A marketplace lets multiple sellers list and sell their products on your platform. You take a commission per sale. Think Etsy or Amazon Marketplace, but you own the platform. WooCommerce can do it with the right plugins.
Dokan
The most used multivendor plugin. Free base version. Each seller gets their own dashboard for products, orders, revenue, and payouts. You set commission (percentage or fixed amount per order). Dokan Pro (149 USD per year) adds seller verification, per-seller coupons, and auctions.
WCFM Marketplace
Free alternative with more features in the base version. Complex but powerful. Seller products can have their own shipping settings. Built-in chat tool between buyer and seller. Good if you need more without paying upfront.
Payouts
Stripe Connect or PayPal Adaptive Payments. Money is split automatically on purchase: your commission stays in your account, the rest goes directly to the seller. Without automatic split, you have to handle payouts manually, which doesn't scale.
Challenges
Quality control: who approves sellers' products? Manual review or automatic publishing with post-review? Returns: who handles them, you or the seller? Customer service: who answers questions? Define responsibility before launch.
Does it scale?
With 10 sellers and 500 products, WooCommerce with Dokan works well. With 500 sellers and 50,000 products, you need serious server capacity and perhaps a more custom solution. WooCommerce marketplace is best for niche platforms with manageable volumes.