eCommerceThe Reality of Owning a Multivendor Site
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The Reality of Owning a Multivendor Site

Want to start your own marketplace?

Whether you’re needing a taxi, a place to stay, or pretty much any product under the sun, you’ve probably used a multivendor or marketplace website to get it. Uber, AirBnB and Amazon are all shining examples of this business structure in action. When done well, the model certainly seems to work.  Choosing to become a multivendor website transforms your proposition from a simple ecommerce model into one where you have suppliers, who effectively become clients, since they pay to sell through your marketplace. Furthermore, your can offer website visitors a much broader range of products and brands, although of course, while being rewarded with a reduced percentage of the revenue.


When considering if you wish to progress along the lines of this model, there are a number of aspects to take into account.  Choosing the multivendor model changes the risks you face and the pattern of revenue and profits you are likely to achieve, not to mention the technical, marketing and competitive challenges that will affect the day-to-day running of your business.  We will take a look at the pros and cons and then try to put those within the competitive context of your specific niche.  Fasten your seatbelts.  When weighing up the multivendor model, it’s important to consider the benefits and downsides from all three perspective i.e. the suppliers, the ultimate customers and yourself, as the multivendor owner.  In doing so, you will gain insight into how to attract both suppliers and customers to use your site and what’s most important to achieve this. Also key is your understanding of the risks and challenges you’ll face as the website owner, so that you can assess your competitive advantages within this role when compared to a simpler ecommerce offering.  Your digital marketing strategy will of course need to cover all these different perspectives and balance budget between them.

Suppliers

When offering your multivendor site to suppliers, there are some very attractive benefits to expound.

Cost-effective risk reduction

One of the most significant of these, for smaller suppliers especially, is the path to market.  When considering the competitive, operational and financial realities of getting a proprietary website up and running, especially for a new company or brand, the risks and dearth of initial rewards can look extremely daunting.  On the other hand, if a supplier can outsource most of these risks for the cost of a small pro rata percentage of their revenue, then it may well seem an attractive alternative.

Timing

Compared to months of development and experimentation, a vendor who chooses to sell through a multivendor site has a very short lead time to market. Once again, particularly for smaller or newer businesses with little in the way of a financial buffer, this reduced lead time could be the difference between being viable or not.

Increased exposure

With a strong multivendor site, the supplier is immediately buying into much broader exposure to different customer sources than they could even hope to achieve from their own website.  While this of course comes at a cost, the benefit of an almost instantaneous and broad marketing effort in a tried and tested strategy increases revenue, especially at these critical first stages.  It’s also worth pointing out that fee structures usually incorporate a commission-based amount and so supplier costs will be in line with actual sales achieved – a very different cost structure to outlaying a chunk of money before they’ve even made their first sale.

Transactions and operational robustness

Finally, suppliers will benefit from the advantages of a robust transaction set-up and operational procedures that have stood the test of prior use.  While features personalised to a supplier’s product can seem attractive, the reality of fussy underlying functionality is often an expensive, tedious and frustrating delay to getting on with the selling.

Customers

As online shoppers become evermore overwhelmed with the volume of information and choice on the internet, many are flocking to multivendor sites. This not only cuts down on the time needed to find a reasonable deal, but also avoids ‘processing overload’ as they are submerged in Oscar-winning video footage and hard-to-quantify special offers.  Whatever is the priority criteria for their purchase decision, multivendor sites can offer advantages.

Easy access

As highlighted above, where sore feet, time constraints or complaining family members may have been the cause for limiting the number of choices when shopping via physical locations, the enticement of endless online vendors can wear rather thin after the first few all nighters looking for new tea towels.  Enter the multivendor site.  From the customer’s perspective, a site that offers a reasonable range of products, be it different brands, styles or whatever, can often if not mostly, meet their need to feel that they have made a reasonable choice. This is an important point to investigate further when setting up your multivendor site, since a whole range of criteria will help determine the extent and span of your supplier base e.g. costs, marketing strategies, website layout, functionality and style, other suppliers, target customers etc.

Price

As a special case of the above, the satisfaction for a customer in being able to compare prices on a single website often helps enormously to convert the casual browser into a buyer.  Once again, consideration as to how you will set up your site to entice suppliers competing on different characteristics of their offering will have to be considered, since clearly a multivendor site that only benefited the cheapest supplier would not be to anyone’s benefit in a longer term scenario of prices wars and falling product choices.

Information hub or almost ‘expert’ status

Customers have the opportunity to visit your site to research the product in which they are interested, by getting a broader selection of choices. This may lead in the end to a sale, particularly if they find a balanced point of view echoed around the site. It may also familiarise them with your site to which they may end up returning, or recommending to others at a future date.

Multivendor operator

As the multivendor provider, you have both your suppliers and customers to service.  Some needs will be common to both, while some you may have to optimise for your own profitability, at the potential diminished value to one or other party.

Marketing

While great marketing will appeal to both your customers and suppliers, it is worth bearing in mind that it needs to perform its function for both these ‘target markets’ i.e. suppliers will need to be impressed by your marketing strategy and website and the results they produce, if they are going to pay you a hefty commission to sell through it.  As with your target end customers, your marketing should be aimed at the sort of suppliers with whom you wish to work. Much of this will come out in the wash if you do a good job of defining your niche for both parties at the start.

Functionality

With suppliers, as well as customers, utilising your website functionality, it needs to be robust and well maintained.  Clearly it will be more complex versus a simple ecommerce site, since it needs to perform some extra functions.  Commission allocation and payment needs to be seamless and take place within the terms of the agreement.  Reporting will have to be extra informative and accurate e.g. it may need to account for V.A.T. in different countries.  It will also have to potentially deal with returns and gift vouchers that operate between supplier and multivendor. With a more complex system, maintenance costs are likely to be higher.

Agreement

As part of your business strategy, you will have decided what breadth and scope of agreements you will be happy to work within. These may be negotiable for different suppliers, depending on your model. The clearer the agreement, the easier it will be to manage supplier expectations and have the business side of things run smoothly. Furthermore, this will help build consistency into your site across different suppliers and help give an overall impression of the whole working together as one, as opposed to a higgelty piggelty random group of stall holders.

What’s important

The single most important factor when creating your marketing strategy and website will be consistency, since you have more participant groups to keep pulling in the same direction.  Communication will also be key to the success of running this model of business, as well as aiming for a good spread of risk among suppliers, in the same way as you would do with the website customer base.  As always, a proactive support function (customer helpline or whatever) will help to keep complaints and issues to a minimum, so it will probably be worth investing some time and effort into this end of the process also.
The multivendor model offers fantastic opportunity to build a strong following of both customers and participating suppliers versus the simple ecommerce model. There are many benefits with which to entice both these interested parties, not least in the synergy of the multivendor space. If you think that this approach suits the strengths of your business, then we would be happy to chat some more about building and marketing a multivendor site for you. Best of luck.

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