How to Build a Multi-Vendor Marketplace in Magento 2:

Everything You Need to Know

About Starting Your Own Marketplace in 2023

The success of e-commerce marketplaces like eBay, Alibaba, and Amazon stably demonstrates a tendency towards growth. It’s quite natural that such popularity has resulted in many people and businesses wanting to mimic their business model and trying to find out how to build a multi-vendor marketplace like eBay by growing similar e-commerce platforms within a variety of niches.

However, each successful multi-vendor e-commerce marketplace with millions of visitors per month is preceded by lots of work. From the development of an idea to its implementation, from compliance with technical requirements to smooth design and proper performance optimization – Whidegroup team has gone through all these stages with our clients while creating marketplaces for different e-commerce market niches and business models.

Want to create multi-vendor marketplace website? Then, start with reading this article. We did our best for you to get maximum practical advice and a huge portion of useful information that will help you in planning and developing a multi-vendor marketplace like eBay, Amazon, or even better.

What Is a Multi-Vendor Marketplace

For those who haven’t yet discovered what a multi-vendor marketplace is, we are going to clear it up. The vast majority of online stores operate on a simple and understandable principle. The merchants create their own single-seller platform where they sell goods. At the same time, business owner himself, or together with the team of specialists, is responsible for:

• Product supplies and availability
• Website uptime
• Content and product management within the platform
• Order management
• Website optimization
• Marketing and advertising
• Customer retention and attracting new clients to the store, etc.

In this case, the merchant receives the full value from the sold products, minus payment processing and operational costs.

How do Multi-vendor marketplaces differ from common online stores?

The major difference between a multi-vendor marketplace and a single-seller e-commerce store is that its main goal is to create a multi-functional e-commerce platform where multiple vendors can sell their products. Unlike with common e-commerce stores, the owner of a multi-vendor marketplace does not need to sell anything. Instead of that, the marketplace owner is responsible for:

• Smooth operation of the website
• Website moderation
• Marketing the platform
• Providing the maximum security for vendors and sellers, etc.

So while simple e-commerce stores include two entities, namely, seller and customer, multi-vendor marketplaces include three of them: vendor, customer, and admin (owner). Further, we will revise in more detail every vital feature for each of these entities. Now let’s find out what are the main advantages of creating a multi-vendor marketplace.

Reasons to Build a Multi-Vendor Marketplace in 2023

The e-commerce sphere moves forward every second, changing and mutating into various intricate forms. In case you’re still a bit hesitant, Whidegroup is here to guide you through these changes and showcase every benefit you can get after building a multi-vendor marketplace in 2023.

Attract more customers

You can invite various merchants and sellers to cooperate with you and sell their products on your marketplace. Therefore, your multi-vendor marketplace can offer a wider range of products, due to the multiplicity of the distributors. This way you can attract a bigger audience to your marketplace. A while after launching a multi-vendor marketplace, you’ll get an impressive customer database, because generally, marketplaces get more traffic than traditional e-commerce websites. Further, you can use the gathered customer data for, let’s say, building your new marketing strategy or advertising campaign.

Chance to turn your marketplace into a community

One of the major features of a multi-vendor marketplace is that it brings together offers from a wide range of suppliers and service providers. It’s quite natural that customers are more apt to use a platform with a broad range of options so they can choose their desired items without having to limit their choice to a single provider. This convenience also means they are more likely to come back to your marketplace. Hence, your marketplace will have a chance to turn into a sort of community – an online platform where customers and suppliers promote their goods and services and can communicate with each other. Consequently, for your purposes, it means more attention from a greater number of visitors, who may be interested in purchasing advertising space from you.

Easier promotion

Since vendors are not less interested in the promotion of their products than you, there is a high chance that they will do a greater part of marketing activities. It is in their interest to create optimized product cards, add high-quality photos and product descriptions, and do everything else that single-vendor e-commerce store owners usually do to attract new and retain existing customers. More of that, if you build a niche marketplace it will be much easier to target the right audience, which means more traffic, higher conversions, and consequently, higher income for you.

Why Create a Marketplace with Magento 2?

While searching for advice about the best platform to choose for building a marketplace, most probably you will be offered at least 5 different CMSs to consider. No doubt, every CMS has its pros and cons, be it its complexity, price, scalability, and so on. So to make the right choice, merchants should have a clear understanding of the business needs along with available timelines for the development and, of course, the estimated budget.

So, why is Magento 2 a perfect choice for building a multi-vendor marketplace? To answer this question we’ve analyzed every existing advantage of the platform. Although the platform has numerous advantages we’ve already told about in other articles, which you canfind by following our tutorial linked above. In this article we will stress the ones that are crucial for marketplaces.

High performance

The speed is a critical characteristic of any internet resource site, and it is especially vital for online stores and marketplaces. Any delay in processing user requests can slow down the e-commerce website’s potential to convert site visitors into customers. The Magento platform possesses high-end caching techniques such as Varnish, as well as other database optimization techniques which ensure error-free and timely results.

More than 50 payment gateways to offer

Magento multi-vendor marketplace is open source and supports an incredibly wide range of payment solutions and gateways that offer merchant services in all parts of the world. Unlike some payment solutions that transfer control to complete the transaction on another site, a payment gateway makes it possible for you to accept credit card payments directly at your store. In the event that you are not satisfied with the list of payment gateways provided, you still have the option to create Magento marketplace integration with other payment providers, using a Magento payment provider gateway.

Significant choice of extensions & modules

Presently, Magento has the largest selection of extensions. On Magento Marketplace you can easily find virtually any extension to expand the functionality of your marketplace. All extensions are thoroughly checked before being loaded to the marketplace. Extensions are sorted by categories such as marketing, customer support, accounting, payments, analytics, sales, website optimization, and shipping, thus making it hassle-free to find what you’re looking for.

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Ease of integrations

It’s all about integrations now, and we have good news for you – Magento is a partner with hundreds of Magento 2 marketplace software providers. Their cooperation is aimed to make integrations as easy as possible. There is a wide array of categories: starting with CRM, email, and migration tools, as well as social media marketing tools, back office, and shipping. The most popular options are SalesForce, Zendesk, MailChimp, PayPal, and Campaign Monitors.

Great community

Currently Magento’s army has more than 150,000 developers that work daily to continually improve the platform. And, according to CreativeMinds, Magento is used by more than 250,000 vendors, which means you’ll never be alone if you run into any issues with the platform. Further, Magento has a dedicated Q&A website, where sellers can ask for help. The community is extremely active, and you can rest assured that your every single question will receive an answer.

We could name about a dozen other advantages of the platform, but let’s better take a closer look at the most necessary marketplace features that can be easily implemented thanks to the platform’s flexibility and scalability.

Must-Have Features for the Magento Multi-Vendor Marketplace

As a complex structure, the multi-vendor marketplace has to offer features that make everybody’s interaction with it smooth and simple. So, let’s learn what aspects should be taken into account for the creation of a successful marketplace with Magento.

The successful operation, further development, and promotion of a marketplace platform depend on the contribution of three user groups, namely, vendors, customers, and administrator. So to make a simple online store become a prosperous marketplace, there is a set of specific features that must be implemented. Let’s dwell on the features required for each party.

Vendor features

Vendors, of course, are the first and most important part of any marketplace. No vendors selling on your platform – no customers buying from your platform. To attract vendors to sell on your platform, you should provide suitable and attractive conditions for using your services. The comfort and satisfaction of the seller will depend on the set of features available within the marketplace and ease of its usage.

So what are the vital vendor features?

Quick onboarding

This is the very first iteration with prospect sellers. Since entrepreneurs are always busy, you should make sure that vendors onboarding consists of a minimum number of steps to get to their vendor panel on the marketplace. The smaller – the better.

Easy product management

The easier it is to add and edit products on your marketplace, the faster and the more products the seller will be able to upload and sell. Most probably, your platform will be one of several marketplaces where vendors want to sell their products. Merchants often sell on several platforms at the same time (brand e-commerce stores, Amazon, Etsy, eBay, or other marketplaces). Therefore, vendors will highly appreciate it if you provide the functionality allowing the quick product import from other platforms.

Convenient order processing

New order/message notifications, opportunity to print packing slips, and package tracking – are must-have features. In this case, of course, a lot depends on how the purchase process is implemented, on the presence or absence of a single third-party shipping provider, and so on. But regardless of these variables, the order placing process and transaction concluding should be simple and fast for both the seller and the buyer.

Intuitive dashboard design

Sellers should have access to statistics that show the most vital data related to their store. So it is essential to create an understandable and easy-to-use dashboard for sellers to track traffic, sales, conversions, invoices, etc.

Listings promotion feature

Competition between different sellers on the platform is a must-have. Therefore, each of them should have the opportunity to stand out from the crowd of competitors and promote their products in different ways, be it discount campaigns, listing promotion, coupon codes distributing, and so on.

Communication between buyer and seller

The availability of Magento marketplace buyer seller chat significantly increases the experience of both parties (vendors and customers). Using chat, the customer can address the vendor directly to clarify any questions that arise and get a fast response from the seller who is highly interested in resolving any issues.

Need more details on the buyer-seller chat implementation process?

This is How We Did It for the Australian E-learning Marketplace

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Customer features

In turn, customers appreciate features that simplify the buyer’s journey and straightforward contact information. These are:

Advanced product search and filtering

Such functionality is not a novelty and we all know how important a clear search in the catalog pages is. Advanced search significantly improves the user experience and helps them quickly find the right products. Filters, in turn, help to sort all suitable products by price, popularity, rating, or sellers.

Smooth checkout

One-step checkout is the best option you can provide customers with. Everybody loves fast and smooth checkout flow. Good news is that there are numerous ways to implement a user-friendly one-step checkout in a Magento 2 multi-vendor marketplace.

Reliable order processing and tracking

This process should be completely transparent, as well as the buyer’s confidence in sellers should be unconditional. If sellers accept orders that they can’t fulfill or customers are not able to track the status of their order, this certainly pushes them away, and they are unlikely to come shopping on your marketplace again.

Buyer-seller chat

As we have already mentioned, the buyer-seller chat is vital. The possibility of direct communication with the seller several times increases the customer retention rate. Customers are much more likely to purchase from the stores where they can directly contact the seller and clarify any issues.

Customer login

Just like sellers, customers should be able to create their accounts quickly. After the first authorization, they should log in to their personal Magento marketplace account within just one click. However, the data security shouldn’t be underestimated, because it is a buyer’s account where all their personal information is stored.

User-friendly design

That’s it. There is nothing else to discuss. The importance of the website layout is being discussed here and there. Structure of the website must be easy to understand and navigate, otherwise, your visitors will not spend their time understanding how things work.

Vendor reviews & rating

The ability to leave feedback about the seller or quality of products bought from the seller is the main tool for building and gaining trust and understanding how reliable the vendor is. Additionally, not perfect or negative feedback incentivizes sellers to constantly improve the quality of their products and services.

Admin features

As for the marketplace administrator, they will just be happy to have a simple and easy-to-use interface that helps them deal with multiple vendors, a statistics dashboard and settings manager.

Marketplace operations management tools

This item includes various platform notifications, tools for setting up and moderating the catalog, as well as tools for tracking general statistics and monitoring other essential activities on the website. The ability to moderate reviews, new users and product publications are no less important for the marketplace admin.

SEO management tools

The platform must be SEO friendly. To gain more visibility website admins as well as vendors should have the possibility to apply search engine optimization techniques to promote the sellers’ products and the platform as a whole.

Multilingual/multi-currency support

If the marketplace is targeted to the global market, it must be available in multiple languages and support multi-currency payments.

Sufficient choice of payment options

The variety of payment gateways is growing every day. However, it is not necessary to integrate your marketplace with all of them. To start with, just select the most popular ones, taking into account the location of your potential customers and check the most used payment gateways in the chosen region.

High-level marketplace features

In addition to the above features, which are an integral part of any marketplace there are other non-essential ones, which can become an extra advantage and distinguish your site among competitors. So these features are nice-to-have and their implementation makes sense if you want madly to unify your platform and if your budget allows doing this:

• Customizable design for each vendor
• Maximum amount of payment gateways
• Standalone mobile app
• Third-party shipping providers integrations
• Multi-user access for vendors

In fact, this list goes on and on. The capabilities of the Magento marketplace can be limited only by your imagination and the knowledge of specialists who will work on the platform improvement.

How to Create an Online Marketplace Like eBay Step-by-Step

So now when you’ve already figured out every benefit of using Magento 2 platform to build your marketplace with, it’s time to switch to the process of starting a multi-vendor marketplace in more detail.

Find a niche for your marketplace

Creating a multi-vendor marketplace today is not an easy task. It is extremely difficult to compete with the market giants like Amazon and eBay because these marketplaces have long won the trust of millions of people around the world. As a beginner, you need to think through your strategy and unique value proposition for potential customers and vendors. Your proposition should look more profitable against the backdrop of constantly growing competition and be eligible to attract the early adopters right after the platform goes live.

The first thing to think about is choosing an e-commerce niche. An excellent plan would be to first choose a single narrow niche and a certain range of products and services to offer. Over time, you can start expanding the range of products inviting new vendors to collaborate and target a new audience.

Besides, defining a single business model will also significantly narrow the target audience and help you to easily market your platform on the web.

Choose a monetization strategy

Choosing a monetization strategy is one of the key factors determining the future success of any startup. If the project does not bring money, does not scale well, and is unstable in the long run, the business fails.

So here are several basic monetization strategies for the marketplace to choose from.

Commission fee

One of the most common ways to monetize a marketplace is to set a commission for each transaction. This model has three formats: the seller, the buyers, or both parties can be charged a commission.

Usually, marketplace vendors like to work on such conditions, because they are not charged any fee until they receive their first revenue through the platform. Marketplace owners also eagerly apply this model since it is beneficial for all parties and start bringing revenues from the very beginning of the marketplace operation. A commission fee monetization strategy is used on Airbnb, eBay, Uber and other well-known marketplaces.

However, under certain circumstances, such a monetization model may not be suitable and, instead of attracting clients, may push away both customers and sellers. The commission fee-based strategy should not be set if:

• 1. High-priced products, such as cars or real estate, are sold on the site.
• 2. There are many similar offers on the market without the need to pay a commission, therefore it is easier for your potential clients to go to your competitor and conclude a deal there.
• 3. It is difficult to set up a billing system. For example, a customer reserves a hotel room through the platform but pays in cash upon arriving at the hotel. In this case, it will be problematic to automate the process of proper commission calculation.
• 4. The topic of the marketplace does not provide any direct payments. This refers to job search and dating websites as well as resources where people exchange the goods and offer any services for free.

Listing fee

Marketplaces that aggregate a large number of listings are characterized by a listing fee monetization strategy. This strategy is similar to the one with paid advertising. This option works well in cases when the seller is willing to pay for access to a wide audience, and the platform can guarantee sufficient coverage.

Listing fee strategy can successfully work in the Magento B2B marketplace. The Mascus, a famous marketplace for selling construction, agricultural, and other specific equipment, has chosen this path. Here, vendors are not interested in the long term subscriptions since sales volumes are small. As a rule, participants are ready to sell just a few pieces of equipment. Therefore, charging for each ad is more attractive for them.

The main issue arising with this monetization strategy is that the listing fee does not guarantee a deal, so the price for such service shouldn’t be too high. Therefore, to obtain a stable income, you will need to attract a large pool of sellers who will regularly place new product listings. To do this, make sure your marketplace provides a sufficient number of benefits for the vendors.

Freemium

The essence of this strategy is that the consumer can enjoy the basic features of the marketplace for free, and pay for the advanced ones if needed. It differs from the trial version that provides users with free access for a limited time. Freemium allows you to use the main functions of the site without any restrictions. Paid services are a kind of reserve that a client may want to receive for more convenience or security.

The advantage of the freemium strategy is that it is much easier to attract an audience to a marketplace that provides its services for free. In addition, users are more likely to pay for additional services if they can first assess the capabilities of the basic offer.

However, to convince customers to use paid services, you need to make them really useful. If only 1% of users are interested in a premium offer and the rest use the free version, the model will not work effectively. Creating a truly valuable offer is not easy so often marketplaces use freemium as a source of additional revenue in combination with other monetization tactics.

Advertising

This strategy is used both as an independent strategy and in conjunction with other ones (the second case is more frequent). Marketplaces charge a fee for displaying ads with products or services on the homepage, at the top of search results, side blocks, etc. Visit Etsy or other popular multi-vendor marketplaces to see how the listing promotion can be successfully implemented.

This option works well for marketplaces with an already established base of sellers and customers. Startupers should postpone the idea of the strategy implementation or draw up a similar strategy in the form of an advantageous offer.

Membership/subscription fee

Membership is one of the most profitable ways to monetize a marketplace. The global exchange economy (shared consumption economics) relies on numerous businesses that generate profits through subscription fees.

Gartner, all startups and about 80% of existing businesses in the software market will implement a subscription-based monetization strategy.

Charging vendors on a regular basis is a great way to generate profit and support the development of your marketplace. Here is the subscription rule #1 – make sure that sellers’ revenue is higher than the subscription costs your platform charges them monthly.

They will be ready to pay $19.99 per month for a subscription if they can generate $199.99 per month in net profit using your platform.

On the other hand, the subscription is more difficult to implement from a technical point of view. You will need a stripe-type of payment gateway that supports subscription payments. However, at the early stages of operation, you can send payment invoices on a monthly basis manually, but the more vendors subscribe, the less viable such approach will become.

The complexity of implementing a subscription-based strategy pays off with the result that it gives. Combine this approach with implementing several vendor groups and scalable levels of access to the platform features, add advantageous features to the premium subscription plan, and get a stable source of regular income.

Underline

Unfortunately, a universal monetization strategy that is effective for all marketplaces does not exist. The commission fee strategy is considered the most profitable and scalable, but even it does not always work. At the same time, the freemium model allows you to quickly attract a wide audience, which is especially important in the early stages but, anyway, does not guarantee sufficient revenues.

A more rational approach is to take a single strategy as a basis and, with the platform growth, combine it with other methods of monetization. Thus, you can scale your revenue model step-by-step and finally find a combination suitable for your particular platform.

Choose the best Magento 2 marketplace extension

The most reasonable way to create marketplace with Magento 2 is to leverage one of the numerous Magento 2 marketplace extensions. However, it can be a bit of a challenge to find the one most suitable for you and your business as some Magento multi-vendor store extensions are simple enough, while others require qualified specialist involvement to do custom development. The latter option is more likely since in most cases marketplace multi-vendor module integration needs serious professional assistance. Below, you can find the most widespread extensions used to create an online marketplace like eBay with Magento, and some of their most prominent features.

The most popular Magento Marketplace extensions

How to choose the one

Speaking about the functionality of each described Magento 2 multi-vendor module, we only touched the tip of the iceberg. Most of them are similar in functionality but still have differences. Therefore, the final decision should always be made depending on the individual requirements for the stack of the Magento 2 marketplace must-have features.

Besides, every Magento multi-seller marketplace extension provider gives the possibility to test their modules in action. So, before purchasing the extension you can easily request a Magento multi-vendor marketplace demo of both frontend and backend.

Multi-vendor marketplace Magento theme: custom vs template

The design is vital for everyone engaged in the marketplace. After all, a website’s design is the first thing a user sees, and a simple, slick, clean design helps the vendor manage their store without difficulty.

When it comes to Magento Marketplace design – there are two ways to go about it: you can ask for help from a professional designer or even a team, or you can choose one of ready-made responsive Magento 2 multi-vendor marketplace themes, narrowly designed for use with the Magento e-commerce platform. Both are good options to make a Magento multi-vendor marketplace. However, both also have their differences in usage.

It’s true that Magento marketplace theme templates are easy to apply for non-tech savvy people. So if you intend to set-up and manage the platform by yourself, are short on budget, and are not going to customize the template, it is a good solution for a reasonable price. It will be pretty easy to find a beautiful responsive theme created specifically for Magento 2 marketplaces. You may start your search for the perfect one from reviewing the following templates:

Mag2 Marketplace

Mag2 provides 3 unique modern home page designs (similar to eBay, Lazada and Amazon designs), and more than 20 pages that can be included on your site. Products can be represented in both grid and list view styles. This theme is also easily customized, and responsive – fitted to look good on any screen resolution. You can change images, choose to showcase “hot deal” products or promote new and best seller product sections.

Shiny – Responsive Magento 2 Marketplace Theme

This multipurpose responsive theme offers such features as Ajax Layered Navigation, Mega Menu, and Image Slider. Ajax Cart helps buyers to purchase more quickly and efficiently. Shiny Magento 2 multi-vendor theme also boasts the availability of multi-currency and multi-language use and has brands slider and product hover effects. Its most prominent features are social media login and recently-viewed products.

Torano – Supermarket Marketplace Magento 2 Theme

Torano is considered to be the perfect choice to sell anything from electronics to organics, shoes, garden tools, and everything else you might imagine. Its sticky Add to Cart encourages customers to take the desired action in any moment at any position of the page. It increases the likelihood that the visitor will add an item to the cart.

In general, theme templates are good to go, because they all are as much customizable as the Magento 2 platform itself. However, having vast experience in customizing Magento theme templates, we do not recommend installing them in order to make significant changes to the design or customize the layout later. This always entails more time for the customizations development and implementation than the design development from scratch.

Custom design development is good if you want only unique design for your website. It is possible to create virtually any desired set of design features and impart a deeply exclusive appearance. However, it requires qualified designer assistance.

Multi-Vendor E-commerce Website Development Cost

When it comes to the cost to build a Magento website like eBay, the answer isn’t readily obvious. Instead, you have to do a little research to get there. For this, first, you need to understand the timelines of all development steps and estimate the cost of implementing them. Don’t worry, we’re here to help! First, consider that it is an hourly rate that influences the cost of a custom Magento 2 marketplace development.

Every company is free to set its own Magento Marketplace pricing. In order to know the accurate rates, you need to contact each company directly. For you to be able to navigate the prices at least a little, we will try to determine the minimum, maximum and mediocre rates that you should expect from Magento development companies from around the world.

First, take a look at the graph below:

What are these rates based on?

• 1. Size of the development company. Rates depend strongly on the size of the team intended to provide you with web development. Generally speaking, all existing companies can be subdivided into three groups. These are: mediocre web development teams that take virtually any kind of job; boutique digital companies – companies with specific specialization and professional references, and big-name digital consultants – eminent companies with a wide range of services that are often expensive due to the “brand,” but don’t necessarily provide top-quality service.
• 2. Geographical location. Hourly rates also depend on the location of the development team or specialist. For example, developers from Canada, the USA, and Western Europe charge on average $100-200 per hour. Specialists based in Eastern Europe and Asia, charge about $40-100 and $18-40 respectively.

In order to give at least an approximate estimation of the project timelines, we need to accurately understand the following:

• Your requirements to the marketplace features
• The number of customizations to be developed and implemented
• Whether you need a custom design or want to use a theme template

As for the average time estimation, we offer you to revise the minimum and maximum number of hours required to build an average multi-vendor marketplace without complicated customizations.

So as you can see, a Magento multi-vendor store development can take from 205 to 880 hours. To get more precise estimation you can contact us directly and after the free discovery interview we will provide you with our estimation for the project.

Final Thoughts

In this article we’ve considered the question of how to create a multi-vendor marketplace website. Creating an online marketplace is an opportunity to enhance or even dramatically change an existing business model – for the better. Whether you’ve started to create your own marketplace, or are trying to understand the value of doing so, consider the marketplace as a way to create sustainable & profitable growth, differentiate your business, improve your customer experience, and accelerate your e-commerce to new heights.

Building a multi-vendor marketplace platform can be quite challenging, but it certainly justifies the expenditure of effort. With many modern solutions like extensions and plugins, the process becomes smoother and easier. Undoubtedly, now is the right moment for you to grab the chance and implement this profitable e-commerce model in your business. If you’ve made up your mind, or perhaps are still hesitating – drop us a line!