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Shopify as a marketplace explained

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If you are considering building a marketplace, you have a choice. You could start with off-the-shelf platforms (Shopify, ShareTribe, Magento) or build your own. The strategy that you decide to go with determines the project’s dynamics and cost. As a marketplace development team, we ever so often get asked about Shopify marketplace development. 

Building an online marketplace on Shopify is a common strategy these days. As teams who built marketplaces on Shopify and helped to migrate from it, we know firsthand the highs and lows of the platform. So, this is our extensive guide to developing a marketplace on Shopify. 

Why consider Shopify marketplace development

As a hosting platform for online marketplaces, Shopify stands out for several reasons. 

  • The reputation of the service. The platform is currently used by approximately 450,000 businesses. The company is clearly growing and the infrastructure will get even more powerful. 
  • E-commerce experience. The main focus of the platform is building Shopify stores, and the company has proven its capacity to offer instruments for setting up very successful stores. With online marketplaces, too, their experience is a positive factor. 
  • A lot of add-ons and backend tools. Marketplace Shopify extensions are adopted specifically to current e-commerce standards. The platform offers extensions for design, functionality, inventory management, SEO, and many other features. 
  • Costs. Using a ready extension is usually cheaper in the first project stages compared to building full functionality from scratch. 

Clients often describe to us their motivations for looking into Shopify. It’s a low-risk environment for testing out the idea and market. For a minimal viable product, Shopify is a comfortable platform that offers more than enough of MVP-level features. 

However, when we are considering long-term growth, Shopify, however versatile it might be, can limit business owners. This is not true for each industry and business model, though – so let’s go over Shopify’s features and examine these pitfalls. 

How does Shopify work?

Shopify marketplace development is done via a Shopify channel app. Shopify Channel SDK is a development kit that allows building multi-vendor functionality. The platform allows 3 types of sales channels

  • Cart permalinks channel: an online Shopify store with permalinks to vendors’ pages that redirects users to third-party stores to carry out a purchase;
  • Checkout API: customers can purchase products from one vendor on the platform;
  • Orders API: users can purchase from multiple vendors directly from Spotify platform, the orders are synchronized between the marketplace Shopify and vendors’ own inventories. 

The “true” online marketplace lies within the realm of the third type – so in this article, we’ll mostly take a look at Orders API. Two other options aren’t representatives of standard online marketplace functionality. 

Functionality of an Order API platform

The main functionality of Order APIs entails being able to collect orders for many vendors, pay out to the merchant, import orders, synchronize order details and refund information, and import details from marketplace Shopify to the vendor’s platform. 

Users, online marketplace owners, and vendors see updates on orders in the real time, preview reports with their purchase/order details, and exchange banking information. In particular, let’s see Shopify’s options for order management and synchronization. 

Order management features

  • A single shopping cart for managing multiple vendors. Building a shopping cart is a pretty complex procedure – Shopify itself suggests choosing Checkout API for those who lack knowledge of customization. In Checkout API, Shopify will be the one to handle the orders, not directly the online marketplace. 
  • With Order API, business owners have full control over the process, determining online marketplace fees and paying out to the vendor. 
  • Synchronizing all orders. Business owners are able to manage purchases real-time directly from a Shopify admin panel.
  • Let users and team track fulfillment. The details of order fulfillment received from the vendor will be automatically displayed on Shopify. If something goes wrong, you can update the user and reach out to the merchant.
  • Direct access to refund, cancellation, and dispute data. Shopify has ready-to-use APIs for handling returns and conflicts between parties. 

The main advantage of the Order API channel is that a business owner has an almost full control over business processes. Unlike in other plans where you need to rely a lot on Shopify administration, this plan allows you to handle all the communication.

Collecting online marketplace fees

The distinct feature of Orders API is that it allows collecting marketplace fees on business owner’s terms. With Shopify Billing API, you can implement ready-to-go billing functionality, receive revenue reports, and control incoming payments from vendors. 

However, remember that this type of online marketplace requires a lot of customization. To be able to manage multi-vendor payments with your own infrastructure, you have to ensure:

  • A checkout process for the merchant;
  • Thought-out mechanism for transferring profit to the vendor;
  • Count in the marketplace Shopify fee (to make profit, you need to price items in accordance with this)

The infographic below depicts the process of transferring payments via a Shopify marketplace. 

Connecting a online marketplace to vendors 

To be able to execute all the features freely, you need to synchronize the marketplace with vendors’ platforms. This requires a lot of work on front-end and backend, all of which is well described in the official guide

Here, we’ll walk you through the basic prerequisites of setting up the account connection flow. Just in case you’d like to avoid detailed explanations, here’s the bigger picture for you. 

  • Synchronizing product publication: on the backend, you should add an API that allows vendors to add a product. It’s done with a “call” command – you activate an API that’s responsible for that functionality. On the front-end, you have to build a product status card using marketplace Shopify card structure
  • Error management. If the publishing process went wrong, you won’t be able to see it – unless you add another status card. By the way, you’ll come across such details quite a lot in your online marketplace customization, both in backend and frontend. 
  • Adding meta-fields to display product information: with an API, you can add metafields and enable vendors to edit the,. However, keep in mind that Shopify offered a limited profile structure (title, image, description, preview). 
Shopify marketplace admin

So, is Shopify functionality really that limiting? Not really, if you pick a sales channel that allows you to take control over most operations. However, in that case you still need an expert development team (here, we just scratched all necessary customizations, there’s a lot more to come). 

So, if you have a development team backing you up, you’ll be able to build a versatile online marketplace even on Shopify. Most important,y, you’ll be able to control all financial and business processes, which is a big security point. 

Shopify marketplace cost

To build an online marketplace with Shopify, you need to pay for the overall access to the platform and for additional instruments. You’ll need to purchase a Marketplace app separately and include some paid integration into functionality. 

The number of additional purchases is influenced by your overall subscription. High-level user plans include most necessary APIs. 

Comparing Shopify pricing plans

Let’s start by taking a look at basic subscriptions and its features before examining additional online marketplace-specific integrations. 

Basic ShopifyShopifyAdvanced Shopify
$29$79$299
Features available on all plans
Social selling
– Instagram, Facebook, Amazon, Messenger (connecting Shopify to facebook marketplace) Buy Buttons- Fast and reliable checkout
Shopify store management
– Unlimited products- Coupons, discounts, and gift cards- Integrated marketing platform (Google, Facebook)
Apps and ecosystem
– 24/7 multi channel support- App ecosystem (4,100+ apps)- Access to our Shopify APIs
Differences between plans
Staff accounts2515
LocationsUp to 4Up to 5Up to 8
Professional reportsNoYesYesAdvanced builder
Shopify commissionOnline credit card transfers: 2.9% + 30¢ In-person payments: 2.7% + 0¢ Online credit card transfers: 2.6% + 30¢ In-person payments: 2.5% + 0¢ Online credit card transfers: 2.4% + 30¢ 2.4% + 0¢ In-person payments: 2.4% + 0¢ 
Shipping discountup to 64%up to 72%up to 74%,  calculating third-party shipping rates, integrating own shipping accounts

Additional subscriptions are Shopify Plus and Shopify Lite. They are used much less often, mainly because:

  • Shopify Plus is a large-volume subscription for high-profit merchants, which is not something online marketplaces usually need in the first stages;
  • Shopify Lite is a Shopify extension: it allows you to add an e-commerce functionality to a ready website, not build a page from scratch. 

A multi-vendor online marketplace app cost

To convert your online shop into a multi-merchant platform, you need to buy access to a set of tools. 

So, next up on your list of development expenses is Marketplace Shopify app subscription. The costs range from $10/m to $45/m. The main differences are in the limitation of seller number, invoicing, custom front-end customization (available only in a pro version). 

Shopify marketplace price

The purpose of the Shopify marketplace app

After you’ve purchased the basic Shopify subscription, you can start customizing your ecommerce Shopify store. However, it will be a regular online shop – not a multi-vendor platform. To enable other merchants to access your platform, you have to change the status of the page to the marketplace. 

Functionality of the Shopify marketplace extension

Main features: 

  • Working with different vendors
  • Taking fees and managing commission for each seller;
  • Adding and editing products via a CSV file
  • Communicating with merchants, sending notifications , incovices, and error alerts;
  • Allowing customers to leave reviews and rate vendors;
  • Setting up a profile page for individual vendor;
  • The support of the mobile app version. 

Additional features

  • Synchronizing product lists on online  marketplace with vendors’ online stores;
  • Conducting auctions;
  • Allowing customers to communicate with vendors directly via a Shopify marketplace;
  • Vacation updates, membership plans, badges for sellers. 

Hosting a Shopify marketplace

An important note: when you build a marketplace on Shopify, you still need to host it on your end. According to requirements for public apps on Shopify, pages that connect users to different vendors cannot be deployed on Shopify servers. 

  • You need to add the cost of the hosting to your Shopify marketplace’s cost
  • You need a deployment team that will help you pick the best hosting provider (which can be tricky for marketplaces due to high processing intensity) and upload the final site to the server. 

Unlike Sharetribe and some other similar platforms, Shopify is not an all-in-one marketplace platform. Still, its main focus are typical e-commerce Shopify stores, and marketplace customization and functionality are somewhat secondary. 

Building a Shopify marketplace means using ready APIs and design themes to build a marketplace. Stil, most of the work and responsibility will be yours – including hosting. 

The process of Shopify marketplace development

If building a website on Shopify would be an easy task, there would be no need for a job of a Shopify developer. This is especially true for marketplaces – building a multi-vendor platform is about the hardest thing one can attempt to do on Shopify. 

Let’s see what design, development, and customization challenges businesses typically face during Shopify marketplace development. 

Shopify marketplace design

You can start by exploring official Shopify themes and look into third-party catalogues that also offer Shopify design templates. For marketplaces, we prefer the latter option – mainly, because Shopify stores don’t make clear distinctions between simple store themes and multi-vendor platforms. 

Instead, you can try Themeforest – a collection of marketplace Shopify templates with a lot of options of marketplace-specific themes

Criteria for choosing a Shopify marketplace theme

  • Responsiveness: most Shopify themes can be viewed on mobile devices. However, the level of accessibility varies depending on the templates. Test all your options on different mobile devices – after all, the majority of web traffic is now mobile. 
  • Scale: we suggest themes that support a lot of filters, settings, and nuanced profile pages. You should be able to seamlessly insert new functionality as the product grows.
  • Speed: page loading speed, both on mobile and desktop devices, is an essential consideration.
  • Intuitivity: rather than going for fancy design solutions, we recommend our clients to pick something straightforward. Unique page templates are often confusing to end users.
  • Product visibility: the main goal of a marketplace is to promote sales. Still, ever so often, we come by templates that seem to stem from blogs. The e-commerce functionality seems secondary. 
  • User reviews and rating: most theme libraries, including Shopify official store, lets users to see the rating of a template.

To see what we mean, take a look at some examples of good Marketplace themes. 

Shopify marketplace themes

Customizing a Shopify marketplace template

Shopify has a nice guide to customizing templates. Still, it’s quite extensive, so we’ll provide a brief summary with our commentary. 

Official guide breaks the customization process into several stages – we’ll take their structure and glance at each step. 

Theme documentation

Detailed instructions of theme UI and functionality is in its official documentation. You can view it before the purchase by going to your marketplace Shopify admin. Here, select Themes => Customize => Theme actions => View documentations. 

Hatchful

If you don’t have a logo, Shopify lets you make one with a custom tool. Hatchful. It’s a low-level branding design – you don’t get logo variations, guidelines, palette, fonts. The goal is to cover basic design needs rather than adhering to best branding practices. 

Editing your theme

Shopify teams themselves suggest getting a marketplace Shopify developer to help you with customization. Although it can be technically done without coding knowledge from the admin panel,there’s too much customization in complex themes. 

Editing theme code

Shopify marketplaces have a built-in code editor where you can display and edit your template’s code. The code editor is not professional, but it allows you to perform basic operations. However, if you are building a scalable multi-vendor platform, we suggest using other, more powerful options

Protecting the platform

To secure your privacy, you can define a password on your Shopify admin panel. In Shopify, the password page is a standalone page of your application – but it’s only visible to search engines. 

Managing product pages

The toughest part of editing Shopify themes is setting up a multi-vendor catalogue. Most themes are not adapted to marketplaces, so you need to customize the theme in sync with the marketplace Shopify app settings. Together with editing a collection (a standard Shopify practice),l you also have to provide access to vendors, call for synching APIs, and add additional alert windows for vendors. 

Summing up the design process

Normally, customizing a Shopify marketplace theme isn’t difficult at all. However, if you are building a marketplace, you’ll quickly see that the theme functionality doesn’t always adhere to marketplace needs. So, you need to add many pages, cards, windows manually – often even edit code for them. 

Shopify marketplace development process

The main challenge of building a marketplace on Shopify is that the team is not focused on marketplaces. In fact, the marketplace Shopify development app, where all the customization is done, is managed by Webkul. The company provides its own customer support and keeps documentation, however, users often find it slow and lacking. 

Let’s take a look at the main steps of transforming a single-vendor Shopify store into a marketplace in the Marketplace development app.

Synchronizing admin and vendors

An admin is a person who manages the marketplace, whereas vendors are partner sellers who are responsible for products and shipping. Three aspects that require careful synchronization are 

  • Inventory
  • Payments
  • Delivery

To manage inventories, developers should add multiple sellers first. It’s the first customization that’s done in the app; the number of users depends on the subscription price. With a basic plan ($10/m), you can add up to 3 sellers. Executive plan ($30/m) extends it to 10 sellers. To add an unlimited number of sellers, you need to purchase a Pro Plan ($45/m). 

Sellers are added either manually via the app’s GUI or in the CVS database. To make things even easier, an admin can enable vendor registration directly on the app. 

Creating joint inventory

Vendors should be able to manage their inventory directly on Shopify. They need to have their own profile pages with customization functionality. Particularly, sellers are in charge of adding new products, indicating availability, removing items, updating descriptions and images. 

Admin should be able to moderate vendors’ activity – allow or deny the addition of products, approve of product information, and oversee the inventory dynamics. Enabling documentation APIs is a good way to generate automated reports on inventory. 

Rating: to keep consistent product quality, we recommend business owners to enable customers to rate vendors and their products. This way, admins clearly see which sellers bring the highest user satisfaction. 

Managing multiple locations

If vendors and their inventories are located in dispersed locations, admins need to enable a multi-location inventory add-on. It will allow sellers to choose the location for order fulfillment, track the availability of a product on multiple locations, and notify admins about changes. 

Managing commissions

Proper synchronization of payments is highly important for maintaining trust between admin and vendors. If transfers come in too late or the sum is incorrect, the relationship with a seller is strained. 

The most common types of commission in Shopify marketplaces are the following four: 

  • Seller commission: a vendor pays a fixed amount for joining a marketplace, regardless of the number of sold or added products. 
  • Product commission: a vendor pays for an added or percentage from sold products
  • Collection commission: commission that combines several approaches
  • Global commission: additional commission for international vendors and cross-border payments. 

Shipping management

Developers should set up shipping tracking features that will notify vendors, admin, and users on the order status. Admin should be able to control vendor’s performance to spot vendors who frequently provide late shipments. 

Unfortunately, Shopify’s marketplace APIs don’t have much tracking functionality. You can send an alert via email and SMS, but obviously, this is not the surest way to get visibility. In custom marketplaces, we often build mobile applications for detailed tracking.  

Search engine optimization of Shopify marketplace

To build a community of vendors and users around your marketplace, you need to make your content visible to social engine bots. To do that, developers build instruments for optimization, create SEO-friendly page layouts, and make sure the page is readable for search bots. 

How is the SEO handled by Shopify? SEO is not Shopify’s main priority. SEO features are limited to meta-tag editors and application of some best practices on the design level. In particular, Shopify marketplace themes follow the following standards: 

  • No iframes on pages: iframe is a page within the page in the HTML document. It allows reusing content and displaying more information, but also is not compatible with SEO practices and brings security risks. 
  • Site structure is broken down into categories: when a site has clear hierarchy, it’s easier for bots to find the right content
  • Readable URLs: the links use standards characters and uncluttered structure.

However, there’s so much more that can be done for SEO visibility, both during development and design, and in the post-production stage by a SEO team. In our custom projects, developers and SEO specialists bind JavaScript to increase visibility, put necessary redirects (like 301 redirect) and remove the excessive ones, identify and fix crawl errors. 

To do that, you either need to assign this to a trusted digital marketing agency such as Marketing Labs or professional developers or access to front-end and back-end code and on Shopify, where features are governed by third-party APIs, the possibilities are highly limited.

Challenges of building a Shopify marketplace

Both on frontend and backend, Shopify offers really basic possibilities. They are enough to get your marketplace up and running, but you should always foresee the possibility of migration. In some cases, however, business developers struggle to roll out even an MVP. Here are the most common challenges that companies face during Shopify marketplace development. 

Poor user experience 

The Marketplace application, used to build multi-vendor platogmrd, is built to suit the needs of many businesses. According to the support team, the focus of the application is to fit almost every company. As a result, menus became complex and difficult to navigate. 

No proper guidance

Another problem that Shopify-based marketplace companies face is understanding the application itself. As a team that regularly works with Shopify’s functionality, we confirm – it’s indeed confusing. Our marketplace development team has a very strong web development expertise, so we know well the logic behind a multi-vendor platform. However, many business owners don’t – and Shopify doesn’t offer an ultimate guide that would explain the process. 

Slow customer support

The complaints about the lack of timely customer services are very common among our clients. The need to make fast decisions is a trademark of marketplace e-commerce – you are managing finances of multiple vendors and users, after all. However, when there’s a problem with payment processing or product cards, solving these can take weeks. As a result, businesses lose their reputation in the industry. 

Synchronization issues

An attractive feature of Shopify marketplaces is the ability to conduct synchronized payments and update product lists. However, in reality, vendors and marketplace teams often fail to set up the right integration. For instance, instead of transferring only a certain portion of revenue to vendors, marketplaces end up transferring all money to merchants. The company loses its credibility among partners, and orders aren’t processed quickly enough. 

This issue can be solved with finding a professional development team who oversee synchronization – so business owners don’t have to rely on support all the time. Still, at the end of the day, business owners rely on the native Shopify infrastructure most of the time. 

Vendor lock-in

Migration from a Shopify marketplace isn’t easy. The concept of Shopify is such that you build the entire functionality using custom Shopify APIs and UI elements. When you leave the platform, all that functionality and design are gone. You need to restart from scratch, since there was no data infrastructure, functionality flow, custom UX, and other crucial elements. 

Limited backend and frontend customization

Clients who want to migrate from Shopify marketplaces and reach out to us for custom marketplace development, often complain about limited functionality. APIs carried out the platform’s purpose up to a certain point, but as a project scaled, businesses need more documentation, tracking, profile customization.

A good example of such a limitation would be a product page. It has basic meta-fields (title, description), photos – but it’s hardly enough to leverage trust among customers. If you want to include custom guarantees, review features, quote estimates, it’s nearly impossible in Shopify. 

Conclusion

Building a marketplace on Shopify is a shortcut for testing a business idea, market, audience. However, it’s not a sustainable environment for managing a scalable multi-vendor marketplace. The business model of a marketplace is such that it requires a powerful increatcuture, creative freedom, and timely fixes. Shopify, so far, doesn’t live up to ambitious standards of multi-vendor e-commerce. 

If you want to build an MVP with Shopify, our Shopify marketplace developers will happily help you to customize design, code, and optimize content for search engines. However, we strongly suggest keeping the possibility of migration in mind and never rely on Shopify’s APIs too much. Otherwise, you are risking years-long vendor lock-in and business stagnation. 

If you are migrating from Shopify or would like to build a custom marketplace, reach out to our marketplace development team. Take a look at some of our recent case studies, where we fully describe the design and development process. Just let us know what the challenge is – and we’ll figure it out from there. 

Contact Syndicode for online marketplace development and consulting.

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