How We Build a Marketplace Part 1

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How We Build a Marketplace Part 1

Types of Marketplace


In this series we’re covering common topics that we encounter when we build or we’re advising on marketplaces. This post will be discussing common marketplace types, how to identify them and then use that information to build your requirements list.


The Private Marketplace


The Private Marketplace is the least invasive marketplace type. It can often be invisible to the customer other than through T&Cs, is commonly used when sourcing products entirely from a third party, and is often considered an evolution of the drop-shipping model.


The product catalogue is owned by the store front and suppliers create ‘listings’ against this catalogue. Typically this might be a one-to-one relationship where only one supplier supplies each product and commonly the original product data (descriptions, titles and attribution) comes from the supplier, but is managed by the store front.


We partnered with The Food Market  to build this style of marketplace. They chose to display on each product page, which merchant supplies the product with a brief synopsis on that supplier.


Hopefully you can see how this compares to the common drop-shipping model, however there are several key differences when deciding between this marketplace type and drop-shipping which we’ll discuss now.



Supplier by Supplier Headaches.


In a drop-ship operation, the store sources a product (or sometimes a selection of products when first launching a category), negotiates with the supplier, agrees terms, signs contracts and asks the supplier to send them product data that contains all the products that are required and then a regular feed of inventory and price to keep the site up-to-date.


As an aside, in our experience, different suppliers act in different ways when asked for stock and inventory data. When building’s marketplace (now Rakuten) one books supplier sent their entire product catalogue in an extremely large, multi-million row CSV file every Monday morning 5am prompt. They literally dumped their entire product and stock database into CSV and uploaded it – regardless of the actual changes in their stock versus’s levels.


Typically, the supplier already has a preferred file format and this means that one side (store or supplier) has to undergo a technical project (at cost!) to integrate with the new file type.


Repeat this over every supplier and not only does the integration cost not scale but the maintenance and support of the integrations quite often becomes a full-time job as well as being specific per supplier.


A marketplace turns this on its head.


You manage your fees and charges through the marketplace administration tools – not through ad hoc contracts. You don’t need Legal to review everything in order to on-board a supplier. You don’t need to consider the “Is this worth it?” question – if a supplier sends you only one product do you want to go to the expense of a contract? You don’t need to with a marketplace.


The marketplace configuration is synchronised with your catalogue and therefore you prescribe the format of attribution that a product should take to be eligible for submission from suppliers. You supply this format to the suppliers in standardised formats.  When building our marketplace software we recognised that some suppliers already use files formats commonly used on other marketplaces, so why not develop the capability to process those?  Imagine how much easier a conversation it is with a supplier to say “Do you already list on popular marketplace X?  If you do, send us that file and we’ll handle it.”


From the hard fought books anecdote described above, we designed our marketplace system to scale based on work-load. We know what goes wrong – we’ve been on the end of the support calls at 5am!



How Do You Move on From Drop-shipping?


You’ve set up your drop-shipping and your new vertical is flourishing.  You need more suppliers and more products.  Scaling a drop-shipping operation brings all the problems listed above, at scale.  A marketplace allows you to grow your business using the  systems that you already have in place.  You know how to operate a marketplace, you just on-board some more suppliers, upload their products and off you go.


Secondly, if you find that one of your new suppliers has one of your existing supplier supplied products at a cheaper price – how do you deal with that in drop-shipping?  With a marketplace you allow multiple listings against one product and the product can be sourced from two suppliers, you get stock depth and your customers are happy.


Hopefully you can see why we consider the marketplace model to be the evolution of drop-ship, and in most situation, is preferable, for a number of reasons. Your marketplace takes one step closer to becoming a catalogue based marketplace….



The Catalogue Marketplace


The Catalogue Marketplace takes all the advantages of the Private Marketplace and extends it to allow multiple suppliers to list against a single product. The products are still pre-defined by the store-front and the store-front controls the title, description, attributes etc. of the product.


The primary difference here are the changes that are required to the front end web-site that is required to reflect that a product can be purchased from more than one supplier.


Commonly, you will want to dedicate a separate ‘listings’ page or page area to list the offers for a product that detail a supplier’s prices, delivery costs, location, return policies and often seller ratings (think customer reviews against suppliers).


This is where a marketplace platform shines – the many-listings-to-one-product model requires a large amount of development to an existing e-commerce store so leveraging existing marketplace software makes sense.


It’s what it’s designed for.


This type of marketplace gives your customers choice, gives you stock depth and choice and also allows you the option of handing off returns issues and support calls back the supplier. If the customer knows that the product has come from supplier X, then it’s natural that the support issues should go to the supplier.


You need a marketplace platform that allows your suppliers to communicate these issues back to you.


You also need a marketplace  that allows you to manage all those suppliers and listings. You need to view SLAs on return rates, late deliveries, refunds and poor performing sellers. These things affect your brand and ultimately the customer’s trust in your brand, and whether they return to make more purchases.


Supplementary to this – you’ll need to consider how you on-board new supplier products into your catalogue. We’ll cover this in more detail in post 2 of the series.


As an example, for our Furniture Etc marketplace the team at Time Inc introduced a quality control workflow within their marketplace, whereby each product passes through a defined step of verification.  Is the description accurate, are the supplied images of the required quality, does the title provide the right level of detail, and so on.


Our marketplace platform takes care of those things. It resizes images, aggregates product information and allows a marketplace administrator transparent control over which products are accepted from a supplier and which are rejected.



The Craft Marketplace


The Craft Marketplace, also the Custom Marketplace is a free-form (largely) catalogue free marketplace. Think Ebay or Etsy.


The Catalogue Marketplace allows a supplier to create listings against a pre-defined, store-front managed catalogue, whereas the Craft Marketplace allows each listing to contain product information that is completely custom to that listing and product combination.


This is the model that we partnered with Time Inc to build for Furniture Etc.  Each piece of furniture is utterly bespoke.


Antique or custom items don’t fit into a catalogue, or at least it doesn’t make sense to add an item to a catalogue just to list it once!


This type of marketplace requires a different approach to a catalogue based marketplace.  By allowing suppliers to control what they list, you could end up with a front end site that looks a little bit more like a jumble sale than an e-commerce site.


To counter this, we prescribed to Furniture Etc suppliers a file format that has fixed attributes that are required to list on that marketplace. This allows us to control the front end experience whilst allowing the  supplier to be relatively free-form with the information they supply within the file formats criteria.


For example, some of the required information relates to title, price, delivery cost, description and availability. You typically must have this information for a product page so we enforce that that data must be supplied from a supplier file upload.


In our next blog post we’ll be covering products and catalogue and the product related challenges involved in running each type of marketplace.




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