Marketplaces are a growing e-commerce trend, and they offer some big benefits for both buyers and sellers. Marketplaces’ built-in comparison platforms help shoppers make more informed decisions. What’s more, sellers can benefit from the high traffic to most major marketplace platforms like Amazon, Walmart, Etsy, eBay, Alibaba, to name a few.
So what is a marketplace exactly? It is simply a platform where sellers offer their products for sale to buyers. This is different from a dedicated website that serves as an online storefront for only one business. This is a key difference, which is why there are several factors to take into account when deciding whether to design your own web store or list your products for sale on an existing marketplace. Let’s take a look at some pros and cons of marketplace selling and explain how to get involved.
Pros and cons of marketplaces
Barriers to entry
In general, it takes less effort to start selling on a marketplace than it does to run your own e-commerce platform. Building the website and the many challenges that go along with it, such as managing payment and data security, are not a problem with a marketplace.
It’s important to note, though, that the bar is higher for some platforms than others. Walmart, for example, will vet you based on customer service, uniqueness of products, order fulfillment, etc., before accepting you. This is different from Amazon, where the requirements are less stringent.
Most businesses consider the lack of branding a negative of e-commerce marketplaces because there is almost no personalization of your unique brand. On one hand, marketplace promotion is out of your hands, which can save your money on advertising. But no one is promoting your company specifically. If you’re running your own online storefront, you can personalize every color scheme, banner, invoice, etc. For example, Depositphotos allows you to remove the background from an image and use it for your own purposes. This is the opportunity to help you with building a brand identity.
It’s important to know that you will not have end-to-end control if you sell only on marketplaces. The platform will determine a lot of pricing and logistics.
This can be a pro or a con, depending on what you want. You may want to be in control of marketing, storage, and distribution, pricing, customer service, etc. Or, you might prefer to mainly focus on your product and leave the logistics to others.
Consider the fact that 53% of U.S. adults said they begin on Amazon when looking for a particular product. On an e-commerce marketplace, you gain instant access to millions of customers from the get-go that you would have otherwise had to spend years building a marketing strategy to reach.
Selling on a marketplace doesn’t mean you can abandon marketing altogether, though. You will still be responsible for your own branding and advertising for your shop in particular. But marketplaces are still a great way to target many consumers at once who already intend to buy.
Cost and scalability
Particularly if you target a global audience, marketplaces offer easier scalability for your business without a lot of money. Just by being listed, your products will automatically be in front of many eyes. Being part of a well-known marketplace can also lend legitimacy to a new business.
But on the flip side, there is a lack of direct customer access. If you sell on a marketplace, most shoppers won’t want to interact with your company unless there is a problem. It depends on what type of customers you’re targeting and whether you value quantity over quality in your customer interactions.
Data and insights
Most marketplace platforms have built-in data and analytics tools that can help sellers optimize an omnichannel strategy to perform better. This can undoubtedly make the seller’s life easier because otherwise, you would have to monitor all of your website and customer analytics yourself.
Who should use a marketplace?
With marketplace advantages and disadvantages in mind, you can determine if your business is a good fit. In general, marketplace selling could be right for you if:
- You want quick and easy access to a huge customer base without a ton of effort to attract them to your site
- You want to test the demand for your product before striking out on your own
- You are selling to a global audience
- You can’t (or don’t want to) formulate a full-scale marketing strategy
- You’re still building customer trust and brand awareness
How to sell on a marketplace
Choose where to sell
The first step towards reaping marketplaces’ benefits is choosing which one(s) suit your business best. Do you want a more niche market or more general? Etsy, for example, is a marketplace for businesses that sell art and other crafty gifts. Big names like Amazon, in contrast, sell just about everything.
Learn the marketplace rules
You will have to ask the following question: How does the marketplace work? Before you finalize a decision, you should research commission rates and sellers’ rules. Once you get started, the best way to learn is to make an account and list your first product. Then, start small in your operations and get a feel for the process.
Develop a pricing strategy
These are different cooperation models for other marketplaces. Some, like Amazon, are commission-based, where a percentage of each sale goes to the platform.
Amazon determines commission based on the number of products you list, and these commissions are usually relatively low. Marketplaces like Etsy and eBay use a listing charges model to charge listing fees and commissions.
When forming your strategy, you take commissions or listing fees into account and adapt prices accordingly.
Monitor your success
As you expand your offerings, be sure to track sales metrics and other analytics so that you can adapt as you go—monitor product returns, customer reviews, etc., to continuously improve.
Marketplaces can greatly benefit online sellers, particularly those who want cost-effective access to a global audience without fine-grained control of the sales process. In contrast, brand-focused businesses may wish to consider building dedicated online shops instead. Don’t forget; you can always begin by selling on a marketplace and build your own store as you grow.