Building a marketplace on Shopify: pros and cons
The number of online marketplaces has kept increasing over the past few years. Meanwhile, many ecommerce platforms are now offering solutions to launch a marketplace website.
Shopify is a popular platform for e-commerce websites, but what about marketplaces?
When talking about marketplaces, we need to differentiate ecommerce marketplaces from services marketplaces.
An e-commerce marketplace is an online platform where multiple sellers can offer physical products for sale to a broad customer base.
A service marketplace is an online platform where service providers offer their skills and services to customers.
In this article, we will start by defining marketplaces and their main functionalities; then we will go through the pros and cons of building a marketplace on Shopify.
Agenda
What is a marketplace?
What are marketplaces' main functionalities ?
What is Shopify?
Pros and cons of building a marketplace on Shopify
Alternatives to Shopify
Scaling a marketplace
An online marketplace is an online platform where multiple vendors, whether professionals or not, are selling their products or services.
A multi vendor marketplace offers many advantages for both parties. Buyers have access to a large variety of products or services and many different sellers, while professionals have access to a huge number of potential clients.
Examples of famous ecommerce marketplaces include Amazon, JD.com, Taobao, while we can quote Uber, Airbnb or Upwork as famous service marketplaces.
The popularity of marketplaces has hugely increased over the past few years, with more and more sellers and buyers shopping on marketplaces.
The number of companies starting to sell on marketplaces rose by 46% from 2020 to 2021 in Europe (Mirakl).
Marketplaces come with many different functionalities, among them:
Ratings and reviews have become pretty common on ecommerce platforms nowadays; but when you run a multi-vendor marketplace, it's especially crucial to implement a rating tool, as customers have access to multiple sellers and need to make a choice based on some criteria.
Besides ratings and reviews, it is now common to have a section dedicated to customers' questions; where other customers can directly respond.
One of the most important marketplace functionality.
Ecommerce marketplaces leverage search and discovery, which is a major tool to increase engagement and revenue.
But what exactly is search and discovery?
The search functionality in marketplaces allows users to locate specific items or services quickly by entering keywords or phrases.
The discovery functionality helps users explore and find products or services they might not have specifically searched for but may be interested in.
Search and discovery has many advantages for marketplaces: they include a better customer experience (easier to make a choice) and lower bounce rate, among others.
Filters are also a must-have functionality, and enable users to have a reduced list of services or products that match their preferences.
Vendor dashboards are a major tool in ecommerce marketplaces platforms.
That is where vendors can access their product listings, create new products, upload new content, create new pages (brand store on Amazon for example), manage orders, or even interact with clients through a live chat or a contact form.
Detailed analytics are essential on any e-commerce platform, and so is on a marketplace, as they provide vendors with insights into their performance and profitability. This information allows them to make informed decisions regarding their costs and pricing strategies.
Some of the most indicators a platform can provide include:
- Performance tracking
- Profitability insights
- Customer engagement
- Competitive benchmarking
- Inventory management
Shopify is an ecommerce builder that can be used by any business to build online store, or sell products on third-party marketplaces, through Shopify Connect. It is one of the world's most famous and used CMS.
Based on a study from Yoguara, 4.8 million online stores use Shopify as of 2024.
So, to what extent can someone build a marketplace using Shopify?
Shopify marketplace needs to be considered by anyone willing to build a marketplace, for it's a very powerful tool.
Shopify is a very intuitive platform, meaning vendors with little to no technology knowledge can easily use it.
Shopify marketplace connect is the tool that allows vendors to sell on multiple marketplaces, directly from Shopify!
Any vendor who wishes to use the app can do so, as there is no condition to use the platform.
While Shopify is a very good choice for e-commerce businesses selling physical products, it is less suited for service marketplaces due to its product-centric design. Shopify's core platform is indeed built around the sale of physical products, as it is optimized for functionalities like inventory management, product listings, variants, and shipping logistics.
We can also list the lack of built-in service-specific features as one major con for service marketplaces, which typically require specialized functionalities such as scheduling, complex payment structures, detailed service provider profiles, and which Shopify does not natively offer.
Shopify gives access to a broad variety of templates; however, customizing beyond them can be tricky for someone who does not have any technical skills. Besides, you might need to use multiple third-party apps for specific functionalities, which can increase the complexity or the marketplace that you are building.
Shopify is indeed primarily designed for single-vendor stores; which means that creating a multi-vendor marketplace might require significant customization. Moreover, it might also be complex to add advanced key features required on a marketplace: multi-vendor management, search and discovery, etc.
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