Why You Can’t Build Your Marketplace Like a Traditional Ecommerce Store

A marketplace should be built on a multi-vendor marketplace platform and not a single-vendor ecommerce platform. We’ll say it again for the people in the back - a marketplace should be built on on a multi-vendor marketplace platform and not a single-vendor ecommerce platform. 

A lot of people look at marketplaces as simply another form of ecommerce, but there are so many nuances to marketplace building and management that single-vendor ecommerce platforms were not built to handle. The single-vendor ecommerce platforms of today were built for a singular seller to take funds from multiple buyers. If you are looking to launch a marketplace alongside your existing ecommerce systems or are building a new marketplace from the ground up, make sure you’re taking notes as we walk through the differences between marketplaces and traditional single-vendor ecommerce stores. 

3 Differences between online marketplaces and single-vendor commerce

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1. Seller experience

The seller experience is one big glaring difference. Simply put - a traditional single-vendor ecommerce store does not have a seller experience because they are taking funds for a single seller (aka themselves). The single-vendor ecommerce platforms of today do not have native seller experiences that integrate well with order management systems (OMS), product information management systems (PIMs), shipping providers, and communication systems.

Marketplaces are two-sided which means they have to take care of both their buyers and their sellers. Marketplaces have to vet and onboard sellers and also make it as simple as possible to make money on their platform. Sellers tools and integrations should be top of mind when building a marketplace. 

2. Fintech Obligations 

While traditional single-vendor ecommerce stores have to deal with buy-now pay-later options, payment methods, and offers, marketplaces have to handle all of that and pay commissions out to sellers. Marketplace operators need to keep on top of tax requirements, 1099s, KYC, and pushing payments out to vendors - all things that single-vendor ecommerce stores don’t traditionally do. As a marketplace, you cannot skip over your fintech requirements. 

Also, on a traditional single-vendor ecommerce platform, there is no way to offer a multi-vendor checkout experience. They were set up to handle a single-vendor checkout. So, if you want to allow checking out from multiple different sellers in the same transaction, there is no way for you to do that. Period.

Multi-vendor marketplace platforms, like Nautical, were built to handle multi-vendor checkouts from the start. No need to pull out spreadsheets and Airtable to build a workaround.

3. Managing Logistics 

The asset-light approach makes the marketplace model incredibly attractive, but also requires sophisticated workflows. As a single seller, you’re dealing with orders in your warehouses, with your staff, your systems, and your shippers. You have relative control over what happens inside your business. When working as a marketplace, you likely will not hold any inventory and instead will simply be promoting transactions between buyers and sellers. This means you’ll be dealing with the warehouses, the staff, the OMS and PIMs, and the shippers of every single one of your sellers. You have to orchestrate transactions through all the logistics providers your sellers have and ensure your workflows make it easy for sellers to communicate with you. 

Additionally, traditional single-vendor ecommerce platforms have limits on the number of warehouses you can use for fulfillment. When you are operating a marketplace, this can quickly become a huge issue. Some of the most popular single-vendor ecommerce platforms limits their warehouses. That means you can only create shipping labels and estimates from a specific number of locations. When you're running a successful marketplace, you will have a lot more than a handful of vendors on your marketplace all shipping from different locations.

At the end of the day, marketplaces are held to the same buying standard as any traditional single-vendor ecommerce store. Marketplace operators have to live up to that standard because you are the brand consumers will be buying from. If something goes wrong with the order, the marketplace is the one the consumer will turn to to make it right. 

Although it is much more difficult to be the facilitator between buyers and sellers as a multi-vendor marketplace, if you get your tech and process right the payoff will be worth it. According to Marketplace Pulse, the top 10 shopping apps are all marketplaces - none are retailers. Not to mention the asset-light dropshipping model has proven to be incredibly lucrative for a variety of companies. 

Soon, every company will have a marketplace component. Multi-vendor marketplace platforms like Nautical are purpose-built to meet the needs of marketplaces complete with seller integrations and self-service onboarding, fintech connections, and communication handling. As you think through your marketplace strategy, make sure you are choosing the right multi-vendor marketplace platform to launch and scale your marketplace.