Want to develop an online marketplace like Snapdeal?
Ever been to a Sabzi mandi or weekday bazaar? Where sellers open their temporary shops and buyers buy needed grocery, vegetables and other household stuff. A marketplace is an online version of the same where buyers and sellers meet together.
Online marketplace is an e-commerce site wherein different kinds of products and services offered by multiple sellers are listed and sold to the end customers. The marketplace operator monitors smooth functioning of marketplace and keeps track on the whole process. A logistics partner, either owned by marketplace owner himself or a third party logistics provider, is responsible for the shipment and delivery part of the process. It is a one stop solution to buyers as well as sellers.
How do Single Seller Ecommerce Portal operations differ from Online Marketplace?
In single seller environment, the ecommerce owner himself owns, controls and manages every function in the end to end transaction, starting from categories creation, product listing, product prices, shipment & logistic partners to handling complaints, refunds & cancellations. As owner (and his team) is the one man army dealing with all buyers, all processes are comparatively simpler. Less policy guidelines and system is relatively more flexible.
Whereas in a marketplace, portal though marketplace operator supervises overall functioning of the system. Sellers list their products and look into on time order fulfilment. Logistics partners are responsible for shipment & delivery. The marketplace operator is also responsible for marketing, promoting the platform and attracting more number of buyers. Sellers get exposure to much larger audience at cheaper cost. As a fee, he charges commission from sellers. In a marketplace, customers get lots of variety of products at much reasonable cost. Marketplace is comparatively a bigger and complex ecosystem than single seller ecommerce portal comprising of multiple sellers, third party partners, multi-fold products and different types of products & services on offer. Marketplace owner has to not only look into customer satisfaction but interests of sellers and other partners as well. Therefore it is very important to have strict policy guidelines, terms & conditions in place.
Strict policy guidelines, terms & conditions can only be derived from a well thought business operations model. If you wish to launch your own marketplace for a product niche, first detail out your each business process carefully. Technology is an enabler which will allow you to standardize your business processes, but without strong foundation of rules & policies your feature heavy marketplace is sure to fail.
We recommend before you jump on to developing a technology platform for your online marketplace do your homework to pen down business processes and policies. Here is a case study how one of the biggest marketplace in India, snapdeal.com manages its business operations.
Case study of snapdeal.com
Snapdeal is one of the largest e-commerce players in India, with more than 20 million registered users. There are more than 4 million products up for sale from more than 20,000 sellers. If you are eager to know how a seller operates on an online marketplace like Snapdeal, just have a glimpse of our information:
One can sell products under many categories like Men & Women Clothing, Accessories, Beauty Products, Baby Products, Books, Consumer Electronics, Digital Accessories, Jewellery, Kitchen, Luggage, Mobile Phones, Movies, Music, Personal Care Appliances, Personal Computers, Tablets, furniture and more.
So your marketplace portal should allow you/ system admin to create multiple categories and sellers to list their products under any desired categories.
Then comes the verification part wherein you receive a mail from Snapdeal for submitting the registration details. It is a three-step process here:
- Sellers details – You are required to fill in your company details, category, type of product to be offered, name to be displayed in listing, email id, etc.
- Bank details – Mandatory documents like PAN and TIN/VAT are essential for continuing the process.
- Contract details – It will only be shown if you have fulfilled the above steps. Before signing the agreement, Snapdeal will inform you about terms and conditions regarding selling your product.
Similar to this you have to decide the seller registration process for your marketplace.
- Whether you want to provide single step or multi-step account registration?
- How verification should be done?
- Is it that only after a verification process one can precede further?
- What should be the form fields?
- What should be policies, terms & conditions and disclaimers to put at the time of seller registration?
- Whether to charge for product listing? If yes, then how much should be charged – a flat amount or % of the product price?
- Should there be a limit on number of products a seller can list?
Snapdeal launched Brand store, where even local brands by individuals or groups can launch their own brand. It is an exclusive page which allows brands to create their own store on Snapdeal.com. Brand Stores aims to provide a new experience to consumers for browsing and shopping for their favourite labels. Snapdeal provides free web store to sellers. Commission 3%-4% is charged per transaction with discounted courier service. Mystery Audit is conducted by Snapdeal to keep an eye on the sellers.
- Do you want to allow your sellers to open individual stores?
When seller receives an order from the end buyer, Snapdeal informs the seller about the necessary details through emails or SMS. Seller has to keep the product packed ready before Snapdeal’s courier partner comes and picks the product for shipment.
- In your marketplace, how would the seller receive an immediate intimation of product sale? Through email or SMS or both?
Snapdeal has moved to a marketplace led model from the late inventory led model where inventory had to be kept at the seller location. In 2014, Snapdeal launched ‘Snapdeal Plus’ enabling sellers, especially small and medium-sized businesses, to keep products at fulfilment centres provided by Snapdeal Plus avoiding hassles for product packaging.. Snapdeal Plus reduces the shipping time from 24 hours to just 2 hours, after the order being placed for majority of the products.
Decide for yourself.
- Who will store the products you or the seller?
- If the seller is going to manage inventory how will you cut down on delivery time?
Traditionally, the packaging material for the product is provided by Snapdeal. The Seller has to keep the product pack ready before the courier guy arrives. They charge Rs. 3 per product from the seller. Snapdeal plus provides sellers with fulfilment centres where the packaging is taken care by them.
It is mandatory to use Snapdeal’s logistics partner’s services. Estimated charges are of approximately Rs. 40 per 0.5 kg shipment.
‘Safeship’ is a fulfilment service offered to sellers by Snapdeal. ‘Safeship’ plays a key role in ensuring product delivery in timely and safe manner by arranging pick-ups through empanelled 3rd party logistics providers authorised by Snapdeal with clear standard policy and standard shipping rates. Snapdeal manages the entire delivery logistics and engages the customer throughout the process.
Shipping is of utmost importance in online shopping. Once the buyer has placed the order, customer satisfaction depends on how soon he receives the order. Therefore as a marketplace owner you have to focus on logistics & shipping.
- How to reduce lead time and order processing time?
- How to ensure delivery of damage free products?
- How to ensure payment collections in case of cash on delivery?
Always remember, reduced lead time equals to higher customer satisfaction and increased sustainability.
Snapdeal charges a commission amount after every successful sale to the seller. The exact percent of commission is not revealed, but an approximate charge is 4%-20% on every sale is known. The subscription and listing are absolutely free. Delivery charges are taken from both buyer and seller.
- What is revenue model of your marketplace?
A payout period is the time taken by the marketplace operator to handover seller’s share of money to him. Snapdeal pays the sellers by Real Time Gross Settlement or Internet banking. The seller is paid out for a successful order within 3 weeks of the dispatch date.
Answer some questions yourself.
- How do you plan to settle seller payments?
- Will you pay per product or gross amount over the period?
- How will you apply the tax?
- How will you adjust product returns, refunds and order cancellations amounts?
When you use the e-commerce portals to sell your goods, you are the vendor and your customer is the end user. So in this case Sales tax is charged on sale of goods.
- Interstate Sale – When sale or purchase is made from one state to another it is governed by Central Sales Tax Act 1956, the rate applicable to particular goods will be taxed according. (i.e 1%, 2%, 4%, 12.5%)
- Intrastate Sale – If buyer and seller are situated in the same state, the taxation will be as per the Local Sales tax as per the state law.
- Taxation is very important. This is very important for accounting. Consult a chartered account and formulate tax policies. You can develop your marketplace tax functionalities as per policy formulated.
The customer has to register its complaint, attach photos of products if required along with its product order number. If the customer returns the product due to any reason regarding the product itself, then the seller is responsible for reimbursing the amount already paid. Snapdeal will inform you about the grievance or complaint. Snapdeal’s only responsibility will be to refund the money charged from the customer.
Non-availability, maintenance, product installation or warranty is the seller’s responsibility and not that of Snapdeal. Snapdeal will arrange the pick-up of the damaged/defective product through its own logistics partner. Courier freight charges will be reimbursed in such form as is determined by the logistics team upon prior consultation with Snapdeal.
Ask yourself some questions.
- How will you plan to manage refunds & returns of your marketplace?
- Will you setup a call centre to take complaint calls? or an email based ticketing system?
- What percent of shipping charges will return to the customer?
- Within how many days, will you redress the complaint?
- What will be the procedure?
Setup clear return and refund policies for buyer. Also, clearly mention dispute resolution rules and role of your marketplace in terms and conditions. Your system should be able to track all complaints, notify all stakeholders of complaint updates, should be able to process refunds and should update transaction reports accordingly. Your logistic partner should process reverse logistics. System should keep track of a latest status of all orders.
We hope our information has helped potential marketplace developers with an idea of how things work. For more information contact us.