E-Commerce has become the new revenue sector that everyone wants to be a part of, and we can’t blame them. In 2014 this sector showed an annual income of $1.3 trillion and the estimated GDP for 2021 is $4.5 trillion, which is an astounding 246.5% growth in 7 years.
The most basic way to get into the field of e-commerce is to run your own e-commerce marketplace. Simply put, your job would entail providing a platform, like a website, where consumers can ask for services from vendors. It is a standard, not all complicated way to be a part of the e-commerce sector.
There are two types of marketplaces that you can create: single vendor marketplace and multi-vendor marketplace. As the name suggests, a single vendor marketplace hosts only one vendor and related products whereas a multi-vendor marketplace hosts more than one vendor and their products.
There are many differences between these two types of marketplaces, and listed below are a few, so you can make an informed decision as to what type of marketplace suits your requirements.
Resources required for running an e-commerce marketplace are very few. You primarily need to build a website and manage it. The website can either be created from scratch or you could buy an already existing marketplace software script.
A single vendor marketplace is simple to build as you have to cater to the needs of only one vendor. The early investment will be fairly less. You need not hire more than few people if you have advanced knowledge of an e-commerce marketplace. Even if you don’t, a team of experts can get the job done.
A multi-vendor platform, on the other hand, is a bigger investment. This is understandable as you will be catering to the needs of more than one vendor. The marketplace software you work with will have to be robust and scalable enough to manage multiple vendors. Managing multiple vendors and all their varying needs means you will need a fairly larger workforce.
e-Commerce platforms are simpler than normal workplaces because there aren’t many moving parts. Most of it is managed from a singular office space. The complexity of an e-commerce marketplace lies in the management of the software and maintaining relationships with the vendor(s).
In case of a single vendor marketplace, the workings of the platform, a.k.a., the website is fairly simple as the software doesn’t have to be robust to function for a single party. The relationship with the vendor is maintained with ease as you can devote all of your time to them.
In case of a multi-vendor marketplace, the complexity is heightened, as the software in use needs to be robust to house the numerous vendors and be customized as per their needs. Maintaining a positive relationship with the vendors requires more working hours and a larger workforce in order to reach all of them.
The staff you hire may need to be trained in order operate the software with ease. The amount of training required is based on the complexity of the software in use.
As the single vendor marketplace software is simpler, the staff will require lesser training.
Staff using the multi-vendor marketplace software will require very detailed training in the subject in order to understand the intricacies of the software.
As an e-commerce marketplace platform, where you are representing vendor(s), you need to have faith in them and the product they are selling. This is integral to your performance and also to the future of your business.
A single vendor marketplace owner needs to make smart decisions when backing only one vendor. You will have to do extensive market research before you get into the same boat with them.
A multi-vendor marketplace owner is on safer shores, as a wide range of clients is working with them. In case one of them is not doing well, there is always someone else who is doing better, thus ensuring guaranteed profits.
Another factor to consider is long-tail marketing, which looks into the profit retailers make from the least popular products on the stand. Many marketing studies substantiate the fact that popular product reflect more sales and the left-over products don’t bring in much revenue. However, if you have a diverse inventory, then the sale of the least popular products together is same as the sale of the popular product.
This goes to show that, considering long tail promotion, multi-vendor marketplace will remain in profit.
Management of Resources
Inventory, order management and shipping orders are also some of the important factors to consider. As a single vendor marketplace will be a small enterprise, the above-mentioned factors will be simpler to manage. In case of a multi-vendor marketplace, due to representing multiple vendors, the management of inventory, order placement and shipping requires more astute attention.
Advantage of single vendor marketplace
- Costing control & management isn’t difficult with a single vendor marketplace business.
- The business flow can be smooth, seamless, and effortless with just a single vendor.
- The management of deliveries and schedules can be timely done.
- With just one supplier, the business relationship will be well maintained.
Advantages of multivendor marketplace
- You can still run your business even if one of your suppliers has difficulties delivering.
- Demand for products can be adjusted easily with multiple vendors.
- You can create a healthy competition among the vendors, so that every vendor comes out delivering their best, ultimately this builds your business credibility.
Today, eCommerce giants like Amazon, Alibaba, eBay are all multivendor marketplace businesses. Popular & successful companies like Beardbrand or I am Alpha M are all single vendor marketplace businesses. These companies have developed their brand in their own style and it does not matter they are single vendors or multivendor marketplaces.
If you are having your own products to sell, something unique and want to implement your own strategy in terms of marketing, branding, storytelling, and other forms of promotional activities, then it is better to try the single vendor business. – Jessica Bruce, Influencer & eCommerce expert, ShopyGen.
If you want to have multiple product portfolio selling at your marketplace to attract more customers with your exclusive deals, offers, products, etc, then multivendor marketplace will be your best bet.
Building and managing an e-commerce marketplace is a booming business and will only see further growth as the public has wholeheartedly embraced online shopping. It won’t matter much if you plan to back one producer with a single vendor marketplace, or many with a multi-vendor marketplace as they are both profitable ventures. Be sure to choose based on what suits you best going forward. Good luck!