Selling on Marketplaces I: benefits and drawbacks
Let’s assume that you are a novice in the field and that you still have no idea what a marketplace is and what it means for an eCommerce to sell on these platforms.
Actually, the chances are that you have ever interacted and even bought in a marketplace, you just didn’t know what these types of portals were called.
A marketplace would be a digital version of a market or a shopping center . In other words, the same space where several merchants sell their own products. Basically, a multi-vendor eCommerce platform .
The best-known marketplace in the West is Amazon. Although Amazon itself also has its brand and sells its products, there are thousands of sellers and stores. Even big brands like Nike have their own showcase within the platform and sell their products through it.
E-commerce experts say that the marketplace is the future of online shopping . Does that mean that traditional eCommerce has no future? No way! And in fact, maintaining your own eCommerce store and selling on a marketplace can be an explosive combination to boost sales.
In this first part of this series, we are going to tell you about the benefits and drawbacks of selling on marketplaces, and why the combination of eCommerce + marketplace can be a winning option. So let’s get to it!
The benefits of selling on marketplaces:
It is likely that at first glance the clearest benefit that comes to mind is the most obvious: selling on a marketplace gives you visibility and, therefore, can increase the sales of your business.
But beyond this very obvious principle, we are going to explain in a little more detail what it can really mean for our online store to sell in a marketplace:
1. Increase confidence:
Amazon itself is already a well-known brand in the world that has been in the sector for more than 20 years. Obviously, the trust it generates in Internet users is quite solid and may be greater than what you have obtained (or can obtain) on your own.
Regular buyers of this type of marketplaces trust that any seller who sells on the platform will meet minimum quality requirements. This extra security that the marketplace gives us by acting as an intermediary, helps conversions to be higher if we play our cards well.
This point is especially interesting when we talk about new online stores, without much previous clientele, which need to make a name and reputation. Starting by doing a good job within a marketplace appropriate to our type of product can be of great help.
2. It saves time and money for the business:
The time and money invested in starting a store directly in a marketplace is much less than for a traditional online store.
If we want to start selling our products, but we don’t have money to invest in a website and all the necessary digital sales logistics, a showcase like AliExpress or Amazon will allow us to start as soon as possible, with a minimum investment of time.
In addition, there is the enormous savings in human resources, and that is that many of the functions that our staff would develop in our eCommerce, can be managed through the marketplace.
Of course, we must bear in mind that not all marketplace platforms offer the same resources to businesses. This is the case, for example, of package logistics or Customer Service, which is not always provided by the marketplace.
3. Facilitates internationalization:
Another strong point of marketplaces is that the vast majority have a huge presence in various countries around the world . In addition, some offer shipping services with very attractive costs for businesses that, if they had to do them on their own, would be much more expensive.
On the other hand, it is the fact that these platforms are usually multi-language, and have Help Centers with agents prepared to answer questions in any of the countries in which they are present.
Something that would be very expensive to achieve on our own if we wanted to prepare our eCommerce for this type of international sales.
4. Offers a huge and varied showcase:
During 2020, Amazon generated sales of 386.06 million dollars , with more than 100 million subscribers to its Amazon Prime subscription. Etsy , a marketplace specialized in crafts, already has more than 40 million active users.
Aliexpress for its part, has found in Spain one of the most lucrative markets in the world, unleashing sales especially in recent months.
With all this data on the table, it is clear that marketplaces are a really interesting commercial epicenter for e-commerce companies looking to expand their business and reach new audiences.
It is also worth bearing in mind that there are specialized marketplaces in very specific sectors. This means that a good positioning on these niche platforms will ensure a well-segmented clientele.
The disadvantages of selling on marketplaces:
But make no mistake, not everything is positive in the world of the marketplace. The truth is that if we are thinking of starting to sell on these platforms, there are several negative points that we must take into account:
Without a doubt, competition is the biggest drawback of selling on marketplaces. After all, in these types of platforms, comparisons with other sellers that offer the same type of products are really simple, so you have to strive to present the best possible value proposition .
In this environment, the price of the product is usually the most decisive factor for the sale to occur. Of course, buyers will always be willing to pay a little more if the quality is higher, so the value for money must be attractive to the user. Otherwise, it will be practically impossible for you to compete with other sellers in the same sector.
Another point that is very relevant within the marketplaces to be able to position yourself with respect to the rest of the sellers is social proof . And with that we mean all the opinions that customers will leave about your products in the profile of each product and that are undoubtedly an indicator of the quality of your product.
Studies that have been done on this phenomenon, maintain that 84% of buyers trust online evaluations as if it were a personal recommendation from an acquaintance.
After all, if two sellers sell the same product, the factor that will help in the purchase decision is precisely the buyers’ valuations .
2. Lack of control and freedom:
While on your own website you are free to choose the way your products will be displayed, when you sell on a marketplace, you must abide by the rules of the platform.
Typically, stores of this type require prior approval of any product that is going to be sold in their storefront. In addition, with regard to logistics and shipments, a minimum of quality is requested, which if not met, would lead to expulsion from the marketplace.
For example, Etsy rewards sellers who offer free shipping by providing extra visibility on their platform.
Obviously, selling on these sites is not free. Marketplaces take a commission for each of your sales. A point that is undoubtedly worth bearing in mind. For example:
- Amazon.com: to sell in the Spanish version of the e-commerce giant you will have to pay a fixed subscription of 44 euros per month, in addition to a commission for each sale, which will depend on the type of product.
- Etsy: this marketplace specialized in crafts has a commission of 5% for each transaction made within its platform.
- Ebay: Products you sell through Ebay have a 10% commission, excluding shipping and handling.
- Aliexpress: the commissions of the Chinese marketplace par excellence are between 5% and 8%.
Why is it important to have an eCommerce
Although simply selling on marketplaces may seem like a very attractive option, especially for new internet businesses, in the long run, if we want to have a solid presence on the internet, the combination of both is the key to success.
It is extremely difficult to build a brand image and a solid business in the long term, depending only on the windows of the marketplaces.
Having our own eCommerce allows us to transmit exactly those brand values and philosophy with which we really feel identified.
Marketplaces, on the other hand, can be of great help to expand our business, and make us known in new markets. However, in the long run, it will be necessary to create a more stable brand image for our business to be consistent.
Read part II of how to sell on marketplaces.