Creating a MarketPlace may seem a complex task and it is difficult to get it right when there are so many things you need to remember. Here is a list of 6 key points to keep in mind before launching your MarketPlace!
The business model
Commission is based on business volume.
A MarketPlace business model is not the same as that of an e-commerce site. The latter is based on the volume of business and the number of vendors. A MarketPlace generally charges its vendors a monthly subscription to cover all or part of its fixed costs and a commission on the volume of business generated.
Just a simple example: if the marketplace takes a net commission of 10% on €100,000 of business volume and bills its vendors for a subscription of €100 each month, it will earn €20,000.
This principle of remuneration requires a dedicated marketplace trading account, as well as good organisation, particularly with respect to management control.
Please note: commission and subscription rates vary much more than on B2C marketplaces. (Commission rates range from 3 to 50% and subscription rates from 0 to 1,000 euros a month.)
The operator’s customers are its vendors
Unlike a classic e-commerce site, the end customers of the platform are not its customers, but the vendors. It is to the vendors that you sell a commercial intermediation contract and the vendors are those who pay your commissions through their sales.
They must therefore be the focus of your attention and you must specify the services offered (logistics, invoicing, export assistance, etc.) that justify your remuneration and will earn their loyalty and encourage them to make maximum sales on the platform.
Customer experience depends on vendors
On an e-commerce site, the operator has full control over the customer experience.
This is not the case on a marketplace site.
Vendors play a key role in this customer experience; they are responsible for the product or service, its shipment and for all after-sales service. The operator must, for its part, manage its brand, the brand promise, litigation and ultimately, the customer experience. The operator must therefore impose rules on its vendors (standard presentation, editorial constraints, rules of conduct for customer relations, etc.) to ensure a positive and consistent customer experience.
For the end customer, the operator is a trusted third party
On a marketplace site, the operator has no control over certain key elements (customer complaints, reimbursement rates, process quality, etc.), which makes it a third party in the buyer-vendor transaction.
It must therefore act as a trusted third party and intermediary for the buyer. To assume this role, the operator must have a clear view of the quality of the relationship between its vendors and the end customers.
To avoid having to mediate in disputes that could have been avoided, the operator must support its vendors as they increase in competence with respect to customer relations and if necessary, encourage them to outsource customer relations to an experienced partner.
The operator becomes a trusted third party, and no longer just an intermediary in customer-vendor disputes.
Promotional offer management is complex
There are two ways of making a promotional offer on a marketplace site:
– The operator creates promotions on its offer or its own funds (10% discount on the first order).
– The operator creates promotional offers and invites its vendors to participate. These offers will then be showcased on the platform. In this case, it is the vendors who bear the cost of the promotion.
Promotional operations on a marketplace site are complex, because they do not only apply to its own products.
They can become even more complex, depending on the business model:
– One vendor per product item (no competition).
– Several vendors per product item (competition that tends to lower prices).
Managing payment methods and financial flows is complex and regulated
On a marketplace site, when a payment is collected, only the commission goes to the operator. The remainder must be paid to the vendor. This distribution leads to accounting, financial and regulatory complexity. Basically, the operator offers a service: collection on behalf of third parties.
This payment service is regulated in Europe and supervised in France by the French Prudential Supervision and Resolution Authority (ACPR) and the Banque de France.
To use this service, you must work with an approved partner such as Webhelp Payment Services.
Your payment partner will take full charge of managing payment flows (deducting commission, cash in, cash out). In a B2B context, it is important to choose a specialist payment company that allows you to offer your end customers B2B-specific payment methods and terms.
Do you now feel ready to start creating your Marketplace? Please do not hesitate to contact us to find out about the opportunities and choices available for setting up a Marketplace and a fluid, appropriate and upgradeable payment management system.
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