An online marketplace is an ecommerce website where products or services are provided not by the owner of the marketplace, but by the third parties—vendors or merchants. The site aggregates product listings on a single storefront. An online marketplace can promote products, services or rentals. This is a perfect place for the customers willing to buy everything they need in one place.
Pros and cons of running an online marketplace business
Considering you are already here, you are looking for some information on how to run a marketplace. Here are a few advantages and disadvantages of having your own multi-vendor store.
- Ecommerce business without storage, delivery and return problems
- Easy monetisation
- Scalable globally
- Easy to find vendors
- Marketing advantage—vendors will help you with promotion
- Hard to find a niche, high competition
- Many vendors—many opinions you need to hear and give them what they want
- High cost
- High service standards
How does a multi-vendor marketplace operate?
The way a marketplace operates is not that complicated as it may seem. Before launching a marketplace the owner decides their monetization model—they can charge their vendors monthly for the product listing or they can get a commission from each purchase.
When the marketplace is up and running online, the owner contacts vendors inviting them to list their products on the storefront. The vendor creates their personal account, adds products they want to sell, uploads product images, writes a description for products, fills in all meta tags for product pages, as well as writes introduction about themselves as a vendor, and then moderates their mini-store layout and design. The administrator guides all vendors throughout this process and makes adjustments if needed.
Then customers arrive. They explore the marketplace adding products to the shopping cart. They can add products from different vendors and buy them in a single order. When it happens, the vendor gets a notification with the payment approval and with all the information to ship the purchased products. When the customer pays for the order, the owner automatically gets their commission and the vendor gets their profit.
This is a person or a company which invests into the business. They pay the bills for administration, server and marketing. The owner dedicates their money and time starting and running an online marketplace. If the business fails, they definitely have something to lose. But on the other side, if the business is successful, the owner can become very wealthy and spend the rest of their life with minimum effort to make a living.
Their invisible presence can be revealed when something changes in the marketplace layout or when new functionality appears. But this is not the only thing the admin manages. They are also responsible for server management, load speed optimization, backup procedures and security settings. They control all the actions on the website made by vendors or customers. They can see and manipulate all products, vendors and visitors in real time, change their details and descriptions, set permissions and restrictions. A marketplace administrator sets SEO meta tags, starts in-site marketing events, manages email newsletters. They are there to help vendors form sales reports, sort out accounting and manage all features and functionality of the marketplace. Like a guardian angel.
The core of a marketplace. They do the selling and bring income to the owner. Being a vendor on a marketplace you don’t need to have your own website or pay for the domain, server administration or marketing. An online marketplace provides its vendors with their own storefront with the ability to manage product listing, layout, and design. As far as vendors do all the dirty work, they make the most profit. A good vendor writes comprehensive descriptions for products, responds to customer emails, reviews and comments. A good vendor is always on the edge of ecommerce trends and innovations and may even make suggestions to the admin on how to improve the marketplace. Unlike bad ones who upload a product list and just wait.
This is us! Customers come to an online marketplace not only to find products or services. They want to solve a problem. They demand customer experience. They seek for positive emotions. They need to feel special. All customer feedback is something which can hardly be overvalued. The owner, administrator or vendors are constantly looking for the way to sell. The customer by leaving even a negative product review is telling how exactly the certain product should be sold for them to buy it. The customer feedback, behavior, purchases, interests, gender, location, age, device—everything is vital in order to lead an online marketplace to success.
An online marketplace business is an aggregator of products and services offered by multiple independent vendors. It is simple to own and run it, sell and buy on it, though it is expensive to start and quite competitive to grow.