I have a request from a client to set up a Mall-type Portal for their website.
 
They would then allow others to open a "store" in their "mall" and sell their items.
 
I was looking at multi-site but that doesn't seem to fit this scenario. Does anyone have any ideas to share?
 
Has anyone done this before??

Yes... this can be done.
 
A user would need to be set up to allow them to post items. You could use the multi site for sure if you wanted to give them their own URL.
 
This wouldn't necessarily be completely automated, however loading their own products would be.