Headless Commerce and Marketplace as a Service – Explained | Defined

Headless commerce and marketplace-as-a-service tools can help eCommerce websites keep up with consumers’ ever-increasing desire for more product selection and variety. The two models are similar, but they have subtle differences, which is why they can be easily confused. There are SaaS, software-as-a-service, headless commerce solutions and then there are also marketplace-as-a-service (MaaS) solutions.

Headless commerce is a product offering for companies that already have an eCommerce website and who want a tool that will let third-party vendors sell additional products on the eCommerce site. The eCommerce site owner will very often never come into possession of these third-party products. Instead, the products are drop-shipped directly to the end customer.

The reason why it’s called “headless commerce” is that the software solution that plugs into your eCommerce site doesn’t have a front-end, consumer-facing user interface. The headless commerce software solution sits behind the scenes and is invisible to the end consumer. Many times, the customer doesn’t know what is being sold as a first party product by the eCommerce site itself versus what is coming from third party sellers.

This dynamic of having third-party inventory is also referred to as a “endless aisle.” Think about shopping in a retail store where the aisle never ends! By having third-party vendors sell additional products that are never taken into inventory, eCommerce sites can, theoretically, have an infinite number of products on their website. Amazon has millions of third-party sellers. As Jeff Bezos has said numerous times, the key differentiator for Amazon is its third-party sales. In 2018, 58% of Amazon’s GMV was from third-party sellers and this share has only increased since. In Jeff’s words, third-party sellers are “kicking our butts.”

SaaS solutions for headless commerce provide exactly that: a software solution to enable you to onboard third-party sellers. MaaS solutions provide two things: a software solution and an existing network of third-party sellers that you can plug into your business.

The SaaS providers give you a portal for third-party sellers to sign-up and upload their product catalog, as well as APIs to hook into your existing eCommerce technology provider. The MaaS solutions provide all of those technology tools and they provide sellers that can list their products on your eCommerce site and any of its other customers’ eCommerce sites.

Headless Commerce Options: SaaS vs. MaaS?

Depending on your organization’s priorities and size, either solution could be a good fit to expand your online product catalog. To be successful with a SaaS product, your organization needs to have a lot of existing digital demand with customers. It’s hard to attract third-party sellers and convince them to sign-up for your marketplace SaaS offering, upload their product catalog and participate in your eCommerce store. For that reason, generally, SaaS marketplace solutions are a better fit for larger companies that want to make a platform business model a strategic priority.

MaaS solutions are easier to setup and have third-party sellers ready to be added to your eCommerce site. Because the MaaS providers are bringing third-party sellers, they usually charge a take rate on the transaction volume from the third party sellers. Whereas, the SaaS providers are only charging a license and/or subscription fee. MaaS should be charging a lower license and/or subscription fee because they can make more money by charging a take rate on GMV, gross merchandise volume. We’ve listed out many of the MaaS and SaaS providers below – and you can download the full report which includes more detailed information.

To download the full report, including fundraising information for these providers, click the image above.

Marketplace Business and MaaS Co-operation

The long-term goal of MaaS is to commoditize the supply side network effect and reduce the unique, competitive advantage of owning your own marketplace. In short, a MaaS provider is a long-term competitor to any eCommerce website trying to build a dominant marketplace business. If you are a marketplace business and considering leveraging a MaaS provider, tread very carefully and don’t forget that the MaaS provider would ultimately like your unique sellers to also be a seller on its MaaS network!

Filed under: Platform Innovation | Topics: