Last time we took a look at how marketplaces are an ideal way to open up new markets, new territories and to attempt to sell new lines. However, they are not a end point in themselves and there are downsides – like who owns the customer, you or the marketplace.
In response to this, many etailers look to use marketplaces to open up new markets and new territories with a weather eye on how to make that drive traffic to their own site, in an ideal world, or to run both side by side with the view to using marketplaces to get new customers and their own website to build loyalty thereafter.
Doing this is a massive challenge, but one that ultimately is the perfect growth strategy. So, what do you need to be aware of?
Compare and contrast
First up, this handy guide from Sellbrite, below, outlines what sorts of things you get from different marketplaces and what you get from running your own.
- Industries Served: low and medium risk industries, including clothing, kitchen, furniture, food, media, toys, electronics, sporting goods, and more.
- Currencies Accepted: Up to 48 different currencies depending on where you list.
- Customer Payment Options: All Major Credit Cards, JCB International, China UnionPay, NYCE, STAR, and Amazon Store Card
- Processing Fees: $0.99 per transaction + commission (12-15%) for under 40 orders/month; $39.99/month + commission for more than 40 orders.
- Industries Served: eBay supports largely the same categories as Amazon, with a few exceptions.
- Currencies Accepted: Up to 24 different currencies.
- Customer Payment Options: All Major Credit Cards, PayPal, Bill Me Later, ProPay
- Processing Fees: Variable listing fee (usually less than $1.00) + commission (12-15%)
- Industries Served: artisanal goods, one-of-a-kind items, handmade, crafts, art supplies.
- Currencies Accepted: Up to 23 different currencies.
- Customer Payment Options: All Major Credit Cards, PayPal
- Processing Fees: $0.20 for a four month listing + 3.5% / transaction
Your own ecommerce site
- Industries Served: whatever you want (as long as it’s legal)!
- Currencies Accepted: whatever you want (as long as your merchant processor can handle it)!
- Customer Payment Options: whatever you want (as long as your merchant processor can handle it)
- Processing Fees: depends on your merchant processor, usually a credit card processing fee of around 2.5%.
As you can see choosing a marketplace is hard enough – it all depends what you want to sell and who you are targeting with it and where – but they do bring certain advantages.
So too, though, does your own website. Together they can be very powerful.
Advantages and disadvantages of marketplaces
The advantages of using a marketplace are multifarious, as we outlined last time, but to recap: the costs of running on it are generally lower and you don’t have to worry about traffic. While they do charge fees, within that you get a ton of marketing and all the costs of hosting and running your presence online, the checkout, delivery and more are all covered.
This can make for significant savings when setting up and running.
The disadvantages of marketplaces come from these same things however, The marketplace may shoulder the weight of making it run and getting you traffic, but the people you are selling to are the marketplace’s customers. They own them, they own their data and hang on to them tight.
Because of this, you will constantly be fighting with competitors on the marketplace for those very same customers and their business – a fight that usually ends up in a race to the bottom on price.
Unless you are selling something wholly unique, you will end up slashing margin to get the sales.
This isn’t ideal, but it does then put the onus on trying to convert those shoppers to come buy more things – at a higher price – on your own site.
Advantages and disadvantages of your own site
The advantages and disadvantages of selling through your own site are, perhaps unsurprisingly, the reverse of those on marketplaces. The costs and complexity of setting up and running the site, as well as getting the traffic and driving conversions, is entirely your responsibility – and it isn’t cheap, nor is it easy.
To have a good site you need excellent goods to sell, a strong message, great (and ever refreshed) content – think images, videos, guides and help – as well as customer service to handle problems and issues.
You also need the means to handle payments and refunds, you need to have warehousing, picking, packing and delivery in place, as well as a strong returns process.
In addition to all this, you need the software to run your inventory and to link that to you front-end (so shoppers can see in real time what is and isn’t available) through your warehouse and out to your delivery network.
Driving traffic is another headache if you have your own ecommerce site, as it too requires a lot of effort to manage SEO, email lists and all the other myriad ways in which you need to keep yourself in front of your customers and prospects.
In short, this requires either more hours in the day than the 24 you currently have, or you need to hire people to do it for you. This costs, along with that of all the software needed to run it and the warehousing to store the goods, mounts up.
While that makes it sound all too difficult, remember it does also give you much more control over what you do and, if you have a distinct brand and a unique offering, it is far easier to sell like this than through a marketplace.
Why not do both?
With all these pros and cons of both marketplaces and ecommerce sites, it would make sense to try and mix and match the best of both to try and mitigate costs and reach as many people as possible.
And you’d be right – but this too comes with challenges.
Selling on both can be great for getting new customers at a relatively low cost of acquisition (marketplaces), while then building them into loyal customers with content, offers and more once you have them (your own website).
Running a website in an established market and expanding out into other regions and territories using marketplaces is also becoming a go to strategy for many Growth 2000 and Growth 3000 Europe business as it does offer the best of both worlds.
The challenges in doing this is how to manage it all across all these channels. Trying to list products on both your own site(s) and marketplaces in different territories – and keep it live, so that shoppers can see what is and isn’t available, potential lead times and more – is possibly the most massive headache of all.
Software can help. There are many different kinds of multi-listing management tools out there – Volo Commerce and Sellbrite, to name but too – which can manage your inventory and even link it to delivery management and order management software to help automate as much of your multi-platform business as possible.
With these tools and perhaps some staff, you can readily start to tap into the ecommerce explosion globally and drive growth post-lockdown.