
Choose a niche that has less competition and provide customers with cost-effective solutions for the challenges they face. You’re most likely to succeed if you can hit the pain points of your target audience.
2. Identify your customer base
Determining the right prospective customers is a crucial part of the e-commerce industry. You can access the data of your target audience based on many demographics such as age level, marital status, income level, location.
You should communicate with consumers who have specific needs and preferences for your products.
It’s easy for marketers to deal with a one-size-fits-all strategy while identifying the target audience. But you will gain success for sure only if you aim at meeting your customers’ specific needs.
No matter how hard you try, if your marketplace doesn’t attract both sellers and customers, it will not work as a sustainable business.
3. Adopt a suitable business model
Choosing the type of your business is essential before working on monetization strategies and marketing campaigns. Determine your business models. Business-to-business ( B2B), business-to-customers (B2C), or customers-to-customers (C2C) are a few popular types of business.
Once you know which business model is suitable for your needs, it becomes a lot easier to generate an effective revenue funnel.
Finally, you need to ensure that your multivendor marketplace is valuable and responsive to the business model you’re planning to work with.
4. Select the right revenue funnel
There are several options through which you can earn money. Choosing the right revenue strategy ideal for every situation and vendor is very crucial. You must select the appropriate revenue funnel tailored to the needs of your target audience and prospective vendors. Get revenue strategy ideas from the following sections.
- Subscription fee (Amazon, eBay, Amazon): Both buyers and sellers pay on a monthly or yearly basis. In some cases, only the sellers pay a subscription fee for using the website.
- Listing fee (Etsy, OLX, Delivery Hero): Vendors pay money for the spots they’re allocated on the marketplace. The listing fee varies depending on a few variables such as product categories.
- Transaction fee (eBay, Etsy, Shopify): This is more like a sales-based commission. The system (marketplace admin) receives a portion from each transaction made via the website. For example, vendors pay 10% of each successful transaction to the marketplace owner.
- Premium fee (Google, OLX): You can offer exclusive features by using premium subscription fees. For example, sellers can show their products on top of the list if they pay the premium fee.
- Advertising fee (eBay, Facebook, Amazon): Sellers can display their products and services across the marketplace by paying an advertisement fee. This helps vendors compete with their counterparts and increase their visibility on the website.
5. Choose the ideal software/platform
You can either build a website from scratch or choose a ready-made platform and customize that as per your needs. Be careful to choose the right platform that allows major customizations for online marketplaces. You can choose the ideal software or platform from the following section.
Open-source solutions like WooCommerce (WordPress-based) and Magento are cost-effective solutions for online marketplaces. Licensed platforms like Shopify Plus also offer great services but they’re a bit costlier.
Self-hosted solutions usually provide excellent flexibility but have a few limitations elsewhere. Cloud-based platforms work worldwide wherever there is an active internet connection.
Each option has merits and demerits. You can benefit from all these options depending on the type of your business. Explore the available options before making your final decision. WooCommerce, Magento, Shopify, Sharetribe, and CS-Cart Multi-Vendor are a few platforms we recommend.
Developing a website from scratch is one of the best ways to open a marketplace. You can customize the features as per your business needs. Though developing a marketplace from the ground up require a higher level of technical skills, you may have to invest a lot in the development process. Here are a few key options you can consider:
- You can hire a team of in-house developers
- Employ freelance developers from Upwork, Fiverr, PeoplePerHour, and more
- There are many development companies specializing in marketplace development
6. Promote your multivendor marketplace
Once your multi-vendor website is up and running, it’s time to promote it to the target audience. Focus on attracting both sellers and buyers as your business depends on both parties.
You can promote your website using popular marketing channels like Twitter, Google Ads, LinkedIn, Facebook, YouTube, and more.
7. Measure your platform’s performance
The online presence of your marketplace is very critical to its success as e-commerce. You need to audit your site regularly to check the SEO health. Find out the room for improvement. Polish the faulty strategies.
Finally, use tools like Google Analytics and your marketplace dashboard to measure the conversion rate, ROI, and other metrics. Take the next step based on data, not your gut feeling.
Online business has the potential to grow even more in the coming years.
Choose the right platform, we recommend using a ready-made platform since it involves less hassle.
Adopt an effective monetization model and a business model that will work for the short term and sustain in the long run.
Creating an online marketplace consumes a significant amount of time and money. So, it’s wise to implement the above-mentioned Things to Consider When Creating a Multivendor Marketplace.