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Your Marketplace: What You Have To Know Before Going To The Developers

The marketplace market, despite new challenges, continues to grow and develop.
And with the advent of an omnichannel marketing approach, even well-known online stores prefer to join marketplaces. For example, on the same Wildberries you can find premium brands Michael Kors, Tommy Hilfiger, Hugo, despite the fact that each has its own online store.


Even large malls and shopping centers are thinking about creating their own marketplace. After all, they have long-term relationships with stores that can become partners.


If this idea also visits you, then before running to the developers, read this article to find out the important points at the start.

What is the main difference between the marketplace?

Marketplace is an online platform for sellers and buyers. The main and cardinal difference from an online store is that the marketplace collects many sellers. They are also called vendors or merchants. So, in one place, the sale of toothbrushes and books may well coexist, as is implemented on Amazon.

But lately, there has been a trend when an ordinary online store selling goods of one segment, gathering an affiliate network around itself, grows into a marketplace. Thus, a niche online platform is obtained, such as Tdelit , a medical marketplace for doctors.

how-it-work
How marketplace works

Do not confuse a marketplace with an aggregator. The aggregator also collects many sellers, but it is impossible to purchase goods directly here. According to this principle, there are Regmarkets.ru, Aviasales. They make it possible to compare products, search for the right ones by characteristics, ratings. But in order to purchase an air ticket, you need to go to the airline’s website.

So, the main differences of the marketplace are:

  1. Possibility to register as a partner
  2. Possibility to buy goods directly

Next, we will find out the important components of the marketplace architecture.

Platform

Due to the popularity of marketplaces, today you can find many offers on the market for ready-made solutions. What should you pay attention to when choosing a platform, besides the price?

Adaptability for ecommerce in your country. If you decide to start with you country market, then make sure that the platform will be available in the country’s popular payment and delivery methods, labeling of goods, online checkout and issuing receipts, in accordance with country law.

Ease of operation. Your functionality should be convenient not only for customers, but for store administrators. Ease of settings will make the marketplace attractive to partners.

Functionality. Even if you first create an MVP version (minimum viable version of the product), then in the future it should be possible to expand the functionality for new challenges.

Possibility of customization. You may need customization when expanding the range of products and categories, as well as any scaling of the project.

When choosing a platform for the marketplace, consider its adaptability to your country market, ease of use, functionality, and the possibility of improvements

The functions of the CS-Cart platform for marketplaces are more than enough to create a marketplace of any subject. Moreover, it is fully adapted to the Russian market. To customize the design and layout of pages, you do not need to resort to the help of programmers. Read more about how CS-Cart works for marketplaces in this article.

Do you have an idea? We have a solution!
We'll develop a marketplace on CS-Cart

Partners

These are sellers, without whom the existence of the marketplace is impossible. The scheme is quite simple: more sellers – more profit.

Amazon-Product-Sales-Flywheel
The more sellers on the marketplace, the more marketplace traffic will be

What’s important

Ask three questions:

  1. What will the marketplace look like from the seller’s point of view?
  2. Where will you attract the first 100 vendors?
  3. How will new sellers be connected?

1. What will the marketplace look like from the seller’s point of view?

To do this, you need to decide on a tariff plan for sellers. Each of them will have their own section – the admin panel, where they will edit products, delivery methods, and change settings. Depending on the tariff plan, it may look like a mini online store in the marketplace, with a separate convenient storefront and a unique design for the seller. In a simpler version, the seller’s goods will be in the general list, but he will see only his own orders.
By answering this question, you will understand whether the marketplace will be attractive and convenient for your partners.

 

2. Where will you attract the first 100 vendors?

The answer to this question will help you build a development strategy, as well as remove rose-colored glasses. Sellers will not come to you as soon as you open the marketplace. An important task at the start is to benefit the first sellers and buyers.

In order to become attractive, it is important to create:

  • favorable conditions for long-term cooperation. Consider what tools sellers will have for advertising and promotion?
  • transparent reporting. Sellers need to understand what they are entitled to and what they have to pay.
  • ease of connection. Seller moderation should be clear and not take too long.
    For buyers, these can be: convenient delivery, a variety of payment methods, unique products.


Think over what unique selling proposition you will broadcast because of what partners will want to work with you, and buyers will choose your site, lay down the functionality at the beginning.

 

3. How will sellers connect to the marketplace?

New sellers can be connected in various ways:

  • Full access to the admin panel and showcase.
    The partner gets access to the merchant’s panel, appears on the storefront and receives an invoice for paying for the tariff plan. In this case, no pre-checks are carried out in order to start posting goods.
    This method is suitable if your marketplace is a complete startup and you need to find the first sellers as soon as possible.
  • Access to the admin panel, approval to access the showcase.
    The seller gets access to the panel, but in order to start placing products, the approval of the marketplace administrator is required.
    This method is suitable for niche marketplaces to control the quality of the placed goods.
  • Approval to both the admin panel and showcase access.
    The seller will not be able to enter the marketplace without approval, and approval is also required before placing goods.
    This method is suitable if your marketplace is already quite successful and you prefer to carefully select new partners.
Options for connecting a new seller to the marketplace

Access control

Depending on the role on the marketplace, there can be the following types of users:

  • Marketplace administrators are those who manage the marketplace. This group can include all your employees who are involved in business processes, such as an accountant or marketer.
  • Seller administrators are those who manage orders, goods, deliveries from the side of the seller. Depending on your goals, you can create separate groups of sellers. For example, when a seller added goods but did not provide the required documents, you can set the status to “Unconfirmed” for the seller.
  • Buyers – through an account on the marketplace can buy goods.

Marketplace management means increasing the team. In order to reduce the risks of errors and evaluate the effectiveness of their work, it is necessary to distinguish between functionality and access rights.

Important
Consider which groups of marketplace administrators you will have, what will be in their area of ​​responsibility.
And also what groups of sellers can be, based on the goals of your business.

Monetization and payments

The most popular cooperation scheme is a commission, when the marketplace takes a percentage or a fixed fee from each order. In this case, the seller pays from the profit already received.


But let’s look at the payment for the order by the buyer, it is calculated in one payment, and not separately to the seller and a little more to the marketplace. In rare, inconvenient and no longer modern cases, the payment is split if the order contains goods from different sellers.

What is important
1. Your task is to think over the routing of payments, through the possible options:

  • Payment goes to the account of the sellers. And they independently pay with the marketplace.
  • The money from the sale goes to the marketplace. And he pays off the sellers.
  • Integration with a billing system that will automatically distribute payments between sellers, minus the marketplace commission.

2. Consider additional ways to monetize. It can be: the ability to advertise the seller, paid placement of only more than 10 product cards.

Delivery

Schemes for the delivery of goods are closely interconnected with the storage and packaging of goods. In practice, marketplaces offer various options:

  • Sellers store, pack and deliver on their own.
  • The seller handles storage and packaging, and the marketplace delivers.
  • The marketplace handles storage, packaging and delivery.

What is important

What categories of goods you will work with, and the ability to organize or integrate with warehouses, plays an important role. Will there be goods with mandatory labeling or oversized, where the standard shipping calculation may not work.
Start with just one option, but be prepared to expand and offer mixed options as new sellers join.

Catalog

The catalog on the marketplace directly depends on the width, depth and richness of the product range.

  • Assortment width is the number of different product categories. For example, televisions, telephones, household appliances, office equipment. 
  • Depth of assortment is the number of variants of products of one category. For example, Phones – Samsung, Apple, Huawei, Honor, etc. Niche marketplaces are just distinguished by the great depth of the catalog.
  • Saturation of the assortment – the number of products in each category / subcategory. If you have many categories, but each of them has 3-5 products, then the user’s expectations may not be met.
catalog structure
Directory depth, using one category as an example

A wide range of products is not easy to manage. And niche marketplaces may have a smaller audience. But the wider the range, the more likely it is to buy, and buyers of niche marketplaces are willing to pay more, even though there are few of them. That is, there are pluses and minuses everywhere.

What’s important
1. These characteristics make up the categories and filters of the catalog, which must be thought out in advance.

A good catalog structure will make it easier for customers to navigate and meet their expectations. And in order for the marketplace to successfully advance in the search, it is advisable to conduct its seo optimization at the start and insert the necessary key queries into the names of categories and filters.

It would seem that an optimized catalog structure is not an obvious thing, but after you acquire solid partners and your assortment exceeds 10,000 products, you are unlikely to want to redo the entire catalog structure. Take care of this in advance.

2. Consider how similar products will be compared. Different sellers can offer the same products, determine on what basis the comparison will be made.

Bad examples of marketplaces

According to a study by CB Insights , the 3 most common reasons why startup projects fail are:

  • 42% are not needed by the market
  • 29% of projects run out of money
  • 23% of startups have a bad team

Wikimart is an online shopping mall.

Stopped operating in 2016. In addition to small shops, such large sellers as Detsky Mir, Lamoda, Citylink and others placed goods on Wikimart. After the introduction of anti-Russian sanctions, there were problems with investments, and the project began to suffer losses. Also one of the reasons for the closure was inefficient management and ideological differences.

Laurel & Wolf marketplace for unique designer items.

The main objective of this marketplace is to make design products available to any buyers. In 2018, a lot of negative feedback about the work of delivery began to appear, the goods arrived damaged or not delivered at all. Partners began to leave the marketplace. The main reason was that this type of business was new to the Internet and the company was ill-prepared for operating expenses, including shipping.

Tutorspree is a platform for tutors.

Tutorspree – as they called themselves, “Airbnb for tutors”. They received a total of $1.8 million from investors. The tutoring market is tough and highly competitive. The difficulties lay in the geography of the provision of services and seasonality. In addition, after the student and tutor established contact and conducted the first classes, they went beyond the platform and dispensed with an intermediary and commission fees.

Conclusion:

Understanding the market, the ability to adapt and innovate is no less important than investing in a project. Under the successful examples that we all see in the marketplace market, many mistakes and disappointments are hidden. In order not to step on the same rake, remember the Survivorship bias. It is important to study not success stories, because they are one in a million, but the mistakes of unsuccessful companies, since there are hundreds of thousands of them.
Analyze businesses in your niche, watch and study failed company stories.

Survivorship bias is the tendency for failed companies to be excluded from performance studies because they no longer exist.

And the most important advice

To test an idea, you don’t have to think through the full concept of the business from A to Z. In practice, there are cases when a marketplace was developed and finalized for a long time and hard, but it never came to its launch and publication. The reasons are the most banal: money ran out, the economic situation in the country changed, investors were not interested, competitors launched faster … continue the list.

To prevent this situation from happening to you, create an MVP version of the marketplace. This is a mini version, with minimal but viable features. It will help to understand whether your idea is interesting and in demand on the market, to earn the first money. And further refine the functionality and reach the product / market fit stage – product compliance with the requirements of your market and audience.

We encourage clients to look online for marketplaces they like in a similar niche or with similar business processes. This will make it easier to determine and answer most of the points described above.
And if you already have an offline business, bring your business processes on paper as is. A competent developer will help integrate and adapt your processes for online business.

Analyze marketplaces in your niche

Even if you do not have a ready-made technical specification, our employees have extensive experience in developing marketplaces without a final understanding. The work is based on the Time&Materials principle. You can adjust the requirements and change the progress of work, depending on the tasks. Payment in this case occurs on the fact of the spent labor-hours of the team.

Do you have an idea? We have a solution!
We'll develop a marketplace on CS-Cart

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