Andrii Pavlenko, CEO of Scallium, explains how and why retailers should build a marketplace.
The marketplace model wins the competition against classic online stores. From a business point of view, this is an opportunity to make money from sales without owning a product and create categories without being an expert in them.
You don’t need to understand the new market; just add the merchant to the communication chain with end customers. It also speeds up time-to-market a product range by partially shifting responsibility to suppliers. Using the example of a DIY retailer, we want to describe how we built the architecture of a sustainable e-commerce business. Taking our scheme as an example, you can understand how to build a marketplace and any flexible e-commerce platform with the help of an internal team or an integrator.
So, what did our client have at the beginning:
- 1 million products
- 60 offline stores
- 1 online store
- Offline and online divisions were not connected well.
The above resulted in such problems as the lengthy process of updating the data on stock balances. It took them more than a day to transfer this information to the online store. And these exact numbers need to be quickly updated in real-time. That is, while data from offline reached online, it was becoming irrelevant again.
There was a task to build a marketplace. Our first objective was to create a platform that would help to increase the number of SKUs quickly. The second objective — a system where you can manage data about customers, partners, and orders.
We built the marketplace back office: a web interface where the client’s staff can easily administer the processes associated with the life of the marketplace.
The back office consists of several systems. They create a single infrastructure and effectively interact with each other. Each of the systems is responsible for specific master data, and their seamless integration allows the clients’ team to combine all the data necessary for the operation of their marketplace.
These systems can be integrated with different ways. We came to the need for seamless integration, so we built a complex system that includes all these modules from the very initiation of the project.
Here is this architecture – 6 fundamental systems for an e-commerce platform:
Marketplace Management System (MMS) – Platform administration system allows the retailer to configure and manage all processes and data from a single working window. In this module, you need to provide the tools for managing users and roles to access certain marketplace functionality. For example, on your dashboard, you can give the merchants access rights to manage their product data selling in your store, but they do not have access to the accounts of other merchants.
Merchant Administration System (MAS) – The system should manage merchants’ processes, including communication and collaboration tools for suppliers and the marketplace operational team. In our case, through the online account created for the merchants, suppliers independently upload and edit their products into the system. And the moderator from the marketplace operational team reviews these products approves them or suggests changes. In this case, it is essential to provide convenient communication tools between suppliers and the marketplace team.
Product Information Management (PIM) – Manages the process of product cards. It includes four fundamental processes: create product cards, edit them, enrich and transfer them into the showcase. PIM is the beading heart for all large retailers and is tightly integrated into other systems.
What is important to consider when choosing or creating a PIM? Primarily, the system should simplify and speed up the products’ time-to-market process and regular updates.
Order Management System – The system should provide work with orders in a single window. It automates order processing from creation to closing. This system closely interacts with PIM since offers are transmitted from here (offer means goods with a specific seller’s proposition: price, remaining stocks, delivery terms). And also, PIM is integrated with the merchant’s account if orders are redistributed between the marketplace suppliers.
A billing system is a system that controls the financial relationships between the platform’s participants. This is important in the case when you build a marketplace with a large number of members.
In addition, the Reports & Analytics system is also essential so that you can track the speed of order processing, the number of orders, the performance of merchants, logistics, managers, and other aspects. You can connect the Power BI system and receive and take action on data:
- Make a forecast of product sales;
- Understand seasonality;
- Understand how the number of attributes affects sales and more.
Marketplace is a technologically tricky project. The market problem is that there is an almost complete absence of comprehensive solutions. This absence entails additional problems with integrating and synchronizing different services and other financial costs to support the entire infrastructure of e-commerce business owners.
As for our particular client case, the measurable results were not long in coming. Firstly, within six months, the retailer had risen from 1 million SKUs to 1.5 million SKUs. Secondly, the company managed to overcome the competition between offline and online divisions, which is typical for large trading corporations. Now all business units are working together, and this gives a great impetus to development. Thirdly, there are several pleasant “side effects.”
For example, we compared the old showcase of a retailer’s online store and the showcase of a new marketplace associated with the originally described complex system. Conversion in the new showcase turned out to be six times higher. It is so because the system processes data significantly faster. When customers use site searches or filters, the page response rate is 500 milliseconds, whereas before, the visitor waited 3 seconds and left the site.
Therefore, if you are developing an e-commerce platform, I recommend utilizing the described model as a basis. However, when creating your own architecture, the business must have a baseline scenario of business processes. There are many models for building e-commerce platforms. For example, if you build a B2B marketplace, you may add processes associated with the interaction of two legal entities. But even then, you will need to work with the above-listed 6 systems.
Andrii Pavlenko, CEO Scallium