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Shopify Marketplace — How to Create a Marketplace on Shopify

GemPages Team
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shopify
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13 minutes read
Shopify Marketplace — How to Create a Marketplace on Shopify

Building an eCommerce marketplace is like raising a beast.

It will take a lot of effort to streamline all the moving parts of your business; but if you do it the right way, this beast can earn you some mighty rewards.

And when talking about anything related to eCommerce, you simply can’t ignore Shopify. So, let’s talk about Shopify marketplace solutions.

In this blog post, we’ll explore the Shopify marketplace potential, provide a detailed guide on how to create a marketplace on Shopify — and discuss all the pros and cons of the marketplace business model.

What is Shopify Marketplace?

Shopify marketplace is a business model where you create an eCommerce platform with Shopify and allow multiple sellers* to list their products and sell them through your platform.

* You may call them sellers, vendors, or merchants — but to avoid any confusion, we’ll refer to them as “sellers” throughout this article.

One of the best examples to understand the concept of a marketplace is Amazon. Amazon is an eCommerce marketplace that allows thousands of sellers to list their products on its marketplace — and customers can shop for these products from a single platform, i.e., Amazon.com.

So, in simple terms, you can create an Amazon-like marketplace and help multiple sellers sell their products. And for providing this platform (i.e., marketplace) to these sellers, you earn commissions from the products sold or charge monthly subscription fees.

Here’s a great example of a creative marketplace business built with Shopify. Outdoor Commune is a marketplace created with a mission to empower outdoor artisans.

Outdoor Commune’s website homepage

This marketplace has a variety of products listed with collections from small outdoor brands, independent artists, and makers. 

Artist profiles on Outdoor Commune’s website

This marketplace uses the Multi Vendor Marketplace app which we’ll demonstrate in our step-by-step guide later in this article.

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Is Shopify Marketplace Business Profitable?

The short answer — yes, it is. But it’s a tough business model and can take time to get into a good profitable position.

This isn’t to discourage you but we want to give you a real picture. Building an eCommerce marketplace is relatively complex and difficult to run compared to an eCommerce store created for your own brand.

There are multiple additional aspects that you must consider while building and running a marketplace. So, there’s a lot more work to do as opposed to running your own eCommerce brand.

Let’s review all the pros and cons of building a Shopify marketplace or marketplace business model, in general:

Pros of Creating a Shopify Marketplace

  • Potential to make it big

If you’re the kind of entrepreneur who loves taking big risks to reap big rewards, the marketplace business model is for you. Although it takes a lot of time and effort to make it big, if you go through it, you can build a giant business.

  • Attract customers with a wide range of products

When selling your own products, your store might be limited to a certain range of products. However, the marketplace model allows you to build large collections in a variety of product categories.

  • Major responsibilities on the sellers

When the orders are received, you only need to manage transactional activities and the major responsibilities like fulfilling and delivering the products lie under the sellers’ responsibilities.

Cons of Creating a Shopify Marketplace

  • Complicated business model

Building a marketplace and managing several sellers together might be a complicated task especially if you don’t have much experience in eCommerce. Also, you need to manage not only the sellers but also the customers of your marketplace.

  • Quality control is relatively difficult

While you can impose certain conditions on sellers to maintain a high level of quality and service, it’s not completely within your control as it would be with your own eCommerce store.

  • Hard to build customer loyalty

If a customer could find the same product directly on the seller’s own website, they might start purchasing from there. You need to work hard on creating that X-factor to make them buy from you.

  • Complexity in building the platform

Shopify is not specifically built as a marketplace solution. So, you need to heavily rely on a third-party app or custom solution. It’s relatively complex to create a smooth user experience and system flow for customers as well as sellers.

  • Difficult to make it profitable

You need to ensure customers find it enticing to buy from your marketplace with attractive rates, and at the same time, you also need to charge sellers commission rates or monthly fees. Thus, sellers may try to cover the cost in the pricing and it can increase the price for customers.

On the other hand, if you reduce the commission rates to attract more sellers on your platform, especially in the beginning, it may not help you keep a healthy profit margin.

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Factors to Consider When Building a Shopify Marketplace

Profitable Revenue Model

When creating your revenue model, you need to figure out the best way to earn a good profit margin and attract sellers to consider your marketplace. Here are the three main ways you can set up your revenue structure:

  • Take a certain percentage of commission from every sell
  • Charge monthly subscription fees to sellers
  • Combine both — percentage commission and monthly fees

Additionally, you can tap into other revenue streams:

  • Promote “Sponsored” spots for product listings
  • Offer paid ads to sellers
  • Sell your own private-label products

Robust Tech Stack

This is one of the most critical factors in running a marketplace. There are multiple ways to build your marketplace platform, and thus, finding the best solution requires some research, thinking, and experiments.

Seller Admin & Analytics

Whichever solution you choose should be able to provide the sellers with an admin dashboard and analytics to view their statistics.

Algorithm for Product Ranking

Established eCommerce marketplaces like Amazon, eBay, and Etsy have advanced algorithms to serve the best search experience and recommend relevant products to customers. You should figure out a way to rank the best products from different sellers.

How to Create a Marketplace on Shopify

There are multiple ways to create a marketplace solution; however, we’ll focus on the two key solutions:

  1. With a third-party app
  2. With Shopify’s Marketplace Kit

Solution #1: Building a Marketplace on Shopify With a Third-Party App

Using a marketplace app, you can convert your existing Shopify store into a marketplace or create a new one from scratch.

Let’s go through a step-by-step guide on how to build a marketplace on Shopify with an app:

Step 1: Finalize Your Shopify Marketplace App

Go to the Shopify App Store and search the keyword — “create marketplace” — and you’ll see many different apps in the search results.

The Best Shopify Marketplace Apps:

We recommend checking out these two popular marketplace apps on the Shopify app store:

  1. Multi Vendor Marketplace - By Webkul Software
  2. Multi Vendor Marketplace Pro+ - By Shipturtle Apps

Compare different apps to see which one best suits your requirements and budget.

Comparison of two Shopify marketplace apps

Step 2: Install the Marketplace App

For this guide, we’ll use the “Multi Vendor Marketplace” app which is developed by Webkul Software. The app has an impressive 4.5 (out of 5 stars) rating from 796 reviews.

Click on the Install button to proceed with installation.

Multi Vendor Marketplace app in the Shopify App Store

Review the access permissions and then click Install again.

Multi Vendor Marketplace app in the Shopify admin

Review all the details provided in the following steps and submit the information as per the instructions. First, you’ll need to select the pricing plan based on your requirements.

Pricing plans of Multi Vendor Marketplace app

Once you’ve selected the plan, you’ll see the welcome message in the onboarding flow. Click the START button to proceed further.

Welcome message of Multi Vendor Marketplace app

The following step is applicable only if you have configured a multi-vendor app on another Shopify store and you'd like to duplicate the configuration(s) on your current store.

Import configurations in the Multi Vendor Marketplace app

Next, insert your business email where you’d like to receive all the notifications.

Email field in the Multi Vendor Marketplace app

Now comes the important part, i.e., setting your global commission rate. Insert the commission rate as per your strategy.

Commission rate setting in the Multi Vendor Marketplace app

Then, add the details of Google reCAPCHA.

Google reCAPTCHA configuration in the Multi Vendor Marketplace app

Now, you’ll have your public URL that you can share will sellers to join your marketplace.

Public URL in the Multi Vendor Marketplace app

Once you complete the onboarding flow, you’ll land on the app dashboard.

Dashboard of the Multi Vendor Marketplace app

Step 3: Review Admin Panel & Configure Other Settings

Once the app is installed, review the admin panel to get yourself familiar with how you need to manage sellers, customers, orders, inventory, etc.

Depending on the app you choose, the settings may vary to some extent. Here are some of the key configurations in the Multi Vendor Marketplace app:

  • General configuration
  • Products configuration
  • Storefront configuration
  • Sellers configuration
  • Orders configuration
  • Payment configuration
  • Restriction configuration
  • ReCAPTCHA configuration

Follow the app documentation to set up your marketplace based on your strategy and requirements. You can also reach out to the app’s merchant support team for assistance if you’re stuck or confused about anything.

Step 4: Set Up Terms & Conditions

This step isn’t related to the app, but in general, you must have robust terms and conditions set for sellers as well as customers.

In simple terms, set the rules for sellers about what they need to take care of when selling on your platform, and what will be consequences if they breach the rules of your marketplace.

You may seek professional guidance or legal writing services to create terms and conditions. For general information purposes, here are some of the important clauses that you should consider:

  • Seller eligibility criteria
  • Payment terms
  • Allowed product types
  • Prohibited items
  • Media usage and rights
  • Returns handling
  • Limitation of liability
  • Termination of services

Also, from a customer standpoint, you need to ensure your liability is clearly defined as a marketplace and specify the liabilities of the sellers too. For example, if a customer files a legal complaint for a certain product, define who will be responsible for obliging to any claim or settlement.

Step 5: Test the App Functionality

Imagine onboarding a dozen sellers on your marketplace only to find errors and complaints from all your sellers. Don’t make that mistake.

Before you onboard any seller on your marketplace, you want to ensure everything’s working fine. Perform a test to see how the onboarding flow goes and how the transactions are processed.

If you can, run tests with multiple stores and for different scenarios to ensure everything’s functioning accurately. For example, perform tests for different scenarios including a successful order, a canceled order, a return and refund scenario, etc.

Step 6: Onboard Sellers to Your Marketplace

Once your app is ready and tested, it’s time to start onboarding sellers to your eCommerce marketplace. You can share your public URL with the sellers who would like to join your marketplace.

Find this public URL by going to Configuration > Instructions for Marketplace in the app admin.

Steps for inviting sellers through the Multi Vendor Marketplace app

Alternatively, if you want to add sellers from your end, you can do so from Sellers > Sellers Listing > Add Seller. Ensure that you have the necessary details from the sellers.

Steps for adding sellers in the Multi Vendor Marketplace app

Pro tip: As a best practice, you should promote your marketplace to sellers in advance — and not after launching your marketplace. Let sellers know about your marketplace launch in your network and community. Showcase them the benefits of selling with your platform and build an email list of interested sellers through a landing page with a form.

Step 7: Have Sellers List Their Products

Now, sellers can start listing their products. Once a seller logs into the account, the dashboard will look like this:

Seller’s dashboard for marketplace

Sellers can go to Products > Products Listing in the top menu to list their products.

A seller adding a product in the marketplace app

Pro tip: Pay special attention to organizing product collections on your marketplace. When customers have too many products to go through, navigation must be smooth and easy. Help sellers with standard naming for "product types" and "product tags" so that different sellers don't use different naming for the same product type or tag.

Step 8: Start Marketing Your eCommerce Marketplace

As soon as you’ve got the product listings done and launched the marketplace, the next big task is to bring traffic to your website. Just like any other eCommerce store, you must implement effective marketing strategies including:

  • Search engine optimization (SEO)
  • Paid ads
  • Content marketing — E.g., Blog, eBooks, etc.
  • Social media marketing
  • Email marketing

Once again, this is something that you should prepare for ahead of the launch. By the way, GemPages has plenty of valuable resources to help you with branding and marketing.

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Example of a Shopify Marketplace

Luca’s Gift is a marketplace for unique and personalized gift items.

The brand started as a family business in 2020 and then expanded into many different products with the marketplace business model. This marketplace is also powered by the Shopify app — Multi Vendor Marketplace — that we reviewed in our guide.

Homepage of Luca’s Gift

Luca’s Gift offers a variety of products including accessories, bags, shoes, bath & beauty products, clothing, and decor items. The brand makes it easy for customers to find relevant products with header menus for different product types, occasions, recipients, and materials.

Header menu of Luca’s Gift

Luca’s Gift allows sellers to create a free account. Sellers get a flat rate of 70% cut from sales, i.e., 30% commission. It has no advertising costs, transaction fees, membership fees, or hidden fees.

Joining page for sellers on Luca’s Gift

Solution #2: Creating a Marketplace with Shopify Marketplace Kit [Without a Third-Party App]

Shopify announced the Marketplace Kit in November 2021. The Marketplace Kit lets Shopify Partners create a marketplace and list products from various Shopify merchants.

However, keep in mind that you must have sound technical knowledge to build a marketplace using this method. Or you can take help from a developer to get it done for you.

For more details, you can check out the Shopify developer documentation.

Here's the sales channel app flow for your quick reference:

A diagram explaining the sales channel app flow

Example of a Brand Using Shopify Marketplace Kit

Aveste — a marketplace for streetwear clothing and accessories — is built with Shopify's Marketplace Kit.

Joining page for sellers on Aveste’s marketplace

Shopify merchants can download the Aveste app and then manage the list of products that they would like to display on Aveste’s marketplace.

Aveste’s app in the Shopify App Store

Here’s how Aveste’s marketplace model works with the Marketplace Kit:

Aveste’s Shopify marketplace model

Final Thoughts on Shopify Marketplace

Ideally, it’s advisable to get into the marketplace business if you already have experience in the eCommerce industry. 

But if you don’t have any experience, a less risky way to get into this business is to first start with an eCommerce store for your own brand. Start generating traffic and sales, then go for the expansion with the marketplace business model.

Plus, if you’d like to learn some valuable insights from someone who’s already tried building a marketplace business, check out the below video by Paul from EcommerceGold. He’s shared some great insights based on his own experience.

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FAQs about Creating a Shopify Marketplace

Is the Shopify marketplace free?
No. You must consider the multiple costs involved in starting and running a Shopify marketplace. First, you need to consider Shopify’s monthly fee (starting from $29 per month if billed annually), and then monthly charges for any paid Shopify app you install. For example, the Multi Vendor Marketplace app has a paid plan starting from $15 per month.
Can you turn Shopify into a marketplace?
Yes, you can. Although Shopify isn’t specifically built as a marketplace solution, you can use a third-party app or Shopify’s Marketplace Kit to turn your Shopify store into a marketplace.
Is creating a Shopify marketplace worth it?
It depends on your current business situation and future goals. If you’re already running an eCommerce store and are looking to expand your business, creating a Shopify marketplace can be lucrative. But if you don’t have any eCommerce experience, creating a marketplace can take a long time and effort to be successful.
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