Marketplace Extension: A Comprehensive Guide to Expanding Your E-commerce Business

According to a McKinsey report, nearly 20 percent of global sales in 2021 came from online purchases. By 2025, almost a quarter of all international sales are expected to be made online. Many of these transactions occur on marketplaces such as Amazon, eBay, etc. So, how can your business claim a share of this growing opportunity? 

Extend your store into a Marketplace. 

Unlike standalone e-commerce platforms that rely solely on in-house inventory, marketplaces enable diverse offerings through third-party sellers.

What is a Marketplace Extension?

Marketplace extension enables an existing e-commerce platform to onboard third-party sellers and sell their products. It’s a shift from selling only your products to facilitating an ecosystem where your business sells third-party products alongside your first-party products, diversifying your offerings and driving growth.

Will this make my e-commerce business like Amazon?

No. Marketplace extensions like Marketplacer allow your business to onboard sellers, and ingest and display relevant products. Unlike Amazon, which is a “one-stop shopping mall,” this approach helps maintain your brand’s integrity. Ensuring that the offerings remain relevant to your target audience prevents potential dilution of your brand’s identity in the marketplace.

Why is it Strategically Important?

• Increased Revenue: Unlock new  income streams from commission and vendor subscriptions, diversifying your revenue model
• Enhanced Customer Retention: Keep your customers engaged by offering a broader range of products and ensuring they return to your store.
• Competitive Edge: Stay ahead of the curve by adopting a business model that meets global consumer preferences and positions your brand as innovative in a rapidly evolving market.  

Benefits of Adding Marketplace Functionality

Transforming an e-commerce platform into a marketplace delivers significant advantages for the marketplace operator and its users. Below, we break down the most impactful benefits:

1. Diversification of Revenue Streams

Adding third-party vendors allows your business to earn commissions on every sale, creating an additional income stream. This model reduces reliance on a single product line or category, ensuring consistent revenue even during market fluctuations.

• In the first quarter of 2024, third-party sellers represented 61% of paid units sold on Amazon’s platform, highlighting the profitability of marketplace models.

2. Broader Product Offerings

By allowing external vendors to list their products, your platform can offer a variety that would be impossible to achieve with in-house inventory alone. This diversity appeals to a broader audience and meets different customer needs.

• According to a journal published by Oladimeji, M. S. and Udosen, noted that the benefits of diversification outweigh the costs. Thus, diversification has a positive effect on an organization’s performance.

3. Enhanced Customer Experience

Customers benefit from the convenience of shopping for multiple products in one place.

• According to Bain and Company, Increasing customer retention rates by just 5% can increase profits by between 25% and 95%. 

4. Scalability and International Reach

Marketplaces are inherently scalable. With the right tools, you can integrate vendors from across the globe, tapping into new markets and diversifying your audience.

Additional Resource: Benefits of Extending Your Ecommerce Store into a Marketplace

Building a Marketplace vs. Extending an E-Commerce Store into a Marketplace

Now that you’ve explored the numerous advantages of adopting a marketplace strategy, you may find yourself asking, “Where do I begin?” Specifically, you might be considering whether to develop an entirely new marketplace from scratch or to enhance and expand your existing e-commerce storefront to incorporate marketplace features.

To help you make a more informed decision, below is a comparison between building a new marketplace and extending your current e-commerce platform. This will guide you in determining the best approach for your business objectives.

	Advantages	Challenges
Building From Scratch	Complete Customization – You control what features you like and don’t need. No Legacy Systems to Worry About – No issues with compatibility with new and old technologies.	High initial development costs. Longer time-to-market due to the complexity of building core functionalities, including the front-end/customer experience. Building an Audience: Establishing a marketplace from scratch requires attracting both buyers and sellers, a process that can be time-consuming and costly. Building Trust and Credibility: New marketplaces often struggle to establish trust with customers and sellers. Reputation-building through reviews, secure payment systems, and customer support is essential but can take time.
Extending Current Platform	Faster implementation and time-to-market can be achieved by integrating the marketplace software into the existing e-commerce platform. Cost Effective – Integrating marketplace software can provide significant cost efficiencies compared to building a marketplace from scratch, Leverage existing networks and partnerships, such as payment processors, logistics providers, and suppliers.  Strong Partnership Existing Audience	Tech Stack Compatibility – There may be compatibility issues with integration. Transition Disruption

How to Extend an E-Commerce Platform

Step 1: Assess Your Platform’s Readiness

The first crucial step in this transition is to evaluate whether your current e-commerce platform possesses the necessary capabilities to support marketplace functionalities. Consider the following key questions and areas during your assessment:

• Can the platform handle increased traffic?
• Does it support APIs and middleware for third-party tool integration?
• Does your platform meet the security requirements for international e-commerce?

Scalability: Ensure your current platform can handle the expected rise in traffic. Make sure your hosting service can scale up as your store visits grow.

Integration Capabilities: Examine the platform’s capability to integrate with external systems via Application Programming Interfaces (APIs) and middleware. 

Security and Compliance: Ensure that your platform adheres to industry standards for data protection and transaction security. 

• Review relevant regulations:
  • General Data Protection Regulation (GDPR)
  • Payment Card Industry Data Security Standard (PCI DSS)
• Verify advanced security measures:
  • SSL certificates
  • Data encryption
  • Secure authentication processes
• Ensure protection of user information:
  • Implement strong data protection strategies
  • Regularly update security protocols

Step 2: Choose the Right Marketplace Platform

Choosing the right marketplace platform for your business depends on your business size, budget, operational complexity, and the capabilities of your current platform. However, here are some things you should consider before partnering with a marketplace solution.

Must-Have Features:

1. Integration Capabilities: Supports APIs and middleware for integration with third-party tools and services, ensuring flexibility and scalability.
2. Scalability: The platform should be able to scale efficiently as the transaction volume grows without performance degradation.
3. Vendor Management Tools: Features for seller onboarding, inventory management, performance tracking, commission calculation, and payouts to ensure strong vendor relationships.
4. Product Catalog Integration: Seamless product imports from third-party sellers through a variety of methods, including native pre-built integrations, API, and manual.
5. Security and Compliance Features: Security measures are crucial for transaction safety and the protection of sensitive data. This includes secure payment processing, data encryption, user authentication and access control, regulatory compliance, fraud detection, and prevention, as well as backup and disaster recovery.
6. Analytics Dashboard: Insights into marketplace and vendor performance, sales trends, and customer behavior, helping operators make data-driven decisions.

Good-to-Have Features:

7. AI-Powered Tools: Such as AI powered product mapping and descriptions.
8. Marketing Tools: Integrations with Retail Media
9. Customization: Flexibility to tailor the platform to your specific business model.

Platform Connectors

When considering integrators, ensure the marketplace platform has an extension solution to connect to your existing platform. At Marketplacer, we offer six prebuilt connectors for various platforms, including an API for custom-built systems.

1. Connected via API: Connected integration allows any e-commerce platform to integrate with Marketplacer via API.
2. Magento 2 / Adobe Commerce Cloud: Integrate third-party products into your Adobe Commerce Cloud or Magento 2 store, expanding your product offerings.
3. Big Commerce Connector: Empower third-party sellers to list and sell their products directly on your BigCommerce storefront, enhancing your marketplace capabilities.
4. commercetools Connector: commerce tools customers can harness the flexible, feature-rich Marketplacer platform to connect to 3rd party sellers and suppliers, offering greater flexibility in managing product listings.
5. Salesforce Connector: SFCC connector ensures you keep all the capabilities of Salesforce Commerce Cloud while leveraging Marketplacer to expand your product and category range, achieving an endless aisle experience.
6. Shopify Connector: Simplify the integration process by syncing product data from new sellers to Shopify, streamlining the addition of third-party products.

Step 3: Find Your Sellers

Once you have selected your marketplace software and integrated your platform, you may wonder how to attract third-party vendors to supply your marketplace.

Fortunately, at Marketplacer, we have a solution that simplifies the process. We offer an extensive seller community featuring thousands of vetted sellers from around the globe. This community makes it easy for you to discover and onboard new sellers and add their products to your catalog. 

You can also integrate your existing sellers into the platform seamlessly. If you’re looking to expand further, here are some tips for finding and onboarding sellers to your marketplace:

Areas to Look For:

• Leverage existing networks
• Attend Industry events and trade shows
• Online forums, marketplaces, and directories.
• Social Media and Online Advertising 
• Trade publications

Ways to Attract Vendors to Signup:

• Craft a compelling value proposition for them to sell on your platform.
• Offer incentives such as discounts or deals to early adopters.
• Highlight market exposure
• Provide a seamless onboarding experience from registration to product ingestion and enablement.
• Cultivate exclusivity: communicate that you only accept the very best suppliers.

Step 4: Launch and Test the Marketplace Functionality

Marketplacer’s onboarding program offers a streamlined approach to quickly launch and grow your marketplace. Here’s a summary of the key steps in the process:

1. Marketplacer Onboarding: The journey begins with a welcome session that covers inclusions, support, documentation, and an onboarding questionnaire.

2. Environment Setup: Customers gain access to pre-configured production, staging, and sandbox environments, complete with standard global taxonomy and best practice configurations.

3. Training: A focused training session covers essential topics like environment access, marketplace rules, order lifecycle, and seller onboarding. Additional self-service resources are available for ongoing learning.

4. Seller Strategy and onboarding: The program includes guidance on seller recruitment and onboarding, with sample agreements and a seller playbook to jumpstart the process.

5. Platform Customization: Operators have the flexibility to tailor the platform to meet your unique business needs, creating an environment that perfectly aligns with their business requirements.

6. Readiness Review: Prior to launch, Marketplacer conducts a thorough review, including a configuration audit and checklist to ensure long-term success.

7. Go Live and Growth: After launch, customers can take advantage of optional services and premium support for accelerated growth.

This program is designed to provide a quick and easy approach to marketplace setup, with a focus on speed to market.

👉 More of this on: How Will Marketplacer Launch Your Marketplace

Tips for Transitioning to a Marketplace Model

While the benefits are clear, transitioning to a marketplace comes with challenges in each phase and step. Some of these challenges you might experience would be:

1. Technical Complexity includes challenges like integration, scalability, and migration.
2. Operational Challenges involving seller onboarding and management, pricing coordination, and enhancing customer experience.
3. Legal and Compliance Challenges encompassing vendor agreements, taxation, regulations, and policies.

👉 Check out our Tips for Marking Your Marketplace a Success

Overcoming These Challenges

Our delivery team has helped to implement over 100 online marketplaces over the last 3 years. Here are some of the tips from our team and customers.

1. Collaborate with Marketplacer’s Certified Integrators:  Work with a Marketplacer-certified implementation partner. They understand the platform and how it best integrates with your e-commerce platform, 
2. Start with a Minimal Viable Marketplace (MVM): Launch with core features and a small vendor pool to test and refine processes. Set goals for how many sellers to launch with and expand as you grow. Onboarding too many sellers before launching may cause delays.
3. Clear Policies and Training: Develop transparent vendor agreements and offer training to ensure smooth onboarding and ongoing operations.
4. Qualify Sellers: Work with experienced e-commerce sellers initially. This ensures a better customer experience and an efficient seller onboarding phase.
5. Robust Technology Infrastructure: Invest in scalable, secure, and flexible technology that can grow with the business.
6. Analytics-Driven Decisions: Use data insights to monitor performance and identify areas for improvement. 

Examples of Successful Marketplace Extensions

Everyday Market from Woolworths

Everyday Market from Woolworths is meeting Australia’s insatiable appetite for online shopping.

• 40 third-party sellers were onboarded within 6 months after launching.
• Grocery adjacent categories such as toys, homewares & electronics have outperformed expectations. Customers provided positive feedback about their ability to shop multiple categories alongside the groceries.
• Over 20% of Everyday Market shoppers are new to Woolworths’s eCommerce offering.
• Customers shopping for both Everyday Market and Woolworths eCom items have a higher combined $AOV than those who shop for just one category of product.

“Marketplacer has enabled Woolworths to create a curated marketplace that features a growing array of quality products which customers can purchase as easily as their weekly groceries.” – Mark Mansour, GM – Everyday Market from Woolworths

👉 Read More: Case Study – Everyday Market by Woolworths

Barbeques Galore Outdoor Living Marketplace

Founded in Silverwater, NSW, in 1977, Barbeques Galore is a familiar fixture in homemaker centers across Australia. From humble beginnings in the founder’s garage, it has grown into Australia’s premier outdoor entertainment retailer, with a national network of more than 85 stores and a team of around 500 staff.

• Barbeques Galore’s range tripled in size without additional investment in stock, warehousing, and logistics.
• Barbeques Galore has successfully boosted its turnover by breaking into exciting new market segments.

“We needed to upgrade our website and expand our range to present an even more compelling offer to our customers. Marketplacer has given us the ability and the technology to create a more complete destination for everything in the backyard. The Barbeques Galore online marketplace lets us offer customers all the things they need to make the most of Australia’s Great Outdoors lifestyle.” – Angus McDonald, CEO – Barbeque Galore

👉 Read More: Case Study – Barbeques Galore Marketplace

Conclusion: Extend Your Current E-commerce Business into a Marketplace

Transitioning from a traditional e-commerce platform to a marketplace model is a transformative step for any business. While it comes with some challenges, the opportunities for growth, scalability, and customer engagement far outweigh the obstacles when approached strategically. Let’s revisit the key points covered throughout this guide:

Key Points:

1. The Strategic Importance of Marketplace Extension
   • Extending your e-commerce platform into a marketplace opens doors to diversified revenue streams, increased scalability, and enhanced customer retention.
   • With marketplaces projected to dominate 60% of global online sales by 2025, this model is not just a competitive advantage but a necessity for long-term success.
2. Benefits of the Marketplace Model
   • Revenue Diversification: Earn commissions, subscription fees, or advertising revenue from third-party vendors.
   • Broader Offerings: Enhance product variety to attract and retain a broader customer base.
   • Scalability: Expand internationally and adapt to market demands with ease.
3. Marketplace vs. Building from Scratch
   • Building from Scratch: Offers complete customization but comes with higher development costs and longer time-to-market.
   • Extending an Existing Platform: Leverages current infrastructure reduces costs, and ensures faster implementation.
4. Steps to Extend an E-Commerce Platform
   • Assess Platform Readiness: Evaluate your current infrastructure, scalability, and feature gaps.
   • Choose Marketplace Software: Opt for SaaS solutions like Marketplacer or custom development tailored to your business needs. Prioritize must-have features like vendor dashboards, payment integrations, and multi-vendor catalog management.
   • Develop a Vendor Onboarding Plan: Attract quality vendors through incentives, training, and streamlined processes.
   • Launch and Test: Begin with a pilot marketplace, gather feedback, and refine operations.
5. Tips on Launching a Marketplace
   • Start with a Minimal Viable Marketplace (MVM) to refine processes before scaling.
   • Work with implementation partners to integrate the marketplace functionality into your store.
   • Invest in scalable, secure, and flexible technology that allows you to scale your marketplace.