5 Reasons Why You Should Invest in Multi-Vendor Marketplace (MVM)

by Magento Developer
Multi-Vendor Marketplace (MVM)
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The shift to multi-vendor marketplaces is the new norm that presents an opportunity for global eCommerce while investing in the right technology is quickly becoming the norm that many businesses need to embrace. E-commerce is a progressive environment that gives multivendor marketplaces a lot to offer customers to satisfy increased consumer demands and the constant evolution of online shopping.

What is a Multi-Vendor Marketplace?

A multivendor marketplace, also known as a multi-seller marketplace, is a website or enterprise application that collectively brings together online vendors and customers. In simpler terms, a multivendor marketplace is an online mall where that contains multiple shops of different brands.

This creates a unified ecosystem that supports multivendor eCommerce or multiple third-party vendors to sell their products online. A good example of an online multivendor store is Amazon, eBay, and Jumia.

The Multi-vendor marketplace is a functional double sword that is advantageous to not only the owner and the seller, but also to the consumer who finds whatever they are looking for conveniently. The owner can create platforms like marketplace apps from which vendors make their sales to acquire profits while the owner gets commissions.

In the same way, the risks are also shared. In this regard, the seller is responsible for the products and their shipping while the owner takes care of and maintains the platform.

Ecommerce Store Vs Multivendor eCommerce

An eCommerce store is a single or multi-brand online store that is run and managed by one brand. A good example of an eCommerce store is H&M, Mr. Price, and Apple among others. Ideally, eCommerce sells one particular brand of things.

While the two have the same function of selling their products to online consumers, the two differ in terms of investment, functionality, maintenance, personalization, and scalability. A multi-vendor marketplace gives broad exposure that includes the same products from multiple brands while eCommerce narrows everything down to one brand which means less clutter.

Benefits of Multi-Vendor Marketplace Business

A multi-vendor marketplace functions as a relationship infrastructure by providing an efficient platform for online sellers and customers to trade. The concept has been advantageous to a lot of people in the business by increasing their sales and presenting an easier and cost-friendly platform to reach a global market. Below are some of the benefits of using a multivendor marketplace:

1. Revenue and Cash Flow

A multivendor marketplace functions by bringing a multitude of vendors together from which a commission is earned. From each transaction made between the sellers and the customer, the multivendor platform earns a certain percentage as commission.

Although the commissions for listing a multivendor store are quite low, a lot of revenue is generated from the increased volume of transactions. Besides, the multivendor marketplace owners have multiple ways of monetizing the online stores in ways that increase the revenue and overall profit. Some of these ways include commissions, listing fees, lead generation fees, advertising, and charges on additional services.

2. Efficiency and Effective Scalable Business Model

A business model with an effective base creates a model that makes the ability to scale easy and efficient. Did you know that the cost of establishing a marketplace equates to the cost of creating an eCommerce website? While the two might differ in perspectives, launching a multivendor store caters to the needs of a multitude of vendors making it more efficient while positioning it for faster growth given the traffic.

With the increased number of vendors within a multivendor platform, comes more customers. And if the multivendor owner is able to balance the high-quality supply and demand, then the business is set to grow exponentially.

3. Mitigated Financial Risks

When you launch a multivendor store, you do not invest in inventory as you would with an eCommerce store. This means that you don’t have to deal with all the business processes like delivery, logistics, and warehousing, and return policies. Your work is to provide a platform for those who have such responsibilities which clears possible financial risks.

However, to optimize this, marketplace owners need to find ways to fight seller fraud by finding ways of detecting and preventing these criminal activities. While there are many common types of fraud with the multi-vendor marketplace, some of the most common ones include:

  • Account takeover involves the stealing of the vendors’ login information to access private and sensitive information. It is a common way to commit credit card fraud.
  • Some vendors may become desperate enough and try gaming the system. Some of the most common ways of gaming the system include the acquisition of fake reviews for rating purposes, price manipulation to increase demand, and store burning to eliminate competition.
  • Shipping fraud occurs when vendors refuse to ship the items that have been paid for by the customers or providing false shipping information.
  • Counterfeit goods are some of the bad actors that can increase the financial risk of a marketplace.

4. Automated Processes

Multi-vendor networking strategies and automated processes are essential to any multivendor marketplace that seeks to grow. The primary source of revenue for a multivendor marketplace is the commission that is acquired from sales that need to be subjected to an extremely streamlined automation process.

The automation of processes in a multivendor platform help in reducing the complexity of business processes and manual tasks. They do this by:

  • Automating tedious and manual configurations by automatically providing common management interface solutions.
  • Enforcing uniform compliance across automation solutions is responsible for generating relevant configurations thus preventing possible human errors or any other system setback.
  • Helping collect unified analytics from multiple types of devices that help in creating a uniform format and visualization.
  • Automating processes that provide the ability to alerts, notifications, and auto remedies in a close loop automated process which makes the process of troubleshooting and maintenance seamless.
  • Using unified analytics and close loop automated processes to provide a reliable way of ensuring high-end network security system.
  • Launching the automation of processes eliminates manual tasks. Therefore, the multivendor marketplace administration can invest time, money, and efforts in activities that add more value to the business position it with a better chance to scale easily and faster.

5. Value Proposition

Focusing on vendor advocacy, the goal of the sellers and owners of the multivendor store is to build a community of customers. With the right strategy and tools, the marketing expenses will be minimized.

When it comes to customers, a multivendor eCommerce presents varieties of options of the same product or service to choose from. This means that customers are not limited to one brand as they can compare and contrast what works for them. Call it quality and quantity over one roof.

Similarly, a multivendor marketplace presents sellers with an opportunity to sell their products to prospecting online customers without investing in a physical store. With a detailed online business identification card and portfolio where necessary, companies using multivendor platforms can sell their products quickly.

Conclusion

It is a digital era and it’s only right to use all the available approaches to make your business work. While establishing an eCommerce, might be the quickest thought, considering a multivendor marketplace should be on your to-do list. Give your business the opportunity to attract a global audience with the power of multivendor platforms.

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