Introducing Multi-Vendor Business models
There are a large variety of eCommerce marketplaces, spanning across markets, industries and sectors. A multi-vendor marketplace as seen above, has three main parties, the owner, the sellers and the customers. Multi-vendor marketplaces can be summarised in three main categories:
Business To Consumer Marketplaces
B2C marketplaces are the most common and are likely what most people imagine when thinking of the structure of a marketplace. In a B2C marketplace businesses (sellers) have a storefront and sell their products to consumers. The sellers gain exposure to the visitors of the marketplace while the admin gains revenue earned from a variety of revenue options. Examples of B2C marketplaces include Amazon, and Rakuten.
Business to Business Marketplaces
In a B2B marketplace products or services are sold by businesses to other businesses. In a B2B marketplace you can expect to see higher average order values (AOV), however, the length of sale tends to be longer than the less complex B2C market. Where a B2C marketplace displays fixed prices, a B2B marketplace can involve quotes, negotiations and auctions. It is common for B2B marketplaces to be more niche than a generalist in their product offering, although an example of a generalist B2B marketplace is Alibaba.
Consumer to Consumer Marketplaces
C2C marketplaces enable selling between private individuals.Whether it’s for products or services, this model connects people to do business with one another. The key here is that a customer – not a business – sells goods or services to another customer. In C2C marketplaces decisions are driven by consumer need and are often bespoke transactions. Perhaps the best-known example of a C2C platform in the UK is eBay, allowing consumers to auction their old items to other consumers. A more recent example would be AirBnB.
What to look for in a Multi-Vendor platform
When looking for a marketplace provider there are some important factors to take into account. Below is a list of what we have deemed the most important factors.
Revenue structure
As mentioned above the owner of the marketplace has a variety of options to choose from when it comes to the pricing structure of their marketplace.
A combination of the above
It’s common for marketplace owners to utilise a combination of the above models to lower the barrier of entry for sellers. Smaller brands will likely gravitate to marketplaces that offer a commission-based structure. Whereas, larger brands enjoy payment structures that are fixed as they benefit from economies of scale. It’s worth thinking about the sellers you plan to have on your marketplace when deciding what revenue structure(s) you will apply.
When selecting a marketplace provider it’s important to familiarise yourself with what revenue structures the provider offers. You don’t want to commit only to find out that the clever revenue model you’ve developed isn’t possible.
Pricing
The cost of a marketplace is an important consideration when researching your options. How you approach the variety of price points on offer will likely depend on the current and planned scale of your marketplace.
The cost to develop and maintain a marketplace will depend on the scope of your project. It’s possible the marketplace you wish to create exactly matches what’s on offer from an out of the box solution. However, in our experience, each project has its requirements and this is where you’ll start to see the price of your project increase if you choose an out of the box solution. Look on the bright side though, the customisations your marketplace requires could become your USPs or even raise the barrier to entry for competitors in your space.
It’s worth considering how the process of adding any customisations looks when researching platform providers. Some companies offer plugins and integrations that may allow you to add functions over time. Others, like W2Solutoin, offer tailor-made customisations built to your specification. Understanding how a plugin or integration works, its effect on site performance, the costs involved and whether it might cause limitations in the future is vital.
Another factor to take into account is how much room to grow the platform provider offers. Marketplaces have the potential to scale quickly, you don’t want your successful business to be limited due to the capabilities of your chosen provider. One option you have is to take a modular approach to the building of your marketplace. Do you require all the functionality when you first launch? Could you start with the core features and then scale your functionality in line with your revenue and marketplace’s growth? We suggest taking a step back and reviewing your platform requirements, you may find that you can reduce your initial costs and invest further once you see results.
Customer Service
Customer service is a key component for any business and marketplaces are no exception. Customer service can be split into three areas:
The platform provider
The quality and availability of the platform provider to the platform owner with effective support and solutions. Unfortunately, things can go wrong, often this is out of your control. In these situations, your revenue and brand image will benefit from having someone to call immediately to get things back up and running quickly.
Sellers
This is the customer support offered to sellers on the platform by the owner and their team. Customer support offerings differ between platform providers and are often overlooked by those researching their options.
Customers
Providing customer support can be a daily task for sellers on marketplaces. This being the case investing in a slick customer support system will keep sellers happy and improve the experience of their customers. Therefore, increasing your likelihood of retaining sellers and providing a great experience for their customers.
