Shipping for a multi-vendor marketplace is far more challenging than it is for any other ecommerce business. Serving multiple vendors means you have a lot of shipping problems to solve, and efficiency is a tall ask.

This guide will cover everything you need to know about shipping for a multi-vendor marketplace — providers, tracking, “free” shipping, fulfillment, and more.

Elements of Marketplace Shipping

A multi-vendor marketplace selling products can’t function without shipping and delivery.

Here are the basics:

Order Management

Order Management enables a marketplace to control every facet of order fulfillment, such as:

• Order placed — how and where is an order placed?
• Order received — the fulfillment center receives notice of the order and begins packing for delivery
• Order ships — the order is shipped to the customer and assigned a tracking number that is shared with the marketplace
• Delivery monitoring — was the package dropped off? Did the customer receive it? Was it on time? What were the friction points?
• Service availability — geographical coverage; same-day delivery; weekend delivery

The shipping procedure starts when a vendor receives a customer’s order and enters it into an order management system (OMS). Ensuring you are using a multi-vendor OMS is vital as a marketplace operator.

Fulfillment

Fulfillment is the process of packaging, labeling, and shipping items after receiving an order.

There are a variety of ways marketplace operators can handle fulfillment.

Take Amazon: Their fulfillment program (Fulfillment by Amazon or FBA) charges sellers extra to store, process, and deliver their goods. This is a good option if your marketplace already has a storage infrastructure.

Vendors can also ship directly to their customers. If this is true of your marketplace, you can still exercise some control over the process, such as requiring the use of branded packaging.

As a marketplace operator, you can include specific requirements about delivery practices in your merchant contracts. At the very least, determine who’s ultimately responsible for shipping: the vendors or a fulfillment service.

Shipping Providers

Your decision on shipping providers will impact cost, delivery effectiveness, and reach. Well-known carriers like FedEx, DHL, UPS, and USPS frequently offer special deals and delivery options for businesses of different sizes and locations.

Here are some examples:

• FedEx provides special discounts when businesses open a free FedEx account, such as:
• 30% discounts on FedEx Express® services
• 15% discounts on FedEx Ground® shipping and FedEx Home Delivery® services
• DHL prioritizes reliability and reach. Businesses using DHL can provide customers with:
• Accurate, updated transit times
• Fast door-to-door delivery services to over 220 countries and territories
• UPS allows businesses to:
• Manage orders from multiple vendors (Amazon, eBay, etc.) in a single dashboard
• Offer weekend pickup and delivery services
• Customize UPS tracking pages to match their brands
• USPS offers convenient and cost-effective solutions to businesses of all sizes. These include:
• A central digital platform to manage large volume shipping
• Online postage purchasing and label printing
• Bulk mail discounts

Tracking

Many marketplaces have vendors ship products themselves which means the tracking number needs to be provided back to the marketplace from the vendor. There are multi-vendor marketplace platforms that enable marketplace vendors to integrate with their shipping providers that will automatically provide tracking numbers to the marketplace. Sellers should update the delivery status (shipped, in transit, unable to deliver, etc.).

Tracking statistics allow you to identify low performers and find opportunities to improve your delivery services.

Returns

Simple yet robust policies and return procedures encourage brand loyalty.

Return policies are particularly important now that many customers value the buying experience at least as much as the product they’re purchasing and are familiar with “try-and-buy” services.

• 66% of customers review return policies before buying
• 81% of customers will hit the “buy now” button only if the vendor offers free returns

For a multi-vendor marketplace, the returns process is a bit more difficult than that of a traditional ecommerce store. Typically, the marketplace is the one handling customer service, but they are not the ones that owns or shipped the item. The marketplace must know which warehouse the customer needs to return the item to in order for it to return to the correct marketplace vendor.

Customer Service

Marketplaces should provide customer care at every stage of the shipping process. This involves informing clients of the status of their orders and satisfactorily addressing any issues or grievances they have.

Decide how much of this you want to offload onto your sellers. Ultimately, your customers are buying from the marketplace — not from the vendors themselves. Offloading to sellers reduces your workload, but you also give up some control. Finding the right balance for your marketplace takes careful consideration and testing.

Many things can, and will, go wrong when an item is shipped:

• The package may be lost or damaged
• A delivery vehicle may experience mechanical difficulties
• The package may encounter delays due to weather or other unforeseen circumstances

Creating efficient feedback and support channels helps to resolve these issues quickly.

Designing and Testing Your Marketplace Shipping Strategy

Once you have a handle on the basics of the many moving parts of marketplace shipping, it’s time to develop and test your delivery strategy. See what works and what doesn’t — and then iterate on success.

You may still be thinking…

What About Free Shipping?

Most marketplace operators are thinking about this as they develop their shipping strategy.

Here are some things to consider:

• Verify your numbers. Make sure you can afford the delivery charges before offering anything for free.
• Know how your competitors manage shipping services. In other words, are your shipping policies outcompeting other marketplaces in your verticals? Knowing your competitive space plays a vital role in your marketplace and can make or break your business.
• For example, you may consider free shipping when a customer spends more than a certain amount
• You might also try a strategy similar to Amazon Prime, where buyers can pay a subscription for free shipping

Who Covers the Cost of Shipping?

The party bearing the burden for shipping costs depends on the marketplace.

Here are some common shipping cost strategies:

• The marketplace will send out shipping labels to vendors through shipping partners (like ShipStation) and cover the cost of shipping themselves.
• The vendor pays for shipping upfront and the marketplace reimburses them when they are paid their commissions.
• The vendor is responsible for covering the cost of shipping.
• The customer is responsible for all shipping costs — in a marketplace, this can become conviluted because of the number of shipments that need to be made in one order.
• The customer pays a flat fee for shipping. In this scenario, the marketplace operator must decide a rate that will cover the cost of net shipping. Some orders they may lose money on shipping, and others they will gain.

Consider Users in Your Shipping Strategy

If a marketplace wants to thrive, it should focus on customer satisfaction first. Shipping is a major contributor to customer success.

Prioritize rate, delivery time, order process, and a transparent, smooth transaction. These factors help create an exceptional experience that’s key to keeping customers.

Create a delivery plan that benefits you and your clients — one that both satisfies clients and grows your revenue.

Whether you offer marketplace fulfillment services or have your vendors handle fulfillment, your marketplace vendors should also have a robust and seamless shipping experience. A marketplace needs to attract buyers and sellers, so client success for marketplaces looks at both sides of that coin.

Enabling integrations with popular shipping providers like ShipStation, ShipBob, Shippo, and others lets sellers keep you in the loop on your delivery statuses.

• ShipStation lets you import orders from 100+ providers, create customized emails and packing slips, and instantly update customers with tracking information
• ShipBob serves over 7,000 brands. They offer automated fulfillment with timeliness and accuracy ratings exceeding 99%
• Shippo finds the most affordable shipping rates from over 85 carriers. They work with over 100,000 brands and complete 100 million+ shipments each year

You’ll need a marketplace operating system to keep your marketplace integrations — including your shipping partners and practices — in good working order.

A marketplace operating system can automate many tasks associated with running a marketplace. This frees up your time, allowing you to focus on other aspects of developing your marketplace.

How To Handle Shipping on Your Marketplace was originally published in Nautical Commerce on Medium, where people are continuing the conversation by highlighting and responding to this story.

Major ecommerce companies like Amazon, Alibaba, and eBay have shown how marketplaces — which bring together multiple merchants and vendors in a single digital space — aren’t just for business-to consumer (B2C) sales. For example, Amazon Business, Amazon’s business-to-business (B2B) sales channel, is expected to see its gross merchandise volume soar 31.7% this year, accounting for one-in-three transactions between businesses.

While some distributors are still receiving orders by fax machine, they’re nonetheless uniquely positioned to play a big part in the shift of B2B sales from offline to online — even as players like Amazon encroach on the business-facing market. Distributors are already serving the function of a marketplace by connecting buyers and sellers. As intermediaries between manufacturers and B2C retailers, they’ve spent years developing personal relationships on either end of the supply chain.

Distributors have done all the legwork to build the trust needed to make sales over phone calls and emails. Now, the multi-vendor marketplace model presents an opportunity for them to serve existing clients even better than before while also expanding into new markets.

5 Benefits of Launching a Food and Beverage Distributor Marketplace

Launching a food and beverage distributor marketplace presents multiple opportunities. Here are five main benefits:

1. More Products: Anyone operating a food and beverage distributor marketplace can expand their product offerings by including other vendors’ catalogs. For example, a dietary supplement distributor could add an organic produce supplier to their B2B marketplace to attract more retailers (buyers) from a previously untapped industry segment.

2. Less Overhead: In a traditional distribution model, distributors purchase products from suppliers. Then they’re on the hook for warehousing the new inventory until it makes its way to retailers. In a marketplace, however, operators provide a platform that facilitates transactions and can outsource shipping and warehousing to vendors. At a time when there’s an acute shortage of warehouse space in the United States, an asset-light ecommerce model is particularly significant.

3. Increased Agility: Another benefit of a food and beverage distributor marketplace is the speed with which operators can change their catalogs to respond to emerging trends. As the operator isn’t burdened with purchasing and warehousing all of their inventory, they can quickly — and frequently — experiment with new products without having to worry about overhead.

4. Improved Transparency: Distributors have long kept wholesale pricing under wraps, fearing they’ll undercut partners or see lower profit margins themselves. However, the world’s biggest marketplaces are known, in part, for the ease with which buyers can shop around — and more B2B buyers want an Amazon-like experience. In fact, 62% of distributors say posting all pricing online improves their close rate for B2B sales, according to one industry survey.

5. More Resiliency: In the wake of Covid-19 and other ongoing disruptions like geopolitical conflict, supply-chain challenges have come to the forefront for food and beverage distributors. By working with a wider network of fellow distributors, as well as retailers and manufacturers, by becoming a food and beverage distributor marketplace, you’re cushioning your business against the impacts of supply-chain disruptions. Marketplace operators have a plan B, C — and beyond.

What Does a Winning Food and Beverage Distributor Marketplace Look Like?

Early online marketplace adopters have arrived in the food and beverage distribution industry. In fact, the first crop of them dates back as far as several years. From industrial kitchen supplies to craft libations, multiple food and beverage distributors have already carved out their own niches with marketplaces.

Here are five examples of the creative ways you can use a food and beverage distributor marketplace:

1. UNFI Easy Options: In 2021, United Natural Foods, Inc., a long-running — and pre-internet — distributor of health and specialty food, established its digital Community Marketplace. “Access to the largest assortment of available items is an area of increasing importance to our customers, and Community Marketplace delivers on this need while giving brands an easy-to-use platform to gain the speed, scale, and agility to win in today’s marketplace,” says UNFI’s VP of ecommerce, Tom Kraus, in a news release.

2. Food Service Exchange: FSX Launched in 2020 and is a marketplace where restaurants, hotels, and other service-industry businesses can purchase discounted equipment from manufacturers and dealers. The items are overstock, discontinued, or have light dings and dents from being displayed in showrooms, allowing the marketplace to offer competitive pricing and attract a large buyer pool. Available items run the gamut from kitchen and bar equipment to furniture and even janitorial supplies.

3. Provi: A self-described “all-in-one alcohol marketplace,” Provi pairs bars and restaurants with distributors, suppliers, sales reps, and brands. The platform is said to save buyers 20 staff hours a month as it enables them to stock their entire bar in one place. Provi, founded in 2016, also claims it’s serving 10% of licensed US alcohol retailers — and it isn’t showing signs of stopping. In late 2021, the marketplace announced an additional $75 million in funding from investors on the heels of a strong valuation.

4. Agorara: Spanning the entire food-supply chain, Agorara helps farmers, food manufacturers, wholesalers, and importers sell food and beverage products to buyers including retailers and distributors (as well as other wholesalers and distributors). Agorara also provides specialized marketing services for sellers, demonstrating just one of many additional revenue streams that food and beverage distributor marketplace operators can tap into.

5. Notch Marketplace: Upwards of 1,500 restaurants use Notch Marketplace to source food and beverage products and ingredients from wholesalers. The marketplace is just part of the digital Notch platform, which was launched in 2015 as ChefHero and also includes other revenue streams like inventory-management services and more. Like Agorara, Notch illustrates different paths to marketplace monetization.

Competition Is Brewing — Launch a Food and Beverage Distributor Marketplace Today

Across industries, marketplace operators are capitalizing on advantages like the potential for larger product catalogs and lower overhead. However, thanks to their existing networks, few are as well positioned as distributors are to profit from the marketplace model — for now.

New food and beverage distributor marketplaces are constantly joining the fray, and existing ones, like Provi and Notch, are flourishing.

With competition mounting, you can’t afford to delay the launch of your food and beverage distributor marketplace. Consider a purpose-built marketplace platform like Nautical, which lets you launch a marketplace in 60 to 90 days. Otherwise, your company’s food and beverage distributor marketplace runs the risk of being stale on arrival.

How Food & Beverage Distributors Are Winning By Launching a Marketplace was originally published in Nautical Commerce on Medium, where people are continuing the conversation by highlighting and responding to this story.

Not only do marketplaces have to aggregate demand for the buyer side, but they also have to aggregate seller demand. This distinction between buyer and seller sides happens across more functions than just marketing — operations, experience, and product teams can also be separated along these lines.

Because of this unique structure, many successful marketplaces have developed distinct organizational charts to serve the needs of both buyer and seller sides.

In this article, we’ll walk through the potential organizational structures of three kinds of marketplace models:

• Managed Marketplaces
• P2P Marketplaces
• SaaS-Enabled Marketplaces

Managed Marketplaces

First off, let’s dive into managed marketplaces.

This breed of marketplace enhances the marketplace customer experience by being directly involved in executing transactions.

A managed marketplace offers additional services designed to improve interactions between buyers and sellers. These services reduce friction points, boost client trust, and expedite fulfillment.

The added involvement in providing these services doesn’t disrupt the connection between buyers and sellers. Instead, it facilitates and strengthens buyer/seller relationships.

More Operational Overhead for Managed Marketplaces

Managed marketplaces often require more operational overhead because they use headcount to offer additional services alongside the marketplace offering.

For example, managed marketplace Bus.com understands that buyers may want to speak with a human. For this reason, they hired a team to offer human interaction on their average order value (AOV) transactions.

‎While early-stage managed marketplaces often scale functions with headcount, eventually, they’ll want to automate and scale with tech. But there are barriers to growth for online-only managed marketplaces. For example, most business decisions made in the early stages put off automation until later, which means managed marketplaces can become personnel-heavy and develop technical issues.

How to Hire for A Managed Marketplace

When building a managed marketplace, focus on creating a strong operations team. You will need an operations leader to run the ship and a lot of supportive operational employees.

Check out this link to learn how Dana Hooshmand, a former Lyft and Groupon employee, hired operations roles for a marketplace.

Other Examples of Managed Marketplaces

Vestiaire Collective, a second-hand marketplace for luxury fashion, verifies the authenticity of luxury second-hand products from sellers before shipping products to buyers. This action increases trust with buyers and eases fulfillment processes for sellers.

DoorDash is a last-mile logistics company that connects buyers with restaurants and handles delivery. They offer a superior experience for both sellers and consumers by closing the gap between supply and demand.

Flexport is a maritime freight forwarder: they transport international cargo across oceans. It isn’t a consumer app; it doesn’t operate a point-to-point logistics network where only one driver is needed for each move. Instead, Flexport coordinates complexity across various asset owners to move goods across international borders.

“Our software plus human approach lets us take on an industry that impacts every human on the planet. Freight forwarding isn’t something that you can hack together in a weekend, and we offer our engineers work that’s more meaningful than building yet another photo-sharing app. At the same time, we offer the most talented people currently in the freight forwarding industry a chance to work at a company that understands the value of modern technology.”
 — Ryan Petersen, Founder and CEO, Flexport

Flexport demonstrates how managed marketplaces can become involved in transactions through logistics (or fulfillment).

P2P Marketplaces

Peer-to-peer (P2P) marketplaces allow consumers to offer goods or services to other consumers.

These marketplaces are often product-led and promote platforms that enable consumers to connect. For example, think about the products Airbnb and Uber have created using the marketplace model.

How to Hire for a P2P Marketplace

Your product team is the star of the show in P2P marketplaces. These marketplaces focus on products, and many other business functions align closely with the product roadmap.

But, as we all know, even if you build a robust marketplace, consumers might not come. Creating an incredible product (or P2P marketplace) is not enough to generate consumer demand. You will also need marketing and growth functions to scale your marketplace.

Y Combinator connected with leaders at startups — like Airbnb, Uber, and Instacart — to learn how they think about hiring growth teams.

Examples of P2P Marketplaces

Facebook Marketplace brings together buyers and sellers who then interact directly. An individual user can be a buyer in some transactions and a seller in others. On the same platform, one person can fill either role.

Airbnb enables consumers to engage with the platform as both hosts and renters. When the company prepared for corporate adulthood, it established a seasoned leadership team with significant tenure at the company to add some structure to what was becoming a sprawling home-sharing marketplace.

Neighbor is a rapidly growing startup for self-storage.

While creating their growth team, Joseph Woodbury, CEO of Neighbor, said they needed to hire 10x, not 1x (engineers, digital marketers, etc.). He explained that not doing so would hurt their overall growth.

And Neighbor prioritized hiring the best, quickly scaling a team of 130+. They’ve raised $60M+ from top funds — like a16z and Fifth Wall — and strategic investors at DoorDash, StockX, and Uber.

SaaS-Enabled Marketplaces

A SaaS-enabled marketplace combines the elements of SaaS (software as a service) with a marketplace. The SaaS functions typically provide tools for the supply side that help suppliers better manage the demand from the marketplace.

How to Hire for Your SaaS Enabled Marketplace

SaaS-enabled marketplaces rely heavily on the sales function to generate demand. Many of them use local sales teams to penetrate markets. And eventually, they expand into new markets as they build a scaleable playbook for growth.

A SaaS-enabled marketplace team’s three most important functions are product, customer support, and sales.

Examples of SaaS-Enabled Marketplaces

OpenTable offers restaurants a reservation management system to complete bookings through their app and over the phone. Consumers can download the OpenTable app to book reservations without having to call multiple restaurants to find an “open table.” OpenTable founder Chuck Templeton built the company from the pain he saw his wife go through to get a reservation.

Notch is another SaaS-enabled marketplace that simplifies restaurant ordering and supply chain management. Jordan Huck, CEO of Notch, has organized his team of 75 so that:

• 25 to 30 people work as product engineers, and
• Everyone else focuses on sales, onboarding restaurants, and customer support.

‎

‎‎Notch uses an in-house sales model to acquire larger restaurants and restaurant groups, a centralized inside sales team to handle booking demos for all markets, and a team of account executives on the ground. The company quickly scaled to being used by over 1,500 restaurants and has raised more than $19M from top investors.

Prepare Your Marketplace for Scale

Regardless of the type of marketplace you build — SaaS-enabled, managed, or P2P — you will likely utilize many manual processes at the beginning of your journey to close technical gaps.

Once you’ve validated your business model and are ready for growth, you can use marketplace-enabling technology, like Nautical Commerce, instead of headcount to scale more efficiently.

As you find your USP (unique selling proposition), you should be focused on generating more marketing demand. Try not to worry about the underlying technology powering your marketplace.

Nautical can help you launch and scale your marketplace with a modern platform. As a result, you can leverage those who worked with you from the start to accelerate your growth.

Ready to launch your marketplace?

Chat with a Nautical marketplace expert today.

Marketplace Org Structure: SaaS Enabled, P2P, and Managed Marketplace was originally published in Nautical Commerce on Medium, where people are continuing the conversation by highlighting and responding to this story.

Because of the lengthy ramp to build a marketplace, many marketplace founders have to figure out how to fund their efforts. So how and where do you start?

There are several different ways to go about finding marketplace funding, and the right option for you will depend on the specifics of your marketplace.

We’ll run through some stages of marketplace development and then dig into some common funding options.

Multi-Vendor Marketplace Funding: How Much Do You Need?

Since every marketplace is unique, your funding journey is also unique. Marketplace funding requirements will change based on your stage of marketplace development and your specific marketplace goals.

The three stages of marketplace development are:

• Problem-solution fit
• Product-market fit
• Scaling fit

The first step in funding your marketplace is understanding what development stage your marketplace is in.

Problem-Solution Fit

Problem-solution fit is the earliest development stage of your marketplace. At this stage, you have to validate whether your marketplace is solving a real problem.

Without significant upfront costs in technology or marketing, you should gather a small group of initial marketplace buyers and sellers to validate your idea. You could launch the initial version of your business and verify your concept with as little as a landing page.

From there, you should build a marketplace minimum viable product (MVP) on a no or low code marketplace tool that offers more marketplace functionality to deepen your learnings and viability.

Many marketplaces at this stage are bootstrapped or funded by friends, family, or angel investors.

Product-Market Fit (PMF)

It’s all well and good that some people find value in your marketplace, but how many people find value in it (and how much are they willing to pay) is another question.

Product-market fit is the process of validated learning and experimentation. This stage shows that your marketplace alleviates customer pain points and that the market is large enough to cover the costs of serving it (aka you can make a profit).

A key market measure to prove out PMF is liquidity.

Marketplace liquidity is the likelihood that each user, whether on the supply or demand side, will be able to acquire what they came for. Another product-market fit indicator is the repeat purchase ratio, which measures how many customers return for a second purchase.

At this point, you should have turned your marketplace MVP into a functional marketplace. Investments should be made in automating processes and preparing for scale.

Scaling Fit

After validating that your marketplace serves a sizable market and finding product-market fit, you’re ready to share your marketplace with the masses. This can mean expanding into new markets or offering supplementary products.

Depending on your marketplace goals, you may have reached profitability and do not need to raise additional funds. But, if you’re looking to grow rapidly and believe your marketplace can support a larger market, raising a round of venture capital may be your best bet.

If you’re going the venture capital route, it’s vital to have solid business plans and projections before you start looking for funding. If you can show investors that your marketplace has growth potential, you’ll be in a much stronger position to get the financing you need.

Here’s a list of key metrics to demonstrate marketplace growth:

• Gross merchandise volume (GMV): This is your total sales volume in terms of cash
• Net Promoter Score (NPS): Subtract detractors (6/10 or lower customer satisfaction) from promoters (9/10 or better) to get this number. You want it to be positive. The higher the better
• Average Order Value (AOV): Total revenue divided by number of orders
• Quick Ratio: Compares growth to churn
• Contribution Margin: Profit per unit sold
• Buyer-to-Seller Ratio: Measure of purchase transactions to seller transactions
• Buyer-Seller Overlap: How many buyers are also sellers on your platform? (for P2P marketplaces)
• Take Rate: Marketplace cut on transactions. There are many ways to monetize your multi-vendor marketplace

Depending on the multi-vendor marketplace model you run, some of these metrics may not be applicable.

Ways to Fund Your Multi-Vendor Marketplace

Now that we’ve laid out the phases of marketplace development let’s run through common ways to fund your multi-vendor marketplace.

Bootstrapping

Bootstrapping, or self-funding, is building a business without external funding. You can use personal savings, credit cards, or loans from friends and family.

One of the advantages of bootstrapping is that you retain control of your business and don’t have to give an ownership stake to any other parties. You’re ultimately the only one who makes (or loses) money.

More than 77% of startup founders get their initial funding from personal resources.

Venture Capital (VC)

Venture capitalists are investors who provide capital to startups in exchange for equity.

Not only do venture capitalists invest money, they also can offer valuable advice, introductions, and guidance.

However, venture capitalists typically want a higher return on their investment than other investors. VC can be costly for your marketplace in terms of percentage, but you should measure this against the acceleration lever VC money provides.

Many venture capital firms share their thoughts on funding marketplaces online. Some firms we sharing useful marketplace information are Version One, Point Nine Capital, and a16z.

Another resource: Everything Marketplaces founder, Mike Williams, pulled together this list of investors who invest in marketplaces.

Crowdfunding

Crowdfunding is a relatively new funding option, but it can be very effective.

Crowdfunding involves raising money from a large group of people, typically through an online platform like Kickstarter, GoFundMe, or Indiegogo.

Crowdfunding isn’t a surefire approach to getting operating money for your marketplace. If it takes off, though, you’ll get a double benefit: not only will you get financing, but you’ll also be connected to a fully engaged and invested customer base.

Crowdfunding can be time-consuming, but that’s because it’s a form of marketing. Rather than making a one-time pitch, you must regularly modify your message, adapting it to your audience. Crowdfunding stakeholders like to be kept up to date on your progress.

Angel Investors

Angel investors are individuals who invest their own money in startups. They typically invest much smaller amounts than VC firms, but they can be a great source of funding for a marketplace startup.

You might be able to connect with an angel investor through a marketplace that matches entrepreneurs with angel investors. At the very least, you can get your marketplace idea in front of a larger audience.

Here are a few platforms you can use to research potential funding:

• Angel Capital Association
• Gust
• Angel Forum

Incubators or Accelerators

A business incubator is a program that supports startups in the product-development phase. Incubators give essential resources to entrepreneurs, such as free office space, equipment, mentorship, a collaborative environment, and the opportunity to network with potential funding sources such as angel investors and venture capitalists.

Existing businesses with product-market fit and at least an MPV can benefit from a startup accelerator program. Mentorship, free co-working spaces, legal assistance to help safeguard intellectual property, a collaborative work atmosphere, and access to industry leaders and potential investors are available through startup accelerators. A typical program lasts one to three months.

Grants

There are several grant programs out there that can provide funding for a marketplace startup. For example, the US government offers grant programs supporting small businesses and entrepreneurs. If you do your research, you may be able to find a grant that can help fund your marketplace.

Investing In Your Marketplace Startup

There is no one “right” way to fund your marketplace. Depending on your marketplace vision and stage of development, there are many funding options at your disposal.

No matter how you plan to finance your marketplace, you need to ensure you invest the right amount in your business at each stage without over-investing in resources or technology. Using a marketplace platform will help you get to validation faster and set your business up for scale without spending millions on custom development.

Building a multi-vendor marketplace from the ground up is challenging. was originally published in Nautical Commerce on Medium, where people are continuing the conversation by highlighting and responding to this story.

While multi-vendor marketplaces are incredibly difficult to slow down once they find network effects, they also have much higher communication and coordination requirements than a traditional ecommerce store.

A regular ecommerce store processes transactions between a single seller and their customers, but multi-vendor marketplaces have to accommodate buyers and sellers. That means enabling vendors to add their products to your site and allow for multi-vendor checkout — that’s just the beginning.

Because multi-vendor marketplaces are so complex, some turn to a developer or IT company to build a custom website. But is that the best choice?

Building with an online marketplace development company

There’s lots to consider before hiring a developer to build your multi-vendor marketplace, and the process has more than one downside. Here are five of the most important factors to consider before making a decision:

1. They’re expensive to launch. Hiring a firm to build a multi-vendor marketplace is a big investment. Costs vary widely depending on what kind of features you want, the scale you’re starting at, and more.

Generally, though, marketplace development costs are estimated to be in the hundreds of thousands of dollars — and they often enter into the millions — just to launch. Budget overruns are common. In fact, 43% of IT projects go over budget, nearly half are late, and 14% are deemed outright failures.

At Nautical, we’ve had many conversations with marketplace founders working on their marketplace with custom development shops who have spent hundreds of thousands of dollars, and years, without any marketplace to show for it.

2. They’re costly to maintain. Every line of code eventually requires maintenance. If you’ve paid another company to create your own tailor-made multi-vendor marketplace, upkeep expenses are entirely on you.

Maintenance spending can quickly add up. Want to make a change to your developer-built marketplace? You’ll need to consult with the team behind it every time. As your custom build ages, this will happen more and more often. In addition, new third-party tools are constantly emerging, but you’ll have to keep customizing your marketplace’s back end to leverage them.

With major institutions like banks, airlines, and government agencies, struggling with aging IT infrastructure, we’ve seen how hard it is to continually update systems — even with vast resources.

3. Launching them is time-consuming. With marketplace popularity surging, thousands of niche marketplaces will soon appear. The sheer scale of the opportunity costs related to delays are hard to fathom.

Yet developing custom software means you’re slowing your time to market from the beginning. It typically takes two years or more to get a custom-built marketplace up and running, and the more time that goes by, the higher the opportunity cost.

Hiring an online marketplace development company will also distract you from what you’re best at: the commerce side of the business. You’re effectively signing on to be a project manager. This will be even more challenging if you’re new to ecommerce, as you’ll need to divert resources from your current operations to provide answers to technical questions from the developers.

4. They might not be built with best-in-class practices. Many ecommerce development firms are great at building everyday commerce websites. Far fewer have the specialized knowledge needed to create an optimally functioning multi-vendor marketplace, which combines ecommerce with fintech and logistics.

Single-vendor estores are simple enough. They use payment providers to accept purchases. Multi-vendor marketplaces must direct payments to suppliers, distributors, and sellers — and in their preferred payment method.

Depending on location, multi-vendor marketplaces face increased responsibilities to verify vendor identity. They’re also potentially exposed to broader regulation as they could have a network of vendors in different countries, each with its own tax rules and financial regulations. To top it off, instead of a limited number of warehouses, they’re dealing with many.

Due to these complexities, understanding the workflows between all of the systems that make up a marketplace stack necessitates working with marketplace experts.

Building out a marketplace that can meet these demands isn’t easy. Finding an online marketplace development company that can navigate this terrain is even harder.

5. They aren’t the only option. Before building your multi-vendor marketplace with an online marketplace development company, you should evaluate other options.

Here are two alternatives to hiring an online marketplace development company for a custom build.

#1 Build on an existing ecommerce platform

It’s not unheard of for marketplace founders to try and launch multi-vendor marketplaces on top of ecommerce platforms like Shopify or Magento. There are some benefits with these solutions, like faster launch times, cost savings, and customer support.

However, traditional ecommerce platforms weren’t designed for the multi-vendor setup and, as such, require many third-party apps and plugins, leaving an operation prone to bugs, outages, and slower run times.

Plus, it’s often difficult for a multi-vendor marketplace to scale on ecommerce platforms because of built-in limitations. The platform may not allow multi-vendor checkouts, or it might cap the number of warehouses and product variations.

#2 Use a multi-vendor marketplace platform

There are multi-vendor specific tools that can be leveraged at every stage of your multi-vendor marketplace journey. These tools were built specifically for the complexities of marketplace transactions, and can help you rapidly validate your marketplace without the upfront cost of custom development.

Solutions like Nautical Commerce’s multi-vendor marketplace platform democratize software development. Marketplace platforms orchestrate between the different systems in your marketplace stack and give you the tools you need to prepare your marketplace for scale.

With Nautical, you can launch a marketplace, complete with custom integrations, within 90 days. With a custom build, you’d still be in the planning phase.

A multi-vendor marketplace platform is the solution

You don’t have time to waste explaining to a development team what you need from your marketplace. It’s crucial to have the flexibility to launch and scale a multi-vendor marketplace rapidly.

Adopting a multi-vendor marketplace platform like Nautical to create a marketplace is faster and more cost-effective than doing so with an online marketplace development company and comes with built-in marketplace best practices.

It doesn’t come with the limits of a regular ecommerce platform either, so you’ll be able to expand your marketplace to meet growing demand.

The bottom line: Whether you’re a B2B or B2C enterprise looking to add a marketplace alongside your existing business or a startup launching a new marketplace, don’t build custom. Choose a multi-vendor marketplace platform and start connecting buyers and sellers within 90 days.

5 Things You Should Know About Building a Marketplace with an Online Marketplace Development… was originally published in Nautical Commerce on Medium, where people are continuing the conversation by highlighting and responding to this story.

Building a marketplace MVP allows you to validate your idea, receive user feedback, and make improvements through an initial marketplace offering with enough features to attract early adopters.

There are a lot of choices to make for building version 0.1 of your marketplace.

Do you reach out to developers to code it? Do you use low or no-code tools? Do you build your marketplace from scratch or use a platform?

How do you decide what’s best for you?

We’ll walk you through options on what works best for you to get your multi-vendor MVP up and running.

What is a Marketplace MVP?

First things first — what’s an MVP? The marketplace MVP is a stripped-down version of your marketplace that focuses on the core functionality.

It has the essential features customers need, but with the bare minimum of bells and whistles.

A marketplace MVP can help you determine whether there’s a market for your product or service and assess what features are most important to your customers. In most cases, an MVP actually saves you money by avoiding the costs of developing unnecessary features.

Whether starting a new marketplace or expanding an existing one, an MVP is necessary for your startup process.

What Do You Want to Achieve with Your Marketplace MVP?

Building a successful marketplace is no easy feat. There are many moving parts, and it can be challenging to know where to start.

But before you start building, you need to identify your goals for this MVP: What do you hope to achieve by launching a minimum viable product?

• Do you want to validate your concept?
• Demonstrate traction to raise capital?
• Find gaps where you need to build out a team?

Whatever your goals may be, settling on them before you start to build will help you create a focused and successful marketplace MVP.

How Do You Build a Marketplace MVP?

As a marketplace founder, you have to decide on how to launch your marketplace. Should you hire a contract developer to build your marketplace MVP? Learn how to use a low or no-code tool?

Hiring a Contract Developer or Custom Development Firm

Contracting a developer or a custom development company might be your initial gut reaction when building your MVP.

While working with a dev shop will get you the custom features you need, that’s the only upside to launching an MVP custom. Additionally, isn’t the point of an MVP to figure out which features are most important? If you already knew what those features were, you wouldn’t need to do an MVP!

You have to understand how a marketplace functions well enough to share your needs with the firm. If the custom dev shop doesn’t have years of experience building marketplaces, you’ll spend time explaining the basic functionality needed for a marketplace before even getting to your specific requirements.

Contract developers and custom development firms are expensive. Are you ready to spend hundreds of thousands to millions of dollars to see if you have a viable marketplace idea on your hands?

It’s very unlikely that an investor will give you millions of dollars to validate your marketplace idea.

Bottom line: Building a custom MVP is expensive, time-consuming, and is not the fastest way to validate your business model.

Launching Using a Low-Code or No-Code Marketplace Tool

Your idea is so special that there can’t be a turnkey platform out there to support it, right?

While it isn’t likely a platform can give you 100% of the things you need for your marketplace, they can give you an incredible head start on your build with built-in marketplace best practices. When you’re building a marketplace MVP, a head start and best practices are exactly what you need.

Using a low-code or no-code tool will save you money on development costs and allow you to quickly validate your business model. The learnings you get from just getting started are invaluable.

Bottom line: Launching on a no-code or low-code marketplace tool will help you validate your marketplace idea faster.

Before Deciding to Build, Learn about Low-Code & No-Code Tools

Looking into some of the most popular no-code tools and platforms for your marketplace MVP will demonstrate their capabilities and limitations. This will allow you to define your marketplace further, make tradeoffs for “nice-to-have” vs. core requirements, discover how you’ll operate it, etc.

You’ll probably find that no single marketplace tool will provide all of the features and functions you could want “out of the box.” Some will have more, some less, but the no-code tool you choose must have sufficient features to test your marketplace concept.

There are many “no-code marketplace platforms” or “no-code marketplace builders” on the market that aren’t self-sufficient no-code platforms or tools at all. They may lack usability, support, or necessary features.

Low-code or no-code tools should only be used to launch your MVP because you’ll hit hard scaling limits once your marketplace starts to take off.

Launching a Marketplace MVP Alongside Existing Business

If you’re already running a business and have a large network of buyers and suppliers around your company, validating your marketplace using a multi-vendor marketplace platform is your best option.

Low-code and no-code tools aren’t going to be able to handle the type of scale you’ll be bringing from the onset.

For new marketplaces launching without a large network, the low-code or no-code options will allow you to quickly validate with a small number of buyers and sellers. But scaling beyond MVP will be difficult.

Prepare for Scale with a Configurable Multi-Vendor Marketplace Platform

Once you’ve validated your marketplace and are ready to scale, it’s time to invest in a multi-vendor marketplace platform.

Unlike marketplace tools that bolt on to other systems or platforms that enable simple listing marketplaces, a multi-vendor marketplace platform can power your entire marketplace from product discovery to fulfillment and returns.

You won’t want to hack together a system when you’ve found product-market fit. Creating a messy marketplace technology stack will require you to fill gaps by hiring additional headcount, slow down your customer experience, and ultimately throttle your growth.

Use a multi-vendor marketplace platform like Nautical to get your multi-vendor platform up and running in days instead of reinventing the wheel with a custom build or backing into a marketplace on top of an ecommerce platform.

Key Takeaways

Creating a marketplace starts by building a marketplace MVP. While there are multiple ways to get going, make sure your MVP strategy aligns with your marketplace goals.

And remember, a custom-built marketplace MVP, while offering to build all the features and functionally you think that you need, is expensive and time-consuming.

Instead, validate your marketplace idea in a low-risk way using low-code or no-code tools. There is no need to reinvent the wheel.

As you begin to scale out of your MVP phase, look for a multi-vendor marketplace platform like Nautical Commerce that’ll allow you to focus on finding suppliers and customers for your marketplace rather than worrying about the underlying marketplace technology.

How To Build a Multi-Vendor Marketplace MVP was originally published in Nautical Commerce on Medium, where people are continuing the conversation by highlighting and responding to this story.

Good or bad, marketplace buying experiences reflect on the marketplace operator, which is why choosing your vendors wisely is so important.

Vendors can make or break transactions, stimulate or stunt repeat business, and build or diminish trust in your marketplace. Whether you found vendors for your multi-vendor marketplace or they came to you, how can you ensure they’ll be good for business?

Vetting Marketplace Vendors 101

Before we get into how to vet your vendors, let’s briefly go over why you want to invest the time and effort to vet them.

Vendor vetting serves to:

1. Ensure alignment between your business objectives and service standards

2. Facilitate positive buying experiences for customers

3. Defend your buyers against fraudsters

4. Protect your marketplace from misrepresentation

5. Shield your reputation from harm

Deciding on the vetting mechanisms you’ll use is also crucial for establishing operations when building your marketplace. Vetting vendors might take substantial human effort, tech investment, or third-party support.

5 Ways to Vet Marketplace Vendors

When vetting vendors for your marketplace, your goal is two-fold: First, you want to confirm the vendor’s legitimacy and, second, determine if they’re a good fit.

Of course, not every vendor vetting method will apply to every marketplace model. Thoroughly screening qualifications might be critical for a brain surgeon marketplace but not as necessary for a flip flop marketplace. Just keep that in mind when you’re making decisions.

#1: Have an in-person or video call

Think about your standard job interview process. You wouldn’t hire an employee solely based on an aptitude test, even if they got a perfect score. What about culture fit? What about personality? What about trust? You’re going to work with this person day-in and day-out after all. An interview is a better way to get a feel for this person, how they communicate and if they inspire confidence in you. The same gut-check is a valuable form of vendor due diligence.

Vetting vendors through an interview process, whether in-person or by phone, can help you understand how they’ll perform as one of your suppliers — and if there are any red flags. You’re about to enter a meaningful business relationship, after all.

Human-to-human connection also goes a long way for issue resolution down the line. Suppose there’s a service issue on the vendor side or a logistical issue on your operator’s side. In that case, the human relationship you establish during an interview can help you get from problem-identified to problem-solved much faster.

Plus, there’s just something to be said about looking someone in the eye.

Vendor interview questions to consider:

• Tell me about your product/service.
• Why did you start?
• How long have you been in business?
• What’s been your greatest challenge and greatest success?
• Where do you source your products from?
• Where do you currently offer your services?
• How do you measure success? (Sales? Positive reviews?)
• What is the most important part of managing your business or services for you?
• Where else have you offered your products and services in the past?
• How long have you sold through that platform?
• Have you encountered any problems through that platform, and how have you or the other operator solved them?
• Do you have references you can share?

#2: Review vendor performance on other platforms

Just as Facebook killed the blind date, a little Googling can go a long way in deciding if you have a future with a vendor.

To start your sleuthing, look at the vendor’s business reviews on other platforms, like their website, Google My Business page, Facebook Page, or Yelp. If the vendor is an individual (think: Etsy creator or AirBnB host), you could take a more traditional approach by reviewing their professional LinkedIn profile, portfolio, or even asking for their resume.

#3: Establish KYV, AML, and anti-fraud procedures

While marketplaces have opened the doors for small vendors to be part of big business, they’ve also attracted fraudsters, money launderers, scammers, terrorists, chargeback artists, and a slew of other unsavory characters.

As a result, many regional legislators now require marketplaces to perform legal vendor checks to protect businesses and buyers. These are known as Know Your Vendor (KYV) or Know Your Business (KYB) checks, and they include vetting mechanisms for anti-money laundering (AML) and anti-fraud. Even if it’s not the law, it’s probably a good idea to have safeguards in place.

The most well-established example of legislation is the EU’s payment services directive (PSD).

How KYC and KYB checks work:

If your vendor is an individual: Like Know Your Customer (KYC) checks, KYV is a set of procedures businesses implement to assess a vendor’s risk and comply with anti-money laundering laws. KYV checks seek to verify the following information:

· The vendor’s identity

· Due diligence on the vendor’s financial activities

· AML checks where you assess any money laundering risks associated with the vendor

If your vendor is a company: Know Your Business (KYB) checks paint a picture of the company’s structure, operational model, and executive hierarchy. The goal is to expose any executive players that could pose a risk.

KYV and KYB checks look out for:

• Large cash transactions
• Multiple unexplained transactions
• Transactions involving suspicious individuals or businesses
• Transactions linked to high-risk areas
• Transactions that don’t make sense for the business

#4: Full comprehensive due diligence

Outsourcing due diligence is probably the most expensive and stringent way to perform vendor due diligence. Typically used by large businesses, third-party risk-assessment services take the onus of vetting vendors off marketplace operators.

Vendor risk assessment services take a formal, thorough approach to vendor vetting, which can include:

• Detailed questionnaires
• Documentation and evidence collection
• Threat intelligence analysis
• Risk mitigation management
• Validation testing and reporting

Many vendor risk management companies will also handle the legal aspects of onboarding, like SLAs, vendor contracts, and even issue remediation.

#5: Certification validation

There are many cases where you’d want to vet the credentials of your vendors. This is especially true for service marketplaces where you may be making connections to doctors, personal trainers, academics, or accountants. But also true of product marketplaces selling a specific niche of products — think “green” marketplaces requiring a certain accreditation to sell on the platform.

A simple LinkedIn search won’t due. Depending on the accreditation, you’ll have to verify vendor qualifications in various industry databases, licensing boards, or regional associations.

If that’s not available, you might have to contact the certifying body to confirm the vendor’s past enrollment and graduation. Unfortunately, this is another task isn’t easily automated, but is worth the effort for liability protection.

Vendor issues are inevitable

Even with the most careful due diligence and stringent verification process, vendor issues will inevitably occur as you grow.

When vetting fails, it’s vital to ensure your marketplace has:

• Operational workflows that enable returns, refunds, or remediation
• Top-notch customer service representatives that can quickly remedy any issues
• Customer reviews and vendor ratings that empower buyers to make informed purchasing choices
• The legal framework to protect your business from liability

Make sure you are using tools like reviews to help find bad actors among your vendors and have vendor standards in place to clearly state the expectations you have of your marketplace vendors.

You’ll never have total control of your vendors, but you can establish proactive and reactive operations to ensure you sign on and keep on trustworthy vendors that reflect well on your marketplace.

If you’re interested in learning more about getting vendors for your multi-vendor marketplace, check out these posts:

How to Get Vendors to Join Your Multi-Vendor Marketplace

How to Find Vendors for Your Multi-Vendor Marketplace

5 Ways to Vet Your Marketplace Vendors was originally published in Nautical Commerce on Medium, where people are continuing the conversation by highlighting and responding to this story.

The dream marketplace launch scenario is one in which the market is so hungry for products that vendors can’t keep their virtual shelves stocked. The reality is “build it, and they will come” only goes so far. Generating marketplace demand in the early days will likely require some strategic demand generation tactics.

Demand Marketing for Marketplaces 101

Demand marketing refers to activities that raise awareness and generate buzz, leading to increased sales. Awareness and excitement are at the core of demand marketing efforts.

Early demand marketing efforts should focus on:

1. Demand creation: If you’re coming up with a completely new offering in an untapped market, your job will be to study the need for your marketplace. You’ll have to figure out your ideal consumer and how to target them.

2. Demand generation: If demand already exists, your goal is to explore what’s driving that demand and leverage it to create more awareness and interest in your marketplace.

Before Starting Demand Marketing for Your Marketplace

Wherever your marketplace falls on the demand marketing spectrum, Chris Toy, CEO of MarketerHire, suggests you start by answering this one simple question:

Who is [your marketplace] for, and why is it a no-brainer for them?

For example: Uber is for anyone in an urban center needing quick, reliable A-to-B transportation. It’s a no-brainer because it’s cheaper than a cab, faster than public transit, and ordered on-demand through a phone.

Before you can begin marketing your marketplace, you have to get to know — like really get to know — the few buyers you have or identify the buyers you’d like to have. One way to do this is by building out detailed buyer personas.

Get to know your ideal customer through buyer personas

A buyer persona is an archetype of your target market. To build out your buyer personas, you’ll have to sit down with users (or potential users) of your minimum viable marketplace and learn who they are, their motivations, and their values. Just like an author creating a character’s backstory, you need to know these people inside and out.

Buyer personas should include:

A demographic profile: “Who” is your customer target market? Learn about their age, sex, profession, income, and education.

A psychographic profile: “Why” do they buy? Psychographics represent your ideal buyer’s personality, values, lifestyle, interests, and attitudes.

Behavior and habits: “What” do they do based on their psychographics? Learn about their motivations and buying habits. (Are they persuaded to buy by influencers or necessity? What would prompt their need to use your marketplace? Are they interested in coupons or discounts? Or does status and brand recognition matter more?)

Once you’ve created buyer personas, the next step is to get your marketplace in front of these people in real life by kicking off demand marketing activities.

Demand Generation Ideas for Multi-vendor Marketplaces

To get the word out and pique early interest, there are several tactics you can use to start creating that highly coveted buzz.

Make Vendors Your Hype Squad

If you’ve rolled out the red carpet for your vendors — as we laid out in How to Get Vendors to Join Your Multi-Vendor Marketplace — it’s time to capitalize on that synergy by asking them to promote their shop on your marketplace. Your success is their success, after all. The best part about using vendors to help spread the word is that they already have access to your ideal buyer.

Of course, your vendors will be busy managing their own business, so you’ll want to do the heavy lifting for them. Here are a few ways you can help them help you:

- Marketing materials: Design and deliver materials, like signage, place cards, and store front stickers, that the vendor can display in their physical space. To further “woo” your vendors, consider including these items as part of an onboarding package, which could also include branded goodies for their benefit.

- Social media materials: Send over a folder of digital materials, like a promo video, curated images, and copy, that the vendor can quickly post onto their social media platforms. Even better if you can customize those materials to showcase unique aspects of your partnership.

- Promo codes: Provide vendors with a promo code they can pass on to their customers and their networks (at your expense!) to incentivize buy-in. It might lower your margins a bit up front but will pay dividends later if their customers become yours.

Tap into Existing Audiences

If you can find a segment of like-minded folks that fit your buyer persona, you can engage them all in one fell swoop. There are plenty of engaged online audiences. The key is locating the one bursting with your ideal buyer.

A few ways to leverage existing audiences:

- Partner with social media influencers with a solid natural alignment with your marketplace. But don’t just go for big names with big followings. Micro-influencers (influencers with smaller audiences) tend to be more authentic. And because they have a closer relationship with a niche audience, they can “boast up to a 60% increased engagement rate compared to macro-influencers.”

- Sponsor newsletters. Community groups, brands, and even your vendors often send out a periodic newsletter to their membership or customer database. Leverage their trusty readership by paying to sponsor or be featured in their communications.

- Facebook groups: While most Facebook Group admins aren’t fond of solicitation, some admins will be willing to post a promotion, contest, or shout-out on your behalf, especially if you’re an active community member.

Up-the-ante on Your Marketplace SEO

When SEO is used correctly, it can be a very effective tool for organically introducing a new audience to your marketplace.

How does SEO work?

In a nutshell, SEO drives more organic search traffic to your marketplace by helping search engines understand your website is relevant to a particular query. To benefit from SEO, you must optimize your marketplace website’s language and functionality. That way, when a buyer types in a relevant query, search engines present your marketplace as the answer.

A few ways to improve SEO:

Add relevant keywords to your website. Add keywords to your product descriptions, product titles, webpage URLs, and meta-descriptions to help Google identify what each page is about.

What’s a keyword? Think of keywords as would-be search terms. What would your buyer have to type for Google to present your marketplace as the answer?

For example: If you were to type in ‘Vintage Air Force Ones,’ sneaker re-seller marketplace StockX would likely come up. They’ve indicated they have “Vintage Air Force Ones” enough times for Google’s bots to be confident StockX has what this searcher is looking for.

For help identifying keywords, try using tools like SEMRush and Moz.

Internal linking. Linking from one page to another on your marketplace helps Google understand the hierarchy of pages on your site. Internal linking keeps searchers on your website longer and looking at more pages, which Google will reward.

Amazon does this on every product page with its layers for “Discover similar items” and “Products related to this item.”

User reviews and ratings. According to Moz, online reviews make up approximately 10% of the criteria for how Google displays search results. Search engines love reviews because they prove the webpage has been relevant to real people.

Marketplaces are set up for SEO success because of their sheer volume of vendors and products. There are many opportunities for keywording, internal linking, and interaction.

Content (Marketing) is Key

Content marketing is the creation of online materials like blogs, podcasts, byline articles, videos, and social media posts. Content marketing aims to indirectly stimulate awareness of your marketplace by creating a broader conversation about the challenges your marketplace solves. Instead of focusing on direct sales, content marketing establishes expertise so that your authority comes to mind when it’s time for a customer to buy.

Content marketing is not outwardly salesy. Content is meant to be thought-provoking and educational, so you’re free to cut the sales shtick. Think telling your marketplace origin story, sharing your entrepreneurial journey, and becoming an expert in the problem your marketplace helps solve.

If you operated a used clothing marketplace, you might write about the environmental toll of fast fashion. If you run a take-out marketplace, you might write about the best burgers in your delivery area.

How to begin content marketing

Start content marketing by contributing to established channels and leveraging their engaged audience. Once demand has matured, consider creating your own content marketing channels to keep buyer demand and engagement on the up and up.

Content marketing ideas:

- Start or attend podcasts. Podcasts work to amplify your voice as an expert and humanize your marketplace by association. If listeners like you and your story resonates, those feelings will transfer to your marketplace.

- Contribute to publications. Submit bylined articles to news, market, or industry publications on topics in your marketplace’s scope to bring a fresh perspective to an ongoing conversation.

- Start your own blog. Be a conversation starter by starting a blog for your marketplace. A blog is another way to implement and benefit from SEO while establishing credibility and controlling the narrative.

Paid Advertising

Since you’ve already established who your buyers are and what they value in your buyer personas, you’ll also have gotten a sense of where they hang out — online and in person. Find out where your buyers put their time and attention and advertise there.

Where do your buyers spend their time?

Digital advertising: Niche websites relevant to your buyers, YouTube, Facebook, Instagram, Yelp, online publications, Google ads, Search Engine Marketing (SEM), and other marketplaces

Traditional advertising: Newspaper, magazines, and transit signage

One caution regarding paid advertising: don’t get hooked on it. Advertising can be a useful way to throw money at the demand problem and see what sticks, but it shouldn’t be the only form of demand marketing you’re using. You’ll need to pair advertising with other initiatives to turn brand awareness into buyers.

For a list of ideas to get your early marketplace users, check out Everything Marketplaces founder Mike Williams’ article on 25 Creative Ways to Get Your First Marketplace Users.

Successfully generated demand? Turn your eye towards supply.

Once marketplace demand generation finally results in a line down the (virtual) block, you might face a different problem: supply! Demand means nothing if you don’t have the goods to convert prospects into buyers. For marketplaces, that means attracting quality vendors. Read on to learn How to Find Vendors for Your Multi-Vendor Marketplace.

How to Generate Demand on Your Marketplace was originally published in Nautical Commerce on Medium, where people are continuing the conversation by highlighting and responding to this story.

There’s no one right way to set up a multi-vendor marketplace. In fact, the type of marketplace you offer can take on very different forms.

Those who want to build or expand an ecommerce business have a host of multi-vendor marketplace models to choose from, including selling direct to consumers (DTC) or targeting other businesses (B2B) and setting up as a horizontal or vertical marketplace. They can even combine two or more models for a hybrid approach.

Multi-Vendor Marketplace Models: B2B, B2C, or P2P?

One way for a multi-vendor marketplace to be categorized is based on who is doing the buying and who is doing the selling. Any multi-vendor marketplace will fall under at least one of the following three categories (and often more): B2B, B2C, and P2P.

1. B2B Multi-Vendor Marketplace Model

A business-to-business multi-vendor marketplace brings together businesses whose customers are other businesses. B2B marketplace can involve a combination of manufacturers, importers, exporters, suppliers, and wholesalers.

B2B merchants often sell in bulk quantities, fulfill custom orders, and sometimes have unique contractual relationships with their customers (rather than a B2C market where every consumer gets the same pricing or terms).

Although B2B marketplaces were slower to catch on, more and more B2B multi-vendor marketplaces have been appearing for the past several years. B2B businesses that launched marketplaces in recent years are more likely to have grown than those that did not.

Alibaba is perhaps the most popular example of a B2B marketplace, but other players like Grainger and Honeywell and new companies like Convoy and Faire are stepping up.

2. B2C Multi-Vendor Marketplace Model

When most people think of a multi-vendor marketplace, a business-to-consumer example is likely top of mind. B2C is the most common form of ecommerce, after all. In B2C marketplaces, retailers (or other merchants) sell products or services to individual consumers.

Amazon is the most dominant example of a B2C multi-vendor marketplace. But many other popular examples exist, from the online channels of department stores like Walmart and Target, to something like Thumbtack, which lets consumers hire professional services, from legal representation to plumbing.

3. P2P Multi-Vendor Marketplace Model

Peer-to-peer (P2P) marketplaces are platforms that enable transactions between peers. The popularity of the P2P multi-vendor marketplace is part of the broader rise of what’s been dubbed the sharing economy.

Ride-sharing app Uber and short-term rental platform Airbnb are prominent examples of P2P multi-vendor marketplaces, but crowdfunding websites like GoFundMe and Kickstarter and education platforms like Skillshare show how much variety there is in the P2P category.

Facebook Marketplace — which Craigslist paved the way for — demonstrates how the model can be used to sell goods, as users upload their own listings and deal directly with prospective buyers.

These three buckets — B2B, B2C, and P2P — are very broad overarching types. Some marketplaces, like eBay and Amazon, span all three multi-vendor marketplace models. They can be broken down even further into horizontal or vertical marketplaces.

Horizontal vs Vertical Multi-Vendor Marketplace Models

Not only do you have to make it clear who your buyers and sellers are by defining B2B, B2C, P2P, or a hybrid multi-vendor marketplace model, you also have to define the products or services you’ll be offering as a horizontal or vertical marketplace.

While the biggest multi-vendor marketplaces sit in the horizontal camp, there’s still lots of room to grow with a vertical marketplace.

Here’s how horizontal and vertical marketplaces differ:

Horizontal Marketplaces

The horizontal multi-vendor marketplace is a one-stop shop. Again, the most obvious example is Amazon, which is called The Everything Store for a reason — there isn’t much that can’t be purchased from Jeff Bezos’s ecommerce giant.

Here are two main advantages of arranging your multi-vendor marketplace horizontally:

• 1. You can go big. Because your merchants are selling everything — or at least products or services across many categories — there’s the potential to capture a massive share of the overall market. Just look at Amazon: it captured 56.7% of all US ecommerce sales in 2021.
• 2. You have flexibility. If one product range or service falls out of favor, you can just focus on your many other marketplace offerings/merchants. The horizontal marketplace is less susceptible to disruption as a result.

Vertical Marketplaces

Vertical marketplaces don’t try to cater to everyone. Instead, they have a specific focus, and it’s reflected in the products or services they sell. Vertical multi-vendor marketplaces embody a piece of age-old entrepreneurial advice: do one thing really well.

That doesn’t mean their catalogs don’t have room for expansion. P2P marketplace Etsy, for example, sells lots of different items — but everything is handmade, vintage, or a craft supply, as per its seller policy.

Here are some examples from Bessemer Venture Partners of vertical industries that a B2B marketplace can enable:

Vertical multi-vendor marketplaces also have their own clear advantages, and here are a couple of big ones:

• 1. You can corner a market. Operators of vertical marketplaces can carve out a specific niche and own it, earning a loyal base of customers, brands, and merchants along the way. Look at how StockX has cornered the streetwear market, selling sneakers that outperform the S&P 500 as investments.
• 2. Costs are lower. It’s going to cost a lot less to target a specific audience with tailored offerings rather than trying to convert every single consumer.

Remember: multi-vendor marketplace models can evolve over time. Amazon began by selling books, perfected its processes, and expanded again and again, becoming increasingly horizontal over time.

What Are the Best Markets for Multi-Vendor Marketplace Models?

No matter what type of marketplace you’re building — be it a horizontal B2B, a vertical B2C, or any other combination you can think of — there’s no limit to the various industries or segments you can try to enter.

Even beyond simply B2B, B2C, P2P or horizontal vs vertical multi-vendor marketplace models, there are a whole host of industries you can disrupt or enable with a multi-vendor marketplace.

Here is a short list of multi-vendor marketplaces across industries compiled by Version One:

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Even with so many marketplace opportunities, some are better than others. Here are three ways to identify the best markets for possible multi-vendor marketplace models:

1. Make sure buyers would want to use your marketplace often. That’s part of what makes online food-ordering marketplaces like Grubhub and SkipTheDishes so successful — most people eat multiple meals every single day. In many cases, however, less-frequent but high average order value (AOV) purchases still have a place in marketplaces — think home or car buying. The high AOV makes up for the low-frequency in terms of marketplace profitability.

2. See if technology can add value. Real estate marketplaces have shown how new tech effectively attracts customers and, in turn, merchants. Companies like Zillow and Trulia disrupted a static industry — one that had long kept info like previous selling prices under wraps — by introducing data-empowered tools to analyze local market dynamics and property histories.

3. Seek out fragmented markets. In a fragmented market, no single organization has garnered enough influence to dictate how a given industry operates on a day-to-day basis. This leaves the door open for a marketplace to try and gain favor with one of the market’s fragments, since there isn’t yet an industry-standard solution.

The future of commerce is going to be more connected with an increasing number of businesses leveraging the multi-vendor marketplace model to enhance reach and revenues. Whether you choose to launch a disruptive marketplace or use your expertise to enable your industry, cross-selling and collaborative online sales are going to continue to rise. The time is now to build your multi-vendor marketplace!

Top Multi-Vendor Marketplace Models for Your Business was originally published in Nautical Commerce on Medium, where people are continuing the conversation by highlighting and responding to this story.

Will every driver get a five-star review? Will every ride go without incident? Will every passenger be a warm ray of sunshine? Certainly not.

And yet, overall, passengers continue to trust drivers to get them to their destination, drivers still welcome strangers into their personal vehicles, and most of the time, everyone arrives at their final destination.

Despite the odds, Uber has built trust into its marketplace.

But how?

Here are five tactics you can use to build trust in your marketplace.

Tactic #1: Establish Marketplace Standards

Establishing standards for operations, conduct, and usage should be one of your first steps when developing a marketplace.

Standards define expectations between vendors, buyers, and you, the marketplace operator, and protect everyone involved. It’s helpful to think of them as a guideline for using the marketplace and a “how-to” for addressing foreseen problems.

Standards can be set in a few ways depending on your marketplace model.

A Service Level Agreement (SLA)

An SLA is a legally binding contract that establishes standards specifically for suppliers, e.g., vendors or sellers. An SLA establishes a desired level of service. The goal is to lay out how things work on your platform, what you expect from suppliers, what they can expect from you, and what happens when those expectations aren’t met or are violated. SLAs can also protect a marketplace from vendors that break the terms of service and give you grounds to terminate the relationship.

Terms of Service

Like an SLA, terms of service outline a set of regulations all platform users (buyers and sellers included) must follow. It should outline the details of acceptable use and determine limits of liability.

Airbnb’s terms of service establish rules and guidelines for renting, hosting, and using the platform. Included are policies on how to manage a listing, cancel a stay, anti-discrimination, and report violations.

Code of Conduct or Community Guidelines

For peer-to-peer and service-based marketplaces, you can build trust by establishing terms for respectful communications, appropriate behavior, safety, and use of personal property. Both buyers and vendors would be expected to abide by the code of conduct.

Poshmark’s community guidelines outline how they expect the Poshmark community to interact, what the platform is for, what it’s not for, and penalties.

Tactic #2: Marketplace User Reviews

Before Airbnb hit it big, the tech world said the concept would never work because no one would ever trust strangers to stay in their home. Public guest reviews solved this problem.

User reviews are the new word of mouth. Nothing establishes buyer trust faster than a five-star review … and nothing scolds bad behavior like a one-star.

Building user reviews into your marketplace is a three-fold process.

Showcase Vendor Reviews

Buyers are conditioned to use reviews as part of their buying process. Research by customer service platform, Dixa, polled 3000 consumers and found that 93% read online reviews before making a purchase.

Reviews have become so powerful that their absence is enough to make buyers abandon cart. Another study found that 92% of consumers will hesitate to make a purchase if they don’t see a customer review at all. These stats show that reviews are almost as imperative to building trust as a vendor’s ability to deliver the goods.

Request Buyer Reviews After a Purchase

Collecting bad reviews isn’t what you want, but it’s most likely what you’ll get — even if poor experiences are rare. A whopping 95% will “shout from the rooftops” about a negative experience, but only 47% will spread the word about a positive experience. A vendor could be incredibly reliable, but if all buyers see is a diatribe on the one-time things went wrong, they likely won’t trust the vendor. How can you even out the scales?

Collecting good reviews is a process of frequent touchpoints and gentle nudging. “Your package has been delivered. Leave a review!” “Your ride has ended. Tell us how we did!” “Leave a review and get 10% off!” It’s your job as a marketplace operator to remind and even incentivize buyers to leave a review. If you don’t, you won’t just compromise buyers’ trust but also vendors.

Suppose the vendor only has negative reviews despite a silent history of positive transactions. If you fail to provide mechanisms to support vendors in soliciting positive reviews, the vendor might feel their reputation is becoming tarnished and lose trust in you as a supportive operator.

Enable Vendors to Rate Buyers

When vendors have to interact personally with buyers, operators can foster vendor trust by implementing a buyer rating system. Airbnb and Uber both allow vendors to rate buyers. This keeps buyers in check while protecting vendors from buyers with a history of poor interactions.

Tactic #3: Marketplace Vetting and Verification

Marketplaces that facilitate interactions where property, proprietary information, or safety are at stake, will benefit from vendor vetting and identity verification.

Verifying identities can protect both buyers and vendors since users can be tracked down and held accountable if they fail to uphold the service standard or violate your guidelines.

Depending on the level of scrutiny you require, identity checks can be performed via:

• Email address: If your goal is to ensure the user isn’t a bot, email validation is a low-effort way to ensure a user is a real person. This method isn’t foolproof — anyone can create a fake email address — but if you simply need to ensure the user is human, an email verification will suffice.
• SMS: Consider SMS verification a step above email verification. While SMS validation can’t 100% verify identity, it’s enough to confirm the account belongs to the user making the purchase.
• Address: Your particular use case might require you to confirm a physical address. Upon signing up, some marketplaces snail mail out a code. When received, the user inputs that code and gains access to the marketplace’s full feature set.
• Photo ID, like a passport or driver’s license: It’s not uncommon for marketplaces to request a photo ID, like a passport or driver’s license, to confirm the person’s profile and ID match. This verification used to require a human touch, but now some apps use AI to facilitate this process.
• Background check: Background checks might seem like a level of scrutiny that goes beyond the capabilities of a marketplace platform. We’re seeing new apps being developed that make it possible to automate background checks without having to hire staff.

If your Uber driver drives erratically, you go to Uber with your complaint, not the Uber driver. Remember, the vendors on your marketplace represent your brand, so it is important to vet vendors thoroughly. Some ways you can vet your vendors are:

• Certification verification: Some marketplaces may require vendors to submit additional proof of verfication. For example, a marketplace for personal trainers should ask for proof of a valid personal training certificate while a marketplace for therapists may need the therapists LPC license.
• Live interviews: Choosing your vendors wisely is vital — especially at the beginning of building your marketplace. Meeting your vendors in person or over video call can reduce the risk of onboarding a fraudulent vendor and allow the vendor to better understand your marketplace brand.
• KYC Checks: If your vendor is an individual, perform KYC (know your customer), AML (anti-money laundering), and anti-fraud checks. If your vendor is a business, perform KYV (know your vendor) or KYB (know your business) checks.

Tactic #4: Marketplace Protection

If your buyer doesn’t like it, can they return it? If it breaks after one year, do you offer a full refund? Forms of protection, like insurance, purchase protection, warranties, and guarantees, foster trust because they eliminate any risk of financial loss.

Insurance

If your marketplace requires vendors to put assets on the line, insurance gives them the confidence their asset is covered in the event of damage. Uber, for example, maintains commercial auto insurance on behalf of its drivers to help protect them in case of an accident while ridesharing on the Uber app.

Purchase Protection

Kind of like insurance, but for buyers. Purchase protection allows buyers to request a refund if they didn’t receive their order, the product arrived damaged, or the product delivered was different than the item described on the listing. In some regions, Facebook Marketplace offers purchase protection. Poshmark also protects its buyers through Posh Protect. Buyers must confirm they’ve received the item as described. Only then are the funds released to the vendor.

Warranties

Providing purchasers with a time-sensitive product warranty shows buyers that you back the products on your marketplace — even if you don’t manufacture the product yourself. Amazon offers warranties on its “Certified Refurbished” devices so that buyers can take the chance on the refurbished product but feel protected if the device is defective.

Returns and Guarantees

You know the phrase “Satisfaction guaranteed or your money back!” A good return policy goes the distance in creating trust for new buyers that might be wary about a purchase. Walmart gives buyers 90 days to return most items. There are a few cases where the box can’t be opened, but Walmart’s return policy is very forgiving for the most part.

Tactic #5: Marketplace Customer Service

Even when trust is lost, good customer service can restore it. A helping hand that’s accessible, prompt, transparent, and human when troubleshooting for users goes miles in retaining marketplace business and supply.

According to research by the Qualtrics XM Institute, almost 90% of customers report trusting a company whose service they rate as “very good,” and only 16% of those who give an “inferior” rating trust companies to the same degree.

So, what makes marketplace customer service “good”?

Support for Buyers and Sellers

For marketplaces, customer service means assisting both vendors and buyers with their inquiries. Both need to feel supported to keep the marketplace functioning seamlessly. Doordash has three support portals on its marketplace: one for customers, dashers (delivery), and merchants.

Immediacy

Hubspot research found that 90% of customers rate an “immediate” response as essential or very important when they have a customer service question.

Eliminating redundancy

No already frustrated user likes to tell the same story multiple times to multiple customer service associates. Hubspot’s report found that “repeating yourself” was tied with “waiting on hold” as the most frustrating aspect of customer service.

Resolution

We don’t need a stat to know that the happiest users have their concerns addressed, but here’s one anyway. KPMG reports that 90% of consumers worldwide consider “issue resolution” their most crucial customer service concern.

How a Marketplace Platform Should Facilitate Trust-building

Building a trustworthy marketplace is all about building trust into your marketplace platform. Your marketplace platform should support:

✓ Standards: Your marketplace platform should include features for vendor onboarding that automates the delivery, acknowledgment, or signature acquisition of SLAs, contracts, or terms of service for users. The platform should also automate the contract review process on the operator side.

✓ Reviews: Your marketplace platform should facilitate buyer reviews via your website and provide vendors with the option to respond and address reviews in their vendor backend. Marketplace platforms should also trigger automated emails or push notifications to prompt buyers to review their purchases.

✓ Identity verification: Your marketplace should integrate with apps built to verify identities, like Verifai and Stripe.

✓ Protection: Your marketplace should have built-in workflows for returns, both from an operational perspective (e.g., providing buyers with a shipping label) and an accounting perspective (e.g., returning funds to the buyer and reconciling funds with the vendor.)

✓ Delivery Updates: Your marketplace platform should allow vendors to easily update the marketplace operate and buyers with delivery timelines and updates. Delivering items on time will build trust for your marketplace.

✓ Customer service: Your marketplace platform should support plug-ins needed to connect to CRMs, chatbots, and support ticketing to provide users with the customer service to feel supported in their transactions.

A marketplace is only as good as it is trusted. By establishing marketplace standards, encouraging buyers and sellers to leave reviews, verifying the identity of users on your marketplace, offering purchase protection, and creating a strong customer service operation, you can build a trusted marketplace.

Building Trust on Your Multi-Vendor Marketplace was originally published in Nautical Commerce on Medium, where people are continuing the conversation by highlighting and responding to this story.