Flex your Multi-vendor Marketplace Muscles: The best platform for growing your business
Updated: Jan 17
Just when you thought it was safe to go back into the high street..
There’s a huge buzz around the ‘marketplace’ phenomenon, fuelled by challenging fulfilment and supply chain issues, rapidly changing consumer behaviour and a struggle for retailers to adapt to these changing landscapes quickly enough to continue to grow.
So what are marketplaces? How could they benefit you and your business? Not sure where to start? This extended post has you.
TL;DR - marketplaces are a multi-brand/multi-product variation of ecommerce, where a store acts more as an operator, with multiple vendors selling products through your store (like an interface such as Amazon) and you taking a commission, with your focus driving traffic to said marketplace and attracting/onboarding new vendors. If you want to know how we’ve seen success setting up clients with their own marketplace platforms and how we can set yours up too, visit our Multi-vendor marketplace section on our site.
The size of the prize
Not sure about the size of the opportunity in marketplaces? The numbers are astounding and not to be ignored.
The global e-commerce market is predicted to be worth over $6.3 trillion by the end of 2023, of which more than half of this being generated through marketplaces. The Office of National Statistics is forecasting over $225 billion of that will just be from UK retailers alone (the highest in Europe) in 2023, and over $285 billion by 2025.
Even if you haven’t heard of a “multi-vendor marketplace” before, you’ve probably bought something from one. If you’ve browsed on Amazon, or Etsy, or even Decathlon, you’ve been exposed to examples of multi-vendor marketplaces - a scaled up ecommerce site where multiple sellers (vendors) can sell, advertise and showcase their products in the same digital store. In the physical world, they’re called department stores, retails outlets or other concentrations of sellers (your local fruit and veg market? Literally a place where a market is).
The fastest growing companies are those diversifying or working from a marketplace strategy and model. Taking advantage of this commerce format has many advantages and few, if any, disadvantages or downsides.
Before we explore any further, here’s a quick crash course on the multi vendor space:
Multi vendor marketplaces are online ecommerce platforms where:
Third party vendors (or sellers) offer their products for sale
Buyers can browse multiple products in a similar category all on one site
Buyers purchase products from multiple vendors from this single site
The marketplace owner handles payments and generates revenue via fees/commissions
The vendor fulfils the order directly to the buyer
What is a B2C/DTC marketplace?
There are multiple types of marketplace in ecommerce, but the main type we’re showcasing today is B2C:
B2C - the most well-used and well-known style of marketplace. It’s heavily involved with the consumer and true DTC processes. Examples of these types of marketplace include Etsy, Amazon, Facebook Marketplace (to a degree, usually referred to as peer-to-peer but you can read more on that here) and typically consumers are the main browsers and buyers. These B2C marketplaces provide a variety of products from multiple vendors, spanning a specific category or a wider range, depending on the strategy of the marketplace operators. This is the most common and a good place to start if a brand or seller wants to start sales
Horizontal vs. Vertical Categories
In simple terms, this defines what breadth or niche a series of products and vendors you’re looking to attract to your marketplace.
Horizontal - a wider breadth of product and categories, not specific to any particular type of product(s). You’re ‘everything everywhere’ type of store. The Amazon of the online world, or perhaps a department store for high street equivalent. Ebay is another example, as is Facebook Marketplace
Vertical - a tiger focus on products in a particular category, likely more to focus around a specific product set or requirement from a buyer. Online, this could be a Country Living for example, as they focus around the handmade/vintage/craft category. Another example could be a hardware store, like B&Q, for the high street - high variety or products, but all very much focused on the home category.
I need more convincing, what’re the benefits of running a marketplace?
Short answer? SO MANY. When you’ve set up your marketplace, your focus shifts from the back office headaches of fulfilment and supply chain, and more around generating demand and vendor attraction, who are actively encouraging best practice behaviour so they can make as much revenue as possible too. It’s a win-win! It’s incredibly time-efficient when built and managed properly, as well as a simple and quick approach to diversifying your revenue growth strategies.
To list a few more advantages and benefits of running a marketplace:
It provides an additional channel to market and sell your products
Often your marketing costs are reduced and lower, compared to other channels
Sell overseas - as you don’t have to worry about shipping and storing products, the threshold to international growth is much lower, allowing growth in different categories and countries efficiently and quickly
Browsers and buyers love them - highly convenient when all the products and complementary products are from a single site
Builds trust - as your focus is on brand building and established seller relationships, it builds a high degree of trust with your buyers, inspiring loyalty and repeat business and confidence in new browsers converting to buyers
Grow your trading network - marketplaces are a dream in expanding your supplier networks and relationships, by their very nature of needing to expand these networks in order to grow. As the relationship is mutually beneficial too, it’s often a flywheel effect of positivity as more suppliers come on board (see below on network/flywheel effects)
Focus on monetising your brand and communities - much like a consumer publisher, loyal audiences can be quickly converted to paying customers, all through the power of the brand
See greater return on your marketing investment - often due to the flywheel and network effects (again, see below), the lifecycle of any marketing campaigns is often greatly enhance
Grow on a massive scale - scaling up and growth can be a rapid process when leveraging multivendor strategies. Trust us, you can see more here
Time to market with new platform and new products
What are the ‘network’ and ‘flywheel’ effects?
Network effect: Humans are sociable creatures at heart. The ‘network effect’ refers to the behaviour trait and situation where the value of a service, product or platform is determined on the number of buyers, sellers and users. I.e. the greater the number of buyers/sellers/users, the great the willingness of future buyers/sellers/users to be attracted to it, and thus the greater the value created from the offering. Professor Bharat Anand, Harvard Business School says it best: “The willingness to pay, for a buyer, increases as the number of buyers or sellers for the business grows.”
Flywheel effect: The mechanics of the flywheel refers to the build in momentum in self-perpetuating growth. Similar to the network effect, the more sellers join, the more products there are. The more products there are, the more buyers there are. The more buyers there are, the more sellers want to join. And so the cycle repeats and grows.
A combination of both a network and flywheel effect is how many marketplaces and brands establish growth, market share, visibility, credibility and scale options exceeding that of a traditional single-seller business model
Still with us? Good, because now we’re talking benefits:
Customer reach - ever searched ‘Six degrees of separation’? Do, it’ll explain how being able to permeate this customer network can be incredibly powerful in attracting and retaining new customers organically, as long as you provide a standout customer experience
Customer retention (customer experience, loyalty, recommendations)
Reduced inventory investment and cost
Greater product and inventory breadth
When your consumers want product breadth
Diversification of inventory is the name of the game. Running a marketplace, you are uniquely positioned to be able to fill gaps in the market, quickly and efficiently, through your network of sellers without ever having to develop, stock and ship the product yourself. It’s the dream scenario, given how trend driven shopping has become via social commerce (yes, we’re looking at you TikTok..)
It also makes sense that savvy consumers want choice, which poses a challenge keeping up with as a retailer, especially when you’re looking to make profit. Tapping into the marketplace strategy however means you can leverage seller relationships in your network to provide these consumers with the desired range and breadth of product options they’re looking for, versus a single-seller retailer.
And what happens if your network of vendors and suppliers don’t have what you’re looking for? It’s a very quick process to go out into the market and expand your product offering through onboarding new vendors. Couldn’t be simpler.
I’m sold! How do I start?
Are you ready to focus on brand equity and marketing position, more than operationally running a store? Looking to diversify your product ranges and tap into your loyal customer base?
It’s easier than you think. MOOT provide intelligent technology to enhance and deliver the ultimate marketplace experience.
With exceptional site build and design, delivering ultrafast sites that are ground up optimised for mobile will have you standing out from the crowd.
With powerful artificial intelligence and machine learning applied to your browsers, we can deliver a greater onsite experience, increasing the propensity to convert those browsers into loyal buyers
With amazing product information management solutions and deep business intelligence analytics, you can provide a single point of truth to your key trading metrics and to those of your vendors, inspiring greater trust and visibility when growing your networks.
All this leads to the all important goal - to supercharge your revenue growth and future-proof your organisation in a challenging retail environment.