Multi-Vendor Marketplaces: Custom or Platform Solution?

In 2018, we can hardly imagine our lives without online shops. The Internet is the first place we look when we need to buy something or find a service. A commerce enterprise with no online presence is extremely rare. Statistics say the total amount of retail online sales is growing steadily and is likely to reach almost $5 billion by 2021.

multi-vendor-marketplace-custom-vs-platform-solution

Image credit: Statista

However, not all businesses are represented as websites or applications. Sometimes, it's much more effective to join a platform where multiple sellers meet multiple buyers – a multi-vendor e-commerce marketplace. This is a great solution for small retail businesses who rely on the marketplace to introduce them to a vast buyer audience and take advantage of the unified functions, such as search or payment engines. For the buyers, online marketplaces are also a great way to find what they are looking for.

Thus, to build a multi-vendor marketplace may be a great solution for a startup or an e-commerce company wanting to explore new opportunities. As more products and services move online, you're sure to find your niche in this huge market. Nowadays, online marketplaces have long moved beyond offering goods and products. Today, they also serve as platforms for finding services. Teachers, stylists, babysitters, doctors, taxi drivers, cleaners – you can find marketplaces for almost any service.

If you have decided to create a multi-vendor marketplace and found the segment in which you are going to work, the next question you need to answer is how you are going to build your platform.

Even a brief search shows there are two main methods of multi-vendor marketplace development – using an e-commerce platform or building a custom solution. You may be hard-pressed to choose between these two approaches, as both have their pros and cons. We will use our expertise and consult with our marketplace developers to outline the advantages of both methods to make it easier for you to find the best solution for your project.

Multi-vendor platform vs custom solution

multi-vendor-marketplace-online-shopping-service-marketplace

Which factors should you consider when choosing the approach to your marketplace development?

Time-to-market

Of course, each startup would like to launch the product as soon as possible to start actually doing business. Here, using an e-commerce platform seems like a great solution, since you can slap together a working marketplace website within a week or two if you use Sharetribe or Arcadier, for example. Custom e-commerce development takes a bit longer. We're talking about 6 to 12 months to roll out a unique marketplace built from scratch.

However, be careful, as quick does not always mean effective. Your first launch is the most important of all, because it performs multiple functions – validates your idea, gauges the market, shows your strengths and weaknesses, and tests the competition. It is very important to come out for the first time with something that is recognizable and valuable. Remember that there is only one chance to make the first impression.

It will not be a very good idea to use a platform marketplace as an minimum viable product while working on the custom solution. Within five years we’ve built different marketplace applications and ecommerce MVP’s, thus we can tell for sure that your MVP should provide a great, even if limited, experience that is going to become your trademark. Our clients emphasize on usability and unique features.

Available features

When developing your marketplace on a platform, you are bound by the set of features that this online marketplace builder comes with. Of course, the out-of-the-box functionality is usually vast and diverse, but you can never be sure that you will find the perfect functionality that can showcase your solution. Moreover, you can hardly add any unique features, only the common ones offered by your competitors.

The advantage of platform development is that you do not need to recreate the components that are available in the platform package. This can significantly speed up the development. However, if you opt for an e-commerce platform, always study its possibilities in great detail and see whether you can find the tools to implement all components of your idea. Mistakes can be incredibly costly, as you might have purchased the platform license only to find out later that it does not fully match your requirements.

Platform solutions might lack some features that your product requires, and they may also have a lot of features that you do not need. Since they come as a package, you will have to purchase the redundant functionality as well.

Customization opportunities

multi-vendor-marketplace-custom-platform-comparison

In this respect, custom e-commerce development truly shines, as it allows you to create the product precisely as you want it to be. While most of the e-commerce platforms currently on the market provide increasingly wider customization options allowing you to build beautiful and perfectly functional e-commerce websites, there may still be some limitations.

With custom development, you can set up your marketplace as you like, then make changes as you see fit. When you build your solution on a platform, you are dependent on the platform functionality and the predefined flows.

Scalability

When you develop a custom marketplace, the scalability options are fully under your control. You can scale your system as much as you wish depending on the load.

With a platform-based marketplace, the scalability options are directly connected to the platform capacities and may sometimes be limited.

Integrations

In this respect, platform development definitely scores the point. When you use a platform, you immediately have a built-in payment engine, a search engine, and analytical tools. There is no need to recreate the integrations with third-party services that you are planning to use.

If you have opted for custom development, you will need to implement the integrations yourself and test your components to verify that they are working properly. In a platform marketplace, all services work effectively right out-of-the-box, as all the implementation and testing were performed by the platform development team.

At the same time, a platform solution is not likely to support integration with your legacy systems, such as ERP or CRM. They will be easier to integrate in a custom marketplace, since you will not be limited by the platform architecture.

Demonstrations

multi-vendor-marketplace-peer-to-peer-custom-development

It is easier to make a demo with an online e-commerce platform than with a custom marketplace development. When you develop a custom e-commerce website, a demo requires the same effort as a finished product.

However, if the development team applies the Agile methodology, it is possible to have a demo ready at the end of each sprint (usually two weeks long). In Agile, the product development is structured so that each sprint ends with a complete chunk of functionality that has been developed and tested. Our team follows the same approach and also coordinates the flow with clients. If demos are needed, they can be easily made at the end of each sprint to show the work that has been completed so far.

Intellectual property

If you use an online platform to build a multi-vendor marketplace, you will own no intellectual property, as you are going to reuse the solutions developed and created by others. No matter how you customize it, the IP will still belong to the platform provider.

This can become an issue with potential investors, if you ever consider attracting them. Investors prefer to support projects where the intellectual property rights belong to the project developers.

There's also the matter of competition. If you are using a platform, lots of other companies can be using it, too. You will have no advantage over your competitors, as you will not be able to offer a unique product.

Costs

When we talk about the costs, the first impression is that custom development is much more expensive than a platform-based solution. Indeed, if you choose customized marketplace development, you are sure to face rather steep initial investments. According to public resources, when making your own custom multi-vendor marketplace, you may expect the costs to start at $50,000. However, talking about DA-14 experience, the price for peer-to-peer marketplaces with limited functionality begins at $30,000. While the more features you include, and the more integrations you provide, the higher the total cost is going to be.

At the same time, a Sharetribe marketplace can cost you $119 per month for the Pro version. Seems like a good bargain, however, if you’re not good at programming and you decide to enhance your p2p solution, then you still need to hire an ecommerce developer to make the improvements. This, in turn, results in extra costs and time to find, interview, and hire an experienced developer. While with custom development, you are getting much more than just the marketplace. You are also getting the post-launch support and maintenance by your own web development team, who worked on the marketplace creation. Most importantly, you are getting a product that does not depend on any third-parties and can help you stand out. When you are building something using a third-party platform, you should be prepared for policy changes, ownership transfers, or even project closing.

Summing up

Our experience and additional research show that both custom development and e-commerce platforms for multi-vendor marketplaces have their advantages and disadvantages:

 
Custom development
Platform solution
Time-to-market
LongShort
Feature set
Custom, according to the project requirementsStandard, may be missing or redundant
Customization
EasyRestricted
Scalability
EasyRestricted
Integrations
No ready integrations; possible integration with legacy systemsBuilt-in integrations with third-party services; difficult integration with legacy systems
Demonstrations
Only with the finished product or moduleImmediately available
Intellectual property
YesNo
Costs
HighLow

 

As you can see, for multi-vendor marketplace providers, the choice of development method may be rather difficult and can be affected by multiple factors. If you need to launch quickly in order to jump into the market, and if you are on a very tight budget, then consider using an online marketplace platform.

If, however, you are building a product that will become your signature and your statement, you want your marketplace to belong to you only and to be unique and recognizable, and you want a product that will grow with you as you want it to, then invest in custom app development.

If you need a more detailed consultation on creating a multi-vendor marketplace or an estimate of the approximate project cost and timeline, contact us to discuss your idea. We will be happy to help you make it real!

↑ Go up

Similar post