When it comes to growing your marketplace, retaining great sellers is key to increasing both traffic and sales. In fact, a marketplace is nothing without good sellers. They form a central pillar of your marketplace’s content, and they’re fundamental to building trust with buyers too. In short, it is very important to manage your marketplace using clear guidelines, in order to ensure that buyers obtain the best experience in the marketplace while sellers reap the benefits from selling in a healthy marketplace ecosystem.
The way to do this is by implementing a marketplace seller agreement, a crucial document to the success and smooth functioning of online marketplaces. In fact, the marketplace seller agreement contains the terms and conditions that govern the seller's usage of and access to the marketplace. As such, it is a contractually binding rulebook between the seller and the marketplace itself.
As in many other aspects of business, having clear clauses help both parties clear out any risks and ensure they are aligned. Below we have listed a few key items that a proper marketplace seller agreements should include:
Establish a clear content policy
To get started, it’s important to set product listings standards and restrictions - these will help maintain your marketplace’s reputation. For example, unproven vague marketing phrases should be avoided in listings, product photography must meet certain quality standards, and prohibited items should be clearly defined. While it’s obvious that no stolen, counterfeit goods, weapons or other illegal content should be sold, some disputes over what a seller can provide might be less clear cut. Content policies typically state that marketplace owners can remove listings at any time without notice.
Ensuring that product quality meets users expectations and that sellers deliver their products on time helps maintain brand loyalty. Whether you are outsourcing logistics or delivery is completely handled by your sellers, all of this should be taken into account in the vendor agreement.
Clarify fees and payments
The chosen revenue model for the marketplace must be clearly outlined in the marketplace vendor agreement. Commission fees are by far the most commonly used model for an online marketplace. Typically, the marketplace agreement will link to a live document that reflects the fees. Important to outline is how will payments be processed?
Over what time periods will these be carried out? Larger marketplaces often set direct debits to their sellers, while smaller ones often make manual weekly, or fortnightly, payments as the orders come in.
Explain how reviews and ratings work
Reviews play a dual role in a marketplace; firstly, they are a surprisingly strong social impetus for buyers. Secondly, they allow you to control the quality of the content being sold. That’s not all though; reviews also drive competition between sellers, provide transparency for consumers and enable immediate feedback on the delivery service as well as the quality of products.
A recent Fan and Fuel survey showed that 92% of consumers would hesitate to buy a product with no reviews.
Linking the review system to the Service Level Agreement (more below) is an option — sellers can be told that consistently poor reviews (below 3 stars for example) will affect their standing in the marketplace and could end with listings being removed. Meanwhile, an added motivation for sellers might be the opportunity to receive a coveted ‘trusted seller’ badge for exceptional performance.
Clarify ownership of customer care
Customer care protocols allow you to standardise what is expected from the seller. By clarifying ownership of customer care, the marketplace owner makes it clear to all vendors that they are responsible for providing a quick, courteous customer service to buyers who have bought their products.
Some of these points will be clarified in the Service Level Agreement (more below). For example, Walmart requires all sellers to respond and resolve customer care queries within 24 hours - failure to do so may result in refunds. This makes sure the buyer is kept happy while ensuring the seller is prompt in their response.
Ensure high performance through SLAs
A service level agreement (SLAs) sets the relationship between the marketplace and the seller in stone. It defines the level of service you expect from a vendor and lays out the metrics by which the service is measured. As marketplaces are directly responsible for the buyer’s experience, making sellers accountable is crucial.
Some key areas that can be monitored and improved through an SLA are:
- Fulfillment and logistics: lead times (hours/days), on-time shipment rate (%), order defect rate (%), and cancellation rate (%).
- Customer communication: lead times (mins/hours), re-delivery (hours/days), etc.
By clarifying a minimum service level, you can reserve the right to remove any sellers that are falling behind the standards you have set after your periodical reviews. Most sellers will want to ensure they make the most of the opportunity to reach the widest possible audience that your platform brings them - so they are likely to follow this guide in a professional manner.
Set the rules and have your sellers stick to them with a view to buyer trends and how these could affect your marketplace’s standing. For example, returns are here to stay. For the modern consumer, an easy and speedy returns process is a crucial factor in their decision to buy online. Indeed, Dotcom Distribution recently showed that 90% of consumers “highly value” free returns. Zappos, an Amazon company, has seen a lot of growth from allowing a very lenient return policy on its shoes.
Sanctions are an effective method for making sure sellers comply with the marketplace vendor agreement. Marketplaces may introduce different degrees of sanctions - from formal warnings to termination of contract - depending on the severity of the infractions.
Termination should only be considered for extreme cases, such as counterfeit or illegal goods, and impeachment of intellectual property. A more common sanction might be that, in the case of consistently low content quality, sellers may lose their trusted seller badge. It is important to not be too lenient; the complex dynamic of the multi-seller business means that this could lead to standards seriously drop across the marketplace.
Last but not least: make sure the policy is easily accessible!
Lastly, the policy should be easily readable by sellers so that they can ensure they continue to uphold the required standards. Make sure an up-to-date copy is always available on your platform’s website. A great way to answer any seller questions — whether they’re current or potential sellers — is to provide an FAQ page alongside the marketplace seller agreement. This will allow sellers to educate themselves about the standards your marketplace expects.
The position of a marketplace owner is essentially that of a team manager; they must ensure that sellers, marketplace staff and buyers can all collaborate smoothly to ensure business growth. Having a clearly set out marketplace seller agreement is key to your marketplace’s journey to success. To access a comprehensive guide on starting a marketplace business, check out at our Marketplace Launch Guide here.