Single Vendor vs Multi-Vendor Marketplaces – Find the Right Fit For Your Business
Single Vendor vs Multi-Vendor Marketplaces – Find the Right Fit For Your Business
Online stores have slowly become an integral part of the purchase process. They have become a powerful tool for brands who want to grow economically and reach a bigger audience. If a brand can come up with the right strategy for their product, supplement that with a decent knowledge of the audience, they can very well establish an e-commerce model that will generate huge revenues.
Before shifting to an online model, one big hurdle that a brand needs to cross is to establish whether they want to sell their products through their own online store or become a part of an already established e-commerce model. The brands that decide to have their own store can be classified as single vendors and the ones that join an already established marketplace can be called a multi-vendor marketplace. If you are new to the market, it can be tricky to decide which one to choose. To make their decision easier, we have prepared an extensive explanation of both the models, which will help you decide which one is the right fit for your business.
Single Vendor Model
This model generally represents a brand that has its own website where only the brand sells its products. Hence, various customers come to the website only to buy products from a single vendor. The single-vendor model involves two parties, one is the company i.e. seller and the other is the customer i.e. buyer.
A single vendor model is popular for brands that want to sell their own stock exclusively to their audience without any mediator. Hence, under this model the company is responsible for sourcing the products/manufacturing them, storing and then distributing the items as and when the sale happens. This also means that the company receives the selling price completely. Single vendor marketplaces are also known as Stand-Alone websites.
Features of a Single Vendor Model
- A Single vendor model has one seller who caters to all the buyers, hence he can build a strong relationship with the customers
- Range of products– A single sellers can never cater to all the diverse needs of its customers, hence a single vendor marketplace generally offers a limited range of products
- Better system of ordering- When only one supplier is involved, it becomes easier to incorporate systems and order items
- Optimized Workflows– With a single-vendor model, coordination, supply, and communication become easier. You are mostly just working with people from your own company which makes it easier to communicate.
- Entry into the market– Single vendors can easily enter the market because they already have the knowledge of the business and all they need to do is take the business online.
- Products managed by the vendor– The vendor has complete knowledge of the products they are selling and hence it becomes easier to manage the same. The company has complete knowledge of the stocks they have along with what’s sold out or no more in demand and hence, product lists can be altered accordingly.
Drawbacks of the Model
- Finding the right contractor– Building an online store requires a contactor or middleman who has enough knowledge and can build a platform for you. It can sometimes become difficult to find the right agency in your specific niche that is willing to fulfill your needs at the price you are willing to pay
- Limited resources- Multi-vendor marketplaces have the advantage of having a third party managing the platform, this multiplies the resources and makes it easy for the company to build a platform. Whereas, single vendors don’t have the same advantage.
- Contractor risk- With single vendor models, having one contactor can sometimes become a problem
A few examples of the single vendor business model include Veromoda, Kaekoo, Coal and Canary, and Cloth Face Mask.
Multi-Vendor Marketplace Model
In comparison to single vendor models, a multi-vendor model is an online store that sells products from different sellers. Under this model, many sellers come together to sell their goods via a common store. Hence, a multi-vendor marketplace is a system where multiple sellers come together to display and sell their products with the help of an administrator i.e. the mediator. Because multiple sellers are involved, this means there is a chance for producing higher profit margins. These marketplaces give the customer a chance to buy products from different sellers under the same roof which saves them time and energy.
Imagine if you were going to the mall to buy a pair of jeans, now instead of going to 5 different brands to select the perfect pair, you can just go to a single store and still get the same level of choices. The multi-vendor marketplace makes this possible. A few industries where these marketplaces are common include the grocery industry, service industry, and food delivery industry.
Under this model, there are three entities involved, these are- the vendor, the customer, and the admin. The platform where these products are sold is managed by the admin
Features of the Multi-Vendor Model
- Economy of large scale- A multi-vendor marketplace has multiple vendors and hence multiple transactions take place in a day. This allows the marketplace to earn profit from one seller or the other.
- Overcoming Fluctuations- We can see demand fluctuations for various products sold over different periods. But the fact that this model has multiple vendors makes sure that these fluctuations can be controlled as product volumes can be adjusted
- Expertise levels- The admin under this model is generally an expert in design and development. This ensures that the website or the app is functioning well and is continuously updated with the help of constant feedback from the team.
- Increased variety of products- Selling products from multiple vendors means variety in products. This makes sure that the platform doesn’t have to depend on a particular vendor.
- Best option for smaller enterprises- Small and medium-sized enterprises do not have the same resources as large brands, hence they might not want to go towards the single vendor route. The single-vendor model puts a lot of responsibility and risks on the sellers, which can be minimized using a multi-vendor model
Drawbacks of the Model
- Administrative Issues- This model requires seamless integration between different parties. Additionally, there are multiple online interfaces involved, this makes it difficult in case of any issues with tasks and processes.
- High costs- This model requires higher costs when it comes to negotiating with different vendors.
- Integration issues- Different components of the product are developed and maintained by different teams, hence integration becomes tricky. These issues can cause additional costs and efforts for the enterprise.
Examples of the multi-vendor business model can be seen in various industries, some of these include:
Products: Amazon, eBay, Flipkart, Etsy, Walmart
Rental space: Airbnb, Trivago
Travel: Kayak, Skyscanner, Just fly
Hyperlocal: Practo, Grofers, Uber, Postmates
Service industry: Upwork, Fiver
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Differences Between the Models
Both of the above mentioned models have their own advantages as well as drawbacks. While one might be more suited for one brand, another brand might prefer option two. We have listed a few major differences between the two, these will help make your decision even clearer.
- Risk Factor- If you want to target a bigger audience, you might also have to face the risk associated with it. While multi-vendor marketplaces will provide you with a higher-growth opportunity, you will also have lesser control over your products and their sale. If you want to have a lesser risk, you can have your own online store as you will get to take the responsibility of handling your inventory, storage, and shipments. On the other hand, if you don’t want to have a high initial investment, the multi-vendor option is the way to go but you might have to handle additional risks.
- Web/App Interface- e-commerce single-vendor sites generally have a simple interface in comparison to multi-vendors. This is because marketplaces have a huge variety of products as well as sellers. This makes choosing a product difficult, the same also involves more steps. Variables such as location, store preference, additional filters have to be added to a multi-store model. Selecting products from just one brand will obviously be easier and faster.
- Development Costs- Although both models require a certain level of investment in design and development, a multi-vendor marketplace will usually cost more. A basic single-store website is comparatively cheaper as there are fewer functionalities and features to be added. On the other hand, a marketplace like Etsy has a more complex interface and hence has higher development costs. There are also multiple platforms under this model which only adds to the costs.
- Revenue Streams- Single-store models don’t have intermediaries and hence the vendor receives the entire sales amount, on the other hand, marketplace owners receive a much lower margin. In the case of a marketplace, the owner’s revenue can come in the form of commission, subscription fee, marketing fee, value-added benefits, etc. The most common way for a marketplace to earn higher revenue is by increasing its sale volumes
- Transaction model- Both these models require a payment system to be put in place. The payment system of a single store can be simple because the money is transferred from the buyer to the vendor. The marketplace on the other hand requires a more sophisticated system that allows money to be split between the parties and also allows delivery persons to receive the tips they’ve earned.
- Traffic Volume- Multi-vendor marketplace will mostly enjoy higher traffic. This is because the platform has multiple brands, which means it can target a wider audience.
- Scalability- Scaling a multi-vendor marketplace is easier as it just requires the owner to add on a few more diverse brands to the store. Single-vendor modes on the other hand need to create a new stream of revenue if they want to scale their business, which might take more time and effort.
- Availability of alternatives- Multi-vendor customers get to browse from a plethora of product choices and hence get a wider choice of alternatives. This allows customers to easily switch between products and find the best one for them, it also keeps them on the platform for longer. A single store will have limitations when it comes to offering choices, hence if customers don’t get satisfied with the products of the brand, they might leave the platform.
- Procurement- Procurement is easier when it comes to single-vendors because the vendor is basically the owner of the products.
When it comes to opening your own online store, you might have to see what your competitors are doing. You might also want to see the major difference between the models, compare your brand to what these models have to offer, and align your requirements with what suits best for you. Hopefully, this article can help you do just that. You might also want to keep certain factors like the level of control you want to have, the investment you can afford, expertise you have, and then make an informed decision. We hope you take the right decision.
Frequently Asked Questions (FAQs)
A1) Some platforms that follow the Single Vendor Marketplace model are Kaekoo, Veromoda, Cloth Face Mask etc.
Q2) What are some platforms that follow the Multi Vendor Marketplace model?
A2) This is a famous model and has been adopted by the likes of Amazon, Ebay, Airbnb, Uber , Grofers and Fiver among others.
A3) You can decide which model to follow on the basis of various factors like competitors research, budget, your requirements, etc. By considering these factors you can determine which model suits best for your business.