7 Critical Factors in Choosing a Multi-Vendor Marketplace Platform

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In 2023, orders placed on multi-vendor marketplaces dominated over 35% of global online shopping orders. Soon, retailers that fail to take marketplaces seriously may find themselves in the same position as businesses that once overlooked e-commerce as a novelty.

Popular marketplaces such as Amazon, Etsy, and eBay, prove that the ecommerce marketplace business model is highly flexible and scalable to any niche. One reason behind the rapid growth of the multi-vendor marketplace is that owners don’t need to maintain inventory. Thanks to a collaborative economy, retailers can develop a thriving business without spending a lot of money upfront on initial inventory.

Keep reading to learn more about developing a multi-vendor marketplace and how to choose the right platform to jumpstart or expand your business.

What Is a Multi-Vendor Marketplace?

A multi-vendor marketplace allows businesses to partner with multiple vendors to sell products from a single storefront. The result is a massive product catalog that shoppers can choose from, providing sellers with a substantial base of customers ready to buy. You can compare multi-vendor marketplaces to shopping malls: multiple retailers offering products to the same set of customers under one roof.

The most telling difference between a marketplace and your typical ecommerce store is that one has the specialized capabilities to support this business model while the other does not. A multi-vendor marketplace platform possesses the technical infrastructure to support the listing and sales of thousands of products that span an extensive range of categories through several vendors. When you think of a marketplace, think eBay and Amazon. Think Zara’s website when thinking of a regular ecommerce store.

The multi-vendor marketplace model is also called the “zero inventory model” because marketplace owners don’t typically hold any product inventory. This is another significant reason that marketplaces are becoming increasingly popular. The model works as follows:

1. A retailer registers as a vendor on an online marketplace
2. The vendor is onboarded with a dashboard to list and manage products
3. When a customer purchases a product from the vendor, the multi-vendor marketplace platform processes the payment and sends the order to the vendor (or packages and ships the product to the customer)
4. The marketplace owner keeps a small commission (depending on the marketplace revenue model) and credits the rest of the sale to the vendor
5. The marketplace owner focuses on onboarding additional vendors to grow their product catalog
6. The vendor focuses on growing store sales to increase their profits

The Rise of the Multi-Vendor Marketplace 

In the early days of 2020 (amid the peak of the COVID-19 pandemic), ecommerce sales soared by nearly 44%. This was the highest annual growth rate for ecommerce in two decades. Multi-vendor marketplaces’ gross merchandise volume grew substantially—by 81% year-over-year in the final quarter of 2020.

The rising success of multi-vendor marketplaces can be attributed to:

• Faster growth of online business listings such as bread flour and toiler paper from retailers that previously relied on local foot traffic
• The rapid expansion of online retailers in response to the increasing demand following pandemic closures
• Dynamic seller base offering in-demand products to customers with little overhead cost (i.e., Etsy selling face masks)

COVID-19 fueled a surge in online products and services, leading many ecommerce business owners to explore starting their own online multi-vendor marketplaces. Since the beginning of 2020, over 1,150 marketplaces have emerged worldwide. As existing marketplaces such as Amazon and eBay continue to hike up their fees, smaller sellers continue to search for and join newer marketplaces to sustain their businesses.

What to Look for in a Multi-Vendor Marketplace Platform

With the technology available today, anyone can launch a marketplace in a matter of weeks. However, to be successful long term, more factors need to be considered. Let’s consider the essential elements when looking at multi-vendor marketplace platforms.

1. Seamless and Efficient Vendor Onboarding

An expansive product offering is often why customers choose to shop from multi-vendor marketplaces. For this reason, the success of your marketplace business hinges on the number of high-quality vendors you can partner with. However, acquiring new vendors isn’t as effortless as it seems. Vendors that are already successful and carry in-demand, competitive products typically don’t join additional channels—especially those where onboarding requires significant time and other resources.

To become successful at onboarding new vendors, you must make the acquisition process as effortless as possible. Using third-party ecommerce integration software, you can seamlessly fit into the vendor’s existing ecosystem. With automation, you and your vendors won’t have to spend hours each day completing tasks such as product listing and pricing manually. Instead, you can import products from their existing online store (such as BigCommerce, Magento, or Shopify). A seamless implementation like this is one of the critical factors to scaling your marketplace.

2. Advanced Product Information Management

With so many competitors, a detailed, multi-layered product catalog is required in the ecommerce industry. Having a platform that provides comprehensive product information management features such as tagging, advanced search, custom attributes, and more is essential to managing a massive catalog. Marketplace-specific features are crucial to helping customers navigate through hundreds or thousands of products.

Another thing to work on is optimizing product information pages. You need to provide vendors with an easy way to create and maintain their product catalog. Retailers should be able to include product images, descriptions, and other details, including variations, availability, delivery information, and more.

3. Sophisticated Order Management

Any excellent multi-vendor marketplace platform is also easy for vendors to use, so it should include the necessary tools to make vendor order management more efficient. You’ll want a management dashboard that allows vendors to receive and fulfill orders according to their process. Your vendors should receive notifications each time a new order comes in, just as your customers receive notifications throughout the process.

With robust integration capabilities, vendor-operated stores (such as a Shopify store) are automatically updated with marketplace orders according to new fulfillment levels.

4. Effortless Platform Maintenance

Before selecting a particular marketplace platform, it’s essential to discover how easy it will be to operate and maintain your marketplace after launch. Ask yourself, “How much can I do without enlisting the help of their development team?” Can you implement product-based marketing? Can your vendors edit their product details pages to optimize for SEO? Can you manage all product content and attributes without the tech team’s help?

It’s worth it in the long run to spend time upfront going through all the possible scenarios of your multi-vendor marketplace business. Learn what you can about the technology you plan to use, including its functionality, risks, and limitations.

5. Long-Term Scalability

When developing a marketplace, it’s essential to determine which business model works best for your specific business. Many multi-vendor marketplace owners choose to start small while expanding their vendor network, refining their value proposition, and designing their transaction flow. However, you must think long-term and avoid becoming stuck in this initial stage.

It’s critical that the technology you choose for your business in the beginning not become a constraint. The multi-vendor marketplace platform you select should be scalable enough to allow you to build on functionality, then pivot to other markets or geographies. Always ensure that the platform you use has adequate technology to support all the potential scenarios of your business in the future.

6. Technical Support

All technology requires some level of support at some point. So, be sure the marketplace platform you choose offers top-notch customer support. To ascertain a platform’s level of responsiveness and technical support, check reviews from other users. This takes some time, but you’ll thank yourself in the future.

7. Safety and Privacy

Marketplace platform security is essential, especially for enterprise companies. The security aspect depends on the provider’s internal policies and the environment the marketplace is built on. With so many laws and regulations concerning consumer data, data compliance and security should be at the top of your list of concerns.

Integrating Your Multi-Vendor Marketplace With Flxpoint

Hoping to build the next best multi-vendor marketplace like Etsy or Amazon? In that case, you need to partner with a comprehensive multi-vendor marketplace platform that fulfills all of your technical needs. Integrating with dropship automation software like Flxpoint allows businesses like yours to develop highly functional ecommerce marketplaces.

To find out how Flxpoint can help transform your marketplace business ideas into reality, talk with an expert today.