A traditional eCommerce store requires that the store owner builds up the inventory themselves, which can be time consuming and costly if the stock needs to be purchased on-hand. Using the marketplace style model, a store owner is responsible for attracting customers, and keeping track of the transactions through the store, while the vendor is responsible for manufacturing the products, and shipping them to the customer.
A marketplace store also has potentially much lower startup costs, and due to the larger inventory usually much more sales volume than a standard eCommerce store.
Marketplaces tend to have a more positive cash flow due to the lower initial stock investment costs, with the vendor holding stock and manufacturing the products. Payments to the store owner are usually based on percentages of the transactions, which can then be re-invested into the company.
eCommerce marketplaces are usually intended to have high volumes of sales due to their large stock sizes across many product categories.
The volumes also allow a store to engage in long tail online marketing, which means the store will show up for many very specific (non competitive) product searches, ensuring many listings on the search engines and potential sales across different industries.
As the owners of the marketplace generally do not need to have stock on hand, scaling the marketplace is a lot more cost effective if traffic increases to the store and more vendors are brought on-board to meet demand. If a good on-boarding process is setup for new vendors, most of this can be automated to rapidly build the store inventory.
Marketplaces are often focused on a particular industry, doing business to business eCommerce with the intention of disrupting an industry normally used to doing business offline. These replace a more traditional manual ordering process, and if refined can have a great impact on the chosen industry by automating typical tasks through the marketplace system.
Many marketplace stores encourage competition between vendors, ultimately leaving the decision to the customer about which product they would like to purchase based on price, vendor reviews, and location.
Store owners often evaluate the efficiency of their vendors, and may promote some vendors based on their service delivery to the customer.
Good customer service is essential for any style of eCommerce store, however in marketplace eCommerce a store owner very often just needs to provide a mediator role to ensure the transaction between seller and buyer takes place without any issues.
Vendor ratings can also encourage better customer service within a marketplace, with vendors competing with another to provide better service, and customers selecting vendors based on their ratings.
Marketplace eCommerce stores can involve more complex development tasks than a standard store, especially when it comes to the inventory setup, price comparisons, and shipping functions.
However when using an experienced development partner, and choosing the right platform and add-ons, the marketplace should go off without a hitch!
Both Magento, Shopify and WooCommerce have solutions to implement marketplace solutions. We tend to recommend Magento at this point, however Shopify is making great strides in this direction.
Have a look at our eCommerce platform comparisons here for more information.
Refresh has been involved in several eCommerce marketplaces, within the manufacturing industry, clothing and pharmaceutical industry.
Contact us today for advice on how to get started with your eCommerce store.