Many retailers fall into the trap of believing that marketplaces are a pure sales platform instead of an entirely new channel in their own right. According to Web Retailer, 77% of retailers who currently sell through Amazon use multiple sales channels – which could be webstores, physical premises and other online marketplaces. Marketplace selling represents one arm of a bigger, multichannel, picture.
They present multiple opportunities for retailers to increase brand awareness, soft-launch into new trading territories and glean key analytical insights into their business. In this article we’ll look at the different ways marketplace selling can benefit businesses – beyond the sell – and what sort of functionality you’ll require from your eCommerce platform to support them.
Why use online marketplaces?
Marketplace sales are booming. A recent report from Forrester revealed that nearly one-third of online shoppers now begin to search for a product on Amazon, rather than using a search engine. And marketplaces are permeating all verticals – for example, we’re now seeing new categories of commerce in the instances of Fiverr and Upwork that sell creative services.
Marketplaces answer a couple of the challenges every retailer faces when trying to reduce some of the friction that shoppers can experience when in-store – mainly product discovery. Customers want to find the products they want quickly and easily, and retailers can help get their products found by using and being featured on marketplaces. If you can give your customers a seamless marketplace experience, not only do they feel like it is much more of personal shopping experience, but when this challenge is solved at scale, the results are massive – and can help reduce your project costs too. Let’s look at some of the other benefits.
5 benefits of marketplace selling
1. Exposure and increased reach through existing shopping network
Building a loyal customer base can take valuable time. If you choose to use a marketplace, then you’re tapping into an existing network of shoppers who are ready to purchase now. For example, leveraging some of Amazon’s 100 million active users. Not to give Amazon all the credit, eBay has 157 million active buyers. This greater level of exposure ensures your business receives a greater volume of orders, which will offset the cost of being a marketplace seller.
2. Auto fulfilment
Amazon allows sellers to have their product inventory fulfilled by them (FBA) which takes the hard work out of holding and shipping your inventory to customers. This means supplying your inventory over to Amazon but it pays off, with 71% of FBA customers receiving an increase of 20% in orders via Amazon. FBA also gives sellers the option of multichannel fulfillment, so your shopping carts are filled across all channels and other marketplaces.
3. Increased sales over multiple channels
Forrester reported that 71% of consumers say that the ability to view inventory information for in-store products online is very important. However, retailers need to take care when allocating stock across channels to ensure that inventory numbers marry up. Often, marketplaces won’t show true stock numbers. One the challenges to overcome when integrating your channels is that your marketplace presence may not be entirely accurate. Retailers can counteract this by reconciling stock and effectively managing their separate channels to avoid overselling or ring fencing stock that won’t get sold.
Using more than one marketplace is also beneficial when it comes to sales. A recent study by SwitchLabs on why multichannel selling is a win for retailers, shows that customers who use a single marketplace make 38% more than those who don’t have a marketplace, and those with more than one marketplace make 120% more revenue.
4. Explore new markets
Not only do marketplaces expand your brand and product exposure, they also give sellers the opportunity to test out new markets in a cost-effective way. Treated as an additional sales channel to market and sell products, brands can use marketplaces to test the waters by launching digital-first in new territories. Marketplace launches typically generate a lot of usable data, so use this data to make a more informed decision before launching a dedicated website or physical store in a new country.
5. Sell old stock
This is a simple and typically cost effective way of disposing of old or unwanted inventory – as well as a great way of advertising your brand cross-channel. Argos are a good example of this, recently joining forces with eBay to develop their Argos eBay Outlet, which allows them to sell old stock on the online marketplace. While they also sell new stock, older – or clearance – stock is clearly noted.
Things to consider when looking at marketplaces as a new channel
Adding marketplaces to your multichannel eCommerce strategy means a bigger audience and new, exciting geographies for your products. The marketplace model allows for increased product availability without inventory constraints, improved service and product choice for customers. But setting up and selling on a marketplace is technically complex. Here are just five things you need to consider:
- The marketplace’s performance: As the merchant, the first thing you should do is check the analytics behind a marketplace. Check where the traffic is from location-wise and any pertinent spikes. You can do this using popular platforms like Google Analytics, which can be integrated into your Amazon webstore.
- Product and customer fit: Which marketplace you decide to sell on should fit your product base and also provide a viable channel that your customers (in each region) will want to shop on.
- System, access and control: You’ll never have the same amount of control as on your own website but you can integrate your interface. Each marketplace also has its own house rules that locks how many listings you’re allowed and whether you can cross-promote on social media channels.
- Fees: The main reason you’d join a marketplace is to boost sales. The path to boosting those sales will vary from business to business but it’s easy to forget that marketplaces are not lead generation or customer acquisition channels. You’ll need to factor in transaction fees as well as listing fees per marketplace, shipping fees and advertising.
- Linking your offline and online channels: Marketplaces have the potential to change the way your business operates by providing a link between your offline and online channels. For example, if a product does particularly well in the marketplace, then it could also be offered as a physical product in-store too. Using the online marketplace to encourage customers to the store is a great way of reducing costs – like Click and Collect.
eCommerce platform functionality
Importantly, your eCommerce platform has to support marketplace selling. If you’re considering delving into international markets, then you’ll primarily need to make sure that your platform integrates with your chosen payment gateway and accepts the country’s currency (or currencies).
- Custom eCommerce design and development
- Easy eCommerce customisation and integration capabilities
- B2B and B2C portal development
- Third Party API and web services integration
- Payment gateway integrations
- Logistics and shipping integration
- Multi-store architecture
- Custom checkout with assisted checkout and one-step checkout
- ERP Module Integration with appropriate ERP systems
- Plug-in and module development
- Categorisation and product mapping
Explore international trading
Earlier in 2015, Amazon opened a store on Alibaba’s online marketplace, Tmall. The strategy behind this was to expand Amazon’s international trading arm in China. Even for a massive business like Amazon, external marketplaces are necessary. Research shows that 95% of UK retailers are already selling via online marketplaces with almost half using them to trade overseas.
While Amazon might be the first marketplace we all think of, there are plenty of other influential ones – Sears, Ozon (Russia), Tmall and Rakuten (Japan). Using these marketplaces is a relatively risk-free way to test products in new cultural markets. You can sell quite cost effectively too as you won’t have to invest in local warehouse space.
Choosing which marketplaces you feature on is important and shouldn’t be judged the same as Amazon, who are all about quick purchasing decisions. Others, like Japan’s Rakuten, are content led, focusing more on information and advice on products. You’ll also have to manage expectations when it comes to international delivery. To meet customer expectations, you might have to consider setting up separate business units that deal solely with international trading.
If you’re looking to test products in new waters, research cultural differences as misunderstandings can be costly. And expect competition to be fierce in these markets – don’t forget that you still need to provide a seamless shopping experience that generates sales rather than reduced price tags. External marketplaces bring opportunity for innovation and expansion and will help develop your online and multichannel markets.
Managing your products on different channels can become tricky. All marketplaces have their own set of requirements, categories, and rules when it comes to listing products – Amazon and eBay don’t set the rules for this. You might also only be able to sell certain products to different channels and listing can be a labour intensive exercise that requires an entirely dedicated team. The solution? Putting a robust product information management strategy in place.
Every retailer’s end game is to make profit and delight their customers. A marketplace should gain customer traction and please customers so much that they inform their friends. Product experience should therefore be exceptional, thought out and executed flawlessly. This should include front-end user experience (the website, customer service, ratings etc), and continue into back end delivery. All these aspects should work in a perfect harmony so you’ve created a “brand away from brand” experience, which encourages customers to adopt new purchasing behaviours.