Decoding the Multi-Vendor Marketplace Model: Marketplace or Dropshipping?

Building an ecommerce business used to be risky. To grow, retailers had to invest heavily in inventory, lease warehouse space, and handle logistics in-house. If items didn’t sell, they were stuck with unsold stock and mounting costs.

In response, new ecommerce models emerged: dropshipping and the marketplace model. Both allow businesses to sell products without physically stocking them - giving retailers a flexible way to expand offerings, reduce overhead, and adapt to changing consumer demand.

How These Models Work?

At their core, marketplaces and dropshipping both serve one purpose: let retailers sell more without buying more upfront. But their mechanics differ.

A curated marketplace (think ASOS, Next, or M&S) connects consumers with a network of independent sellers. The retailer provides the digital storefront, and sellers handle the fulfillment. Retailers earn a commission on each sale and expand their product catalog without managing inventory.

Dropshipping, on the other hand, operates more like a silent fulfillment partner. When a customer places an order, the retailer forwards it to a supplier, who then ships the product directly to the customer. The retailer never sees or touches the product.

Both models remove traditional inventory burdens, but they come with different operational and branding considerations.

Why Retailers Are Doubling Down on Curated Marketplaces

The marketplace model is no longer limited to ecommerce giants like Amazon or eBay. Household names like Next and Marks & Spencer have embraced it to boost product variety, relevance, and shopper loyalty.

Back in 2020, Next CEO Lord Wolfson said their Label marketplace was built on “the proliferation of choice,” allowing customers to find more products in one place—even if it meant competing with their own in-house brand.

Marks & Spencer now sells nearly 90 third-party brands. “We’re driving new customers to shop with us and our existing shoppers are coming back more frequently and spending more,” said Nishi Mahajan, Director of Third-Party Brands at M&S. Crucially, most orders that include third-party products also include M&S products, reinforcing brand stickiness.

Marketplace momentum isn’t slowing down. According to Edge by Ascential, third-party sellers will capture 59% of global ecommerce sales by 2027, up from 56% in 2022. The four largest marketplaces alone are expected to generate $4.3 trillion in sales, representing nearly two-thirds of total ecommerce volume.

What Makes Dropshipping Attractive in 2025?

While marketplaces dominate volume, dropshipping continues to carve out its own growth path—especially for niche and startup brands looking to expand quickly.

Dropshipping allows businesses to:

• Add products without inventory investment
• Test new categories with minimal risk
• Focus on branding and customer acquisition

Mark Adams, SVP at BigCommerce, describes it simply:

“Dropshipping is like running a store without a stockroom. The supplier handles inventory and delivery while you focus on selling and marketing.”

According to Grand View Research, the global dropshipping market will grow at a 22% CAGR through 2030, driven by demand for low-capital ecommerce models.

The Risks: Who’s Responsible When Something Goes Wrong?

One of the main concerns with both models is loss of control. When another party fulfills the order or manages the customer interaction, mistakes fall on the retailer’s shoulders—not the supplier’s.

Late shipments, poor packaging, or stockouts can damage your brand, even when you're not at fault.

The solution?

• Vet partners thoroughly and regularly
• Use technology to monitor SLAs and fulfillment metrics
• Automate issue resolution workflows (e.g., auto-refunds, real-time tracking alerts)

Why a Hybrid Approach Makes the Most Business Sense

The most forward-thinking retailers aren’t choosing either marketplace or dropshipping—they’re doing both.

In a hybrid model, a retailer offers a curated marketplace experience, but also uses dropshipping behind the scenes to expand selection or speed up delivery.

This lets retailers:

• Provide broader selection without overextending logistics
• Maintain control where it matters (e.g., key categories or private labels)
• Test new brands or categories before making larger commitments

Operational Shifts: Challenges Behind the Curtain

Hybrid models come with backend complexity. Retailers often need to:

• Retrain teams on new fulfillment flows
• Implement more robust OMS and PIM systems
• Build integrations between marketplaces, ERPs, and suppliers

But these investments are paying off. Retailers gain agility, higher margins, and the ability to meet customers wherever they are—without locking up capital in inventory.

Final Thoughts: Flexibility Wins in Modern Ecommerce

Whether it’s marketplace, dropshipping, or a hybrid of both, modern ecommerce is moving away from rigid supply chains toward flexible, tech-powered models.

By reducing inventory risk and offering more choices to consumers, curated marketplaces and dropshipping aren’t just trends—they’re foundational strategies for future growth.

Retailers that embrace both models—and invest in the right tech to manage them—will be best positioned to thrive in a customer-driven, inventory-light ecommerce future.