We get the question from a number of retailers and merchants… where should I sell my product in online marketplaces?
Online marketplaces are a type of site in which a vast number of various third parties can sell goods. You are probably most familiar with sites such as Amazon, Ebay, Etsy or newcomer Jet.com, to name a few. With the emergence of Jet and Amazon’s recent announcement of sunsetting Product Ads and Text Ads, we’re finally hearing more about a resurgence of shopping marketplaces. With the amount of time people spend shopping online increasing at a rapid rate, it is vital that companies take a step back and ask the important questions as to whether or not selling on in online marketplaces is right for their business.
Many retailers and product manufacturers ask the question about where to sell products online. Do you focus on direct sales? Wholesale relationships? Should you go after online marketplaces like Amazon and Ebay to resell your products? Here are some of the key factors you might want to consider.
As we have watched the ecommerce industry grow and evolve, we have seen the incremental opportunity that online marketplaces create for retailers. However, there are also a few drawbacks to keep in mind as well before taking the plunge.
Benefits of Online Marketplaces
These are just a few benefits of selling in online marketplaces:
- Reach: In the realm of online marketplaces, you have the ability to go after larger audiences that you might not have been able to influence otherwise.
- Consumer Demand: Face it, there are some Amazon “Prime Heads” that refuse to put their credit cards down on other websites. Make it easy for these customers to buy your stuff, you might miss the sale otherwise.
- Overstock: It is also a great way to sell overstocked items or close-out inventory. If a product is no longer in season or slightly outdated, turning to online marketplaces is a great way get in front of a larger audience and find customers who might still be interested. With expanded reach, this ultimately drives more sales.
- Fulfillment: Selling through major marketplaces with fulfillment can save big on operational costs associated with drop shipping. For example, if you send a crate to Amazon, you incur one large shipping cost. They then have to deal with the cost of keeping inventory and shipping each item to the customer.
- Mobile: Using online marketplaces is a great way to capitalize on mobile users.
Drawbacks of Online Marketplaces
There are a few drawbacks to keep in mind when it comes to online marketplaces:
- Lower Margins: Marketplaces will take a cut of everything you sell. This is to cover for their own operational costs and then also, obviously, they have to make a profit.
- Customer Data: When someone buys through Amazon, Amazon owns that customer and you don’t own that direct relationship. This also means that you are not able to reach out to them in the future with emails, promotional offers, etc.
- Price Parity: It can be tough to enforce price minimums, which will make it harder to sell direct.
- Commoditization: When selling through marketplaces, many products become a pricing game and are commoditized since brand presence is only supported through product descriptions on templated pages.
Questions to Ask to Find the Right Online Marketplaces
Are online marketplaces right for you? These are a few questions to ask yourself:
1) Do you have room in your margins to be able to profitably sell on in online marketplaces? Generally these marketplaces are going to take a cut of the profits in order to cover their costs and make a profit.
2) Do you have the inventory and/or the funds to cover the cost of inventory? In certain cases you have to ship a certain amount of your product to that marketplace before the sale actually takes place. This creates a bit of a gamble in the sense that if you pay for the production upfront, and that product doesn’t sell, you see no return on your investment. Always look into what the buy-back policy is for each online marketplace you sell on.
3) How important is your brand presence to you? Is brand more important than sales and reach? Example: The Honest Company, which sells stylish, eco-friendly baby diapers, wipes, and bath & body care, has a huge opportunity to sell their products on marketplaces such as Amazon. However, because they feel their brand values differentiate their product, they choose not to sell in these spheres. Generally, products that sell well because of the full brand experience behind the product are not going to do as well in online marketplaces
Check out how we helped one of our Ecommerce clients increase their revenue by 17%: