How to manage multi-vendor marketplace: Ultimate guide

Starting a multi-vendor e-commerce website requires careful planning, strategizing, and execution, including determining your niche, choosing a platform, setting up a vendor registration process, developing policies and terms of service, and providing excellent customer support.

Anything “multi” is about more than one. It could be multi-talented, multi-faceted, multi-tasking, multi-level, multi-track, or multimedia. For example, multimedia is communication that includes more than one type of media (audio, video, text, gifs, animations, 2D/3D, augmented/virtual). Similarly, a multi-vendor marketplace means a place with many vendors of different categories of products and services.

In an earlier time, you would go stall to stall, shop to shop, from one vendor to the other in search of the perfect product. But with the likes of Amazon, we can find hundreds of vendors of every product right at our fingertips. Amazon had more than 150 million users on its mobile app in September 2019.

What Is a Multi-Vendor Marketplace?

A multi vendor marketplace can be any; online platform/street/locality/city/state/country where many sellers come together to offer their products and services. We will focus on online multi-vendor marketplaces here. The COVID-19 pandemic has created surplus demand for such online marketplaces. Vendors, suppliers, manufacturers, even tutors are looking for ways to continue their income online.

In such a scenario, investing in developing and nurturing an online multi-vendor marketplace is a sound business decision. Let’s take a peek at what a regular day of online multi-vendor marketplaces looks like:

1. Managing inventory of all the listed products and the upcoming ones.
2. Shipping out purchased products on a tight schedule for on-time delivery.
3. Calculating and recording vendor fee, commissions, transportation costs, and collecting payments from customers.
4. Settling vendor payments to ensure that everybody gets their fair share of earnings.
5. Branding, marketing, and growing a community of vendors and customers around your company.

The key to understanding online multi-vendor marketplaces is in the categories of products offered. They define how your marketplace will look to a user, what it will offer to customers, and how you will make money with everything that happens on your platform.

If you want to be a niche marketplace that focuses on one category of products, you would be managing one type of vendor, develop one kind of product list designs, and target your marketing efforts to one customer segment.

However, if we are talking about multi-vendor marketplaces like Amazon, eBay, and Alibaba, then the game changes rapidly. For such marketplaces, it is all about managing a sea of vendors who offer different kinds of products, cataloguing and sorting products by variant type, developing different types of product listing designs, and targeting all customer segments.

The Essential Elements of Multi-Vendor Marketplaces

There are a few essential aspects of online multi-vendor marketplaces. Let’s take a look at the basic ones below.

1. Inventory Management

   Managing the inventory of all your vendors is possible at first, but a few months down the line, when your company grows, it will be impossible to do so. Alternatively, you can let vendors add their inventory of products.

   

Inventory management saves time and increases the speed of product listing on your platform. However, you must install a quality checking mechanism to ensure that all product listings follow the same standards.

Whether you are going for a pre-built eCommerce platform such as WooCommerce or coding a new custom platform for your company, make sure that there are necessary quality checks and a cohesive inventory management process implemented.

1. Shipping Management

   Shipping the right product, to the right address, at the right time is an art in itself. Companies like FedEx and UPS are masters of the art of logistics. But you don’t have to be a master at figuring out a cost-effective and time-efficient way of shipping products.

You may choose to let vendors manage their shipping using the details mentioned by the customer. Or, install your own logistics systems to pick up orders from sellers and deliver them to customers.

Even when installing your own logistics channels, you can either have your delivery employees or outsource to a logistics company like GrabOn or Delhivery.

1. Vendor Management

   Not everybody should be a vendor on your platform. If a bad-quality product is sold on your website, the damage to your brand is extreme. You must keep the good vendors satisfied to ensure a continued association. The most important and most complex part of vendor management is managing vendor payments.

   

   Make sure that you have a payments system installed to disburse vendor revenue share on time. You could schedule weekly, monthly, quarterly, or instant payments. A good idea is scheduling payments after a lock-in period to cushion your company in case of refund requests for bad-quality products.

2. Managing Commissions

   While managing vendor payouts, you must factor in the cost of convenience and the commissions you want to charge on different products. Ideally, your company should use automated processes with fee calculators and commission modules to define the listing price of products.

   

3. Branding & Marketing

   Last but not least, focus on branding your online multi-vendor marketplace and invest in content marketing to generate goodwill among prospects. Building trust is crucial, as 89% of buyers prefer buying products on Amazon rather than other multi-vendor marketplaces.

   

   Other marketing channels, such as social media and paid advertisements, must be included in your marketing plan. The idea is to get the word out and reach as many people as possible through as many channels as you can manage. You can also organise contests and roll out loyalty programs to attract and retain customers. For instance, Amazon Prime, the loyalty program of the online multi-vendor marketplace, has over 150 million members.

Conclusion

If you think from an IT standpoint, you would want to develop each module for vendors, customers, order management, payments, and shipping. That means creating an umbrellamulti-vendor marketplace with a dedicated interface for different processes.