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Ecommerce

Ecommerce Marketplaces and why you should Sell on them

 

For me, this decision comes down to where you are in your ecommerce business journey. One of the best places you can start selling is directly through ecommerce marketplaces such as Amazon or eBay, for the reason that it gives a real life reflection of buyer interest for your product and the price point you are going to focus on.

Ideally, you would have both. However, it can be a large undertaking for a one man or woman band to get things all under control, unless they have a small set of products or the money to invest in marketplace population tools that can take your data set from your Magento site and feed it into the relevant marketplace for you.

I will break down the pros and cons of each.

Selling through Ecommerce Marketplaces

Marketplaces give advantages mostly to people who sell the products of others. I think of them like wholesale supermarkets. They are places to bring your products to barter for business. First up let’s look at what is so good about them:

Ecommerce Marketplaces

Pros of using Ecommerce Marketplaces

1. Marketplaces are cost effective places to test a markets interest

You read this all the time when online at forums and social media, what should I sell? what sells well? The issue with these questions is once you have finally discovered what sells well online you are unlikely to want to go and share that information with would be competitors.

Let us agree here that product X is the best selling product, if even half of the people reading this went away and bought into that idea. That alone could easily skew the market as it would become overcrowded and cause the product to perform worse.

In business always strive to avoid sheep mentality.

The best way to think about selling is to sell something you know. Something people are likely to buy in your opinion. Buy 30 groups of different products like this, small numbers of each. Then try selling them on eBay or Amazon.

You will very quickly find out what does sell and where the most return is likely to come from. Likely some things will not sell but that can also provide you with valuable information going forward with your business.

Once you have your market, I’d advise not divulging your specifics on what sells well. While there’s no harm in helping others, if it’s your livelihood you don’t want to give away the secret sauce.

You have had to do weeks if not months of planning, research, and testing to work out what you want to sell. Never forget that.

 

2. Prebuilt ecosystem that customers are used to shopping on

People of the UK might be surprised to learn that the ecommerce marketplaces we all buy from actually have business ecosystems set up across the globe tailored to specific geographic locations.

Most people are aware of amazon.co.uk and a .com (if they live in the UK) as these are the most common domain extensions we see day-to-day. However, what many will be less aware of is the existence of .jp for japan, .fr for France, .de for Germany etc. These are not just japanese versions of the same thing, they are completely different markets that you can sell into or buy from.

So why is this an advantage?

If you intend to sell overseas and extend the reach of your brand into new markets (which I highly suggest you look at doing) then there really is no better place to try than ecommerce marketplaces.

I have seen statistics and results that are actually hard to believe.

Local companies in Scotland selling Tea back to China. A business based in a town right next to mine selling millions of german manufactured tools back to Germany.

It is amazing that this is possible but also very humbling to think that a business in a different geolocation can sell a country back its own products, simply by doing better on price and service.

 

3. Standardised processes to follow on shipment and returns

Have you written a shipping policy before? What standards product images should follow? What information is required? If you sell on marketplaces it’s more like following a recipe, you follow their rules.

It’s another reason why I like to see fledgling ecommerce businesses try selling on marketplaces first. The experience you can gain from this cost effective channel is a brilliant return on investment.

 

4. No requirement to create your own brand

Ecommerce marketplaces are very difficult places for unique brands. It’s for this reason many niche brands have decided not to use them for their sales channels. Brands like ugmonk are absent from amazon.

The markets just make it harder to leverage the advantages a brand holds.

That being said if you are selling someone else’s products (i.e. you’re not a manufacturer) then marketplaces are great options for you.

5. You can get successful quickly and cheaply

Creating a brand can be an expensive exercise, but if you’re focusing on negotiating good deals on stock and then selling volume through ecommerce marketplaces brand won’t matter. These businesses are referred to as

These businesses are referred to as power sellers and the ecommerce marketplaces are their biggest places of operation.

While they can sell through their own websites, they opt to play more of a volume-based strategy selling only through the marketplaces.

 

ecommercemarketplacecons

Cons of using Ecommerce Marketplaces

1. You don’t own the customer data

Ask any experienced ecommerce manager what the true value of a customer is they will never mention the first sale.

It’s the lifetime value of a customer that you are looking for. Ongoing cash flow and trust associated with your brand.

The first fact you learn in any sales role is:

It costs a lot less to sell to an existing customer than what it does to obtain a new one.

It’s for this reason I am listing customer data as the biggest disadvantage on ecommerce marketplaces. It kills lifetime value stone dead. Ask one of your friends what the last item they bought on Amazon or eBay was.

Then when they state the product or products names, ask  “and what company did you buy it from”. They see it as the channel, not the supplier. So all your hard work on service goes to the site owner Amazon or eBay in this example.

That’s not good if you are looking to build up a brand presence.

 

2. Competition lives on the same site as you

Depending on what you sell you might find a very saturated market that you are in on the marketplaces you have selected to operate on. If they can afford to take more of a hit on the margin you could find it difficult to get started.

 

3. The bigger companies have more buying power

In any type of retail or store buying power and negotiation are two key areas of focus. Both allow you to offer the most competitive pricing to your would-be customers. If you can buy more volume you can suppress the costs per unit. This is difficult for many startups when the biggest killer of an ecommerce business is cash flow.

4. Price automation can kill your stocks profit margin

Ecommerce is a digital sector, and with digital comes automation. There are several ways to use automation effectively in the ecommerce space. This could be marketing automation, feed automation or price automation.

The ability for your site to look at the prices around it for the same product and then calculate mathematically if you can afford to drop your price 10 pence below what your competitors are offering it at.

It’s an unbelievably clever and useful feature. This is what the companies that spent time and effort reinvesting back into their business will be looking at. Reducing work for their teams so that those same resources can be deployed in increasing margin, basket size and the tasks that cannot be automated.

Conclusion

Ecommerce Marketplaces remain one of the best places online to sell your products. There is no such thing as the “perfect” solution, which is why I would personally advocate a joint attack between having your own site and utilising marketplaces to cover both bases.

For physical stores looking to enter this area, you also have the added advantage of omnichannel sales.

Omnichannel looks at fusing the digital and physical space and is one of the most exciting areas of ecommerce to look at.