The success of Amazon and eBay is not hidden from us. They have achieved success through innovativeness and technology. No supernatural power has done a magic here. They have opted for multivendor stores. Magento marketplace module is the one which is behind the success of eBay and Amazon.
The multivendor module comes with many advantages but also with challenges ahead. They offer really good e-commerce features. But as multi means many, it comes with many challenges also. Because it involves one store, many vendors and many customers under one roof.
Multivendor store earns through commissions which come from vendors. And instead, it saves vendor from taking care of many areas. It helps the vendor to focus on only products.
Need for Magento marketplace module
First and foremost question – when one can handle multiple clients at a time then what is the need of handling only one client and progressing very slow?
To open an online store, there are two categories to go for:
Warehouse: Here, an online store owner keeps all the sellable products under his/her warehouse and sells these products online to consumers. Here maintaining inventory is a big problem. Warehouse costs are huge and it affects the business badly.
Separate shops: Here, a separate shop owner launches his/her website. A consumer will go to the website for one product and if everything is suitable related to the product, then the consumer will give order for it. For one product, the customer has to go to different sites for quality, price check etc. and that means for buying different products would be a messy process for the customer. At the same time, the shop owner has to invest a lot in marketing for the strong customer base.
The Magento multivendor module is the best of both- warehouse and separate shop owners.
In Magento multivendor marketplace,
A vendor can create his account, add his/her personal details, add-delete-modify products, add discounts-offers, set payment options, set shipment for delivery, view reports for future projections and enhancements etc. A multivendor module takes care of e-commerce infrastructure and SEO thing, so client’s expenses are saved for these two categories.
A customer can view many products under one roof. For one product many – vendor options. Many prices and quality options would be there for one product. Customer’s time, money and energy are saved. The customer can choose many products from different vendors, add in a cart and at last pay for all the shopping.
A store owner can add-edit-delete products, decide commission systems, set payment methods, set shipping rates, view and change order status, add-delete-edit vendor details etc. A store owner earns a good revenue from the commission system depending on the membership of a vendor. A store owner doesn’t have to maintain a warehouse because it is handled at individual vendor’s place. So transportation and warehouse maintenance cost are saved here.
If many parties are involved in one business, then challenges also would be many.
–> Many vendors
Handling many vendors under one portal, it is a huge challenge. If one vendor is not performing, then it affects the whole store’s performance.
Technically, the inventory is not with the store. It is a vendor. But what vendor does with the quality of products, delivery, shipments, payments all are directly connected with the brand name of the store.
The Magento marketplace module’s commission system has different categories.
It is decided as per transaction of a product. Some amount is already decided as per transaction.
Every product is assigned to some category. Suppose a face cream order can give more commission than a book. According to the category, the commission is generated.
In the market, some products generate more revenues and thus become favorite amongst vendors and store owner. At the same time, some products generate less revenue. So different commission is decided for this kind of products.
Different commission for a different vendor. All the vendors are given different area and 10%, 30% type’s commission are decided by the store owner.
Sometimes subscription fee is charged when a vendor enrolled himself in a store. Vendors sometimes don’t have experience in the multi-vendor market. In such situations, they can opt for the membership. The store charges membership fees and in exchange provide its services. Amazon prime videos, Saavan.com, Wynk etc. all these charges membership fees to clients.
The store can take advertisement projects from other companies as well. In exchange, they give money. Also, the marketing related to feature products can also be done on the store itself. So marketing cost of own store product can be less. The sites which generate revenue from advertisement are the sites who sometimes give membership free also. Featured listing helps the sale of the product to be faster and less time-consuming. At the same time, by taking advance order profits can be booked before production.
Third party advertisement
There is one account name – the hosted AdSense account. This account allows Google ads only. They may be published on Google apps like YouTube, blog-spot only. One has to register a hosted AdSense account first. But marketplace owner should use only offers not advertisements on their e-commerce web application. The featured product can be given a direct link so that user can avail information regarding it directly.
So far, we understood the importance of Magento marketplace module, its benefits and challenges, its architecture, and the commission systems. This will enable you to decide for the strategies to set up an online store in order to be profitable.