Building A Multi-Vendor Marketplace on Shopify - What Should You Keep In Mind?
Feb 17, 20219 min read
IT Marketing Strategist at Ideamotive. Travel addict and remote work advocate.
When it comes to a multi-seller marketplace, competing with online giants like Amazon, eBay, or Etsy is a challenge that requires a lot of pain points.
In short, combining products from multiple sellers on the same page and earning commissions from sales seems straightforward, right?
Not really! It takes a lot to run a thriving multi-vendor marketplace to get things up and running as quickly as needed.
In this article, we will dive into the ecosystem of the multi-vendor e-commerce marketplace and try to understand why you should build a marketplace with Shopify.
Also, you’ll get to know in more detail the principles of this business model. We’ll describe all the stages you need to go through to launch your online store and start getting the first sales.
After studying the article, you will have a more transparent understanding of how to create and launch a multi-vendor business in the USA and Europe, what difficulties may arise in the process and what skills are required for successful work.
What is a multi-vendor marketplace?
A multi-vendor marketplace is an online store for multiple sellers. Marketplace functionality turns any online store into an online marketplace similar to the well-known Amazon or eBay.
It is easy to sell and find buyers through it. It has a wide range of products that are continually being updated and implemented.
A distinctive feature of such a store is the presence of several independent sellers.
They can control and manage sales, paperwork - invoices, and monitor the delivery of goods. All this is done using an individual control panel.
Sellers have complete control over managing items, sales, invoices, and deliveries through a personal, intuitive dashboard.
Income for the owner
As the owner of a multi-vendor online store, you receive a flat fee for every order you receive through sellers. The commission is formed in two ways:
based on a fixed amount from each sale, independent of the total cost of the goods or services sold,
based on the rate in % of the value of goods/services sold
Integration with third-party programs
As in the case of a regular online store, a multi-vendor marketplace's necessary capabilities can be extended using third-party modules. Integration with Shopify, delivery services, payment systems is permissible.
How this marketplace works
The user registers and sends an application for a job as a seller;
Notification of acceptance of the application is sent to the administrator by email. The admin approves the candidacy, and the seller receives a letter about their approval for work;
Then the seller puts the catalog of goods on the website;
Information about the goods sold is reflected in their personal account. The administrator sets the percentage of the cost of the goods, which will be deducted from the store's income;
The seller opens a personal account through which they track the goods sold, after which they can ask the administration to withdraw the money earned;
The history of withdrawal requests is displayed in the admin’s personal account;
The administrator has the right to admit the seller to sales or remove.
The creation of such a marketplace implies an increase in the number of sales from the site, which means an increase in income.
So you decided to create a marketplace.
The next step will be choosing the tool for building it. Ideamotive strongly recommends turning your store into a multi-vendor marketplace on Shopify.
What is more, buying a product, storing, and managing inventory is a tricky process, which is why building a multi-vendor store on the Shopify platform is a great way to run your business without having a product in stock. You will be able to focus your precious time and resources on high-quality marketplace scaling and increasing sales.
For many entrepreneurs, starting a Shopify multi-vendor marketplace is a great way to launch their own eCommerce business.
What is Shopify?
Shopify is the front eCommerce platform that allows business people to start their own marketplaces. Shopify is easy to use, so knowing specific nuances will make it easy for you to manage your own store, even if you have never had any website building experience.
The platform is perfect for entrepreneurs who want to open their own online store with minimal investment in a short time frame. Besides, using Shopify provides access to a variety of themes and widgets to help automate many processes and increase key business performance indicators.
Shopify platform advantages
Shopify is the world's most popular eCommerce platform. More than half a million entrepreneurs are already using this service to conduct business.
The platform is characterized by the presence of a large number of different functions that greatly simplify the processes of filling the store with goods, changing the appearance of the site, receiving and processing orders, and much more.
Pricing: In addition to your regular Shopify subscription, the Multi-Vendor marketplace app will set you back $10 per month. However, you can start with a 15-day free trial.
When you download and use the multi-vendor marketplace Shopify app users can add an unlimited number of merchants to your website. This gives you the ability to transform your Shopify store into a different marketplace for many vendors. Who knows? Perhaps you will someday compete with the likes of Amazon and eBay?
Not to mention, each of your sellers has the ability to upload and sell an unlimited number of items.
You will also be able to sync your products with stores on all of the following platforms:
2. 3rd party existing solutions
CS-Cart does offer a product for multiple stores. But CS is a licensed, standalone cart, unlike Shopify, which is cloud-based. Also, the AmeriCommerce shopping cart can deploy a marketplace, but this is considered custom work.
The only reason we mention this cart is that AmeriCommerce also offers the ability to manage more than one store from a single admin, so in theory, you can manage your marketplace and any other eCommerce site from one dashboard.
3. Custom Software Shopify development
After trying several services and wasting time and money, entrepreneurs end up building a multi-vendor marketplace Shopify from scratch. This custom software Shopify development ultimately saves you time and money. It really depends on the size of your business.
What every entrepreneur should remember about
It may seem to be quite obvious advice, but still, many entrepreneurs forget about this stage/feel that it is not so crucial.
Pages are information desks that must be placed on the site so that users of your multi-vendor marketplace Shopify can easily find the information they are interested in regarding delivery times, terms of return of goods, as well as get acquainted with the history of your company development.
Information pages are also necessary for the successful connection of the payment system, which we will discuss later.
The store should have the following pages:
About us - company page
Contact us - page with contact form
FAQ - a page with frequently asked questions and answers to them
Track your order - a page with a link to service for tracking parcels
Shipping & Delivery - information on terms and conditions of delivery
Returns & Refunds - information on return conditions
Terms of service - user agreement
After assembling and filling the store with products, you need to connect some applications to your online marketplace. Many applications not only greatly simplify ordering but also automate email marketing, increase conversion in your online store, increase the average bill, and much more - the functionality of applications is endless.
Shopify apps come in both paid and free. As a rule, payment for use occurs every month. Many apps provide trial periods ranging from 7 to 30 days.
If your budget is tight, free Shopify apps are a great start-up solution for your business. Take your time to spend money on apps that supposedly guarantee high conversions. Understand what apps you need, which ones are free, what free alternatives are there, etc.
In any case, we recommend to install the following applications:
Editing the Settings parameters implies making changes to the store's internal settings:
1. Terms of delivery
It is essential that you have transparent shipping rates in your multi-vendor store. We recommend that you always offer free shipping regardless of the recipient country. Different shipping conditions for other regions can lead to confusion, so we advise you to simply include shipping costs in your items' price and make shipping free.
For example, if you plan to sell T-shirts for $20, raise the price to $25 and offer free shipping. You can set up free shipping in the "Shipping" tab in your Shopify settings.
Delete all shipping zones and add "Free International Shipping" to the "Rest of the world" section. Then you need to select “Rate: Free Shipping Rate,” and you're done.
2. Information for clients in the checkout
Editing the Settings parameters implies making changes to the store's internal settings: delivery methods, automatic notifications, checkout, payment providers, and more.
3. Payment information
This step is critical because, at this stage, you determine how to receive payments from future customers.
The first thing you need to do is add a payment method - this is an extremely important step on which the revenue side of your business depends.
To add a payment acceptance method, you need to go to the Settings page in Shopify, select the Payment providers tab on the left, and add your payment information.
Shopify offers the integration of a large number of different payment systems. The best options are the Stripe payment system, Paypal, 2Checkout, and others.
If in practice, you have reached this point, we congratulate you! Next, you need to focus on optimizing the business model of your Shopify store. It's no secret that the higher the conversion of the site, the more visitors it is able to “keep” in the online store, and, as a result, more people will reach the checkout page and make purchases. You can read more about business models in our overview.
Providing customer support is one of the most important elements in the multi-vendor business, and if you don't pay enough attention to it, you can suffer substantial financial losses.
Refunds, disputes, business complaints are often the main reasons for closing online stores. Customer service plays a crucial role in multi vendoring as it is the only tool in resolving unsatisfied customers' problems.
Suppose you do not respond to customer requests. In that case, they will solve the problems on their own by contacting the bank with a request to return the money - they are interested not only in purchasing goods but also in the subsequent transparent and straightforward system of returns, processing requests, and receiving answers by mail, etc.
Analytics, process automation, and scaling
Found your clear bestseller? In this case, it's time to scale this product's advertising and continuously analyze the sales dynamics. However, whether you have a clear sales leader or not, never stop testing new products. A product can gain popularity for weeks and then instantly become useless to anyone.
Don't forget that e-commerce is one of the most dynamic and ever-changing areas. If, after a specific time after launching your marketplace, you are unable to attract traffic and generate stable sales, turn to specialists.
Continue to work on the automation of all processes, start outsourcing some tasks whenever possible. Do not forget to continually study, read relevant articles, study videos on Youtube, in order always to be aware of all the innovations.
Your results will directly depend on your knowledge and practical experience, so improve and keep working, despite the problems or drawdowns encountered. Only in this case, you will begin to achieve high monetary results.
Be ready to invest, invest and invest
Also, your success will significantly depend on the amount of your initial investment. No matter how smart and experienced you are, with $100 on your card, you won't be able to achieve any results, so take your multi-vendor marketplace launch as seriously as possible.
Those who reach grave turnover from $5,000-10,000 per day spend thousands of dollars on Facebook ads every day, so be prepared to invest in yourself and your business.
With a competent and responsible approach, your investments will begin to pay off over time and bring you pleasant monetary benefits.
Basically, Shopify is the backbone of your project, which is the skeleton you need to design, launch, and maintain your business. This way, Shopify keeps your online marketplace running smoothly while you're focused on selling and growing your business.
The multi-vendor marketplace is the perfect business model for entrepreneurs looking to start their own business with minimal upfront investment. Thus, Shopify is the most accessible platform you can use to accomplish this task.
With a Shopify marketplace, you never have to worry about excess or no inventory, as you will be ordering the required quantity of goods immediately after the order is placed and paid by the buyer.
This system differs significantly from the traditional business, which involves the production or bulk purchases of goods.
Now you should have a rough understanding of what you need to go through before you start getting your first sales. In case you want to minimize risks and be sure that your store works correctly, we offer to contact our talented Shopify developers. Our specialists are ready to support your product.
Michał is a digital marketing veteran with a growth hacking mindset and 10+ years of experience. His goal is building high-quality technological content, with particular emphasis on React and Ruby on Rails. Traveler, climber, remote work advocate.