There is almost a growth of 60% in Online marketplaces in 2022. Source: Statista
Every day internet users are growing and with it, the eCommerce market is growing exponentially. People are choosing and buying products online with ease to get doorstep delivery.
It has become necessary for everyone to give a facility to their customer to see and choose what they sell online. Because of this, there is a growth of 80.4% in brand websites in the retail market.
With this, online marketplaces have created their position with an aim to make 1000’s of products available on the platform with a variety of choices to pick from, with the responsibility to get it delivered.
Online marketplaces stand equivalent to shopping malls where from one place we can shop for everything.
What are marketplaces?
Online Marketplaces platforms are websites and apps that allow sellers to sell their products online and some also take care of logistics as well. From marketplaces, buyers get the option to purchase products from multiple vendors.
Online marketplaces are creating their own eco-system and user base where everyone can go and sell their products.
Biggest example is AMAZON.
A coin has always two sides. If marketplaces have pros then there are cons as well.
There are ways to overcome the disadvantages of the marketplace which will be answered in the end.
Advantages of Selling product on Marketplaces
1. Ready ecosystem
Marketplaces have already invested a hell lot in creating their ecosystem. Then why not take direct advantage of it? Because creating your own community and ecosystem will take quite a long time and investment.
In business, there is always a smartness to use the existing ecosystem to grow faster.
2. Contact with your target audience
Good marketplaces get heavy traffic from buyers where they come and navigate through products and compare each one to make their final choice.
It’s better to place our brand/product in such a market where we can get direct visibility to the targeted customers.
Along with sales, marketplaces will also help new products and brands to grab the attention of the buyers.
3. Trust Level
We have generally seen buyers trusting more established marketplaces than brand websites.
It’s obvious, as people have more assurance on delivery and product quality. As the marketplaces are the one that are responsible for payment and delivery on time.
4. Low startup cost
Online stores come with lots of challenges and costs.
Cost of development of eCommerce store, server, maintenance, payment gateway charges, SMS gateway, email gateway, backend and managing staff, managing logistics & returns and a lot more.
Running an eCommerce store is not that easy, it comes with heavy maintenance costs. Very few businesses are ready to bear the cost at the initial stage.
So for startups and at the beginning stage of the business, it becomes easy to sell on marketplaces as you only spare money from your profits.
When you're starting a business initial investment is not that high and thus business can sustain itself for a long time.
5. Hassle-free business and better focus
Running an online retail store has many hassles and challenges. A few of them are managing and recruiting the backend staff to manage orders, a strong support system and taking care of logistics.
With marketplaces, all these tasks become easy for you as a major part of it is taken care of by these marketplaces.
When major hassles are taken care of by marketplaces you need to focus on branding, production and marketing.
6. Scalability
Online marketplaces can provide a platform for scaling up quickly. As demand grows, sellers can easily increase their product offerings and reach a larger audience without the need for significant infrastructure changes.
7. Customer Reviews and Feedback
These platforms often have robust systems for customer reviews and feedback, which can be invaluable for improving product offerings and gaining credibility with new customers.
8. International Reach
Marketplaces can provide access to international markets without the complexities of setting up a global e-commerce operation, including dealing with different currencies, languages, and shipping logistics.
Disadvantages of selling Products on Marketplaces
1. Competitive pricing game
Of course, you are not the only one selling on the marketplace. There are different vendors as well selling the same products.
So, we need to have very competitive pricing to sell our product fast.
2. You must respect the rules of the marketplace
It’s their ecosystem so we need to obey and work as per their rules. If you are in different marketplaces at a time you have to train your staff to work as per their rule and based on that you might also need to change your policies as well.
3. High profit margins are taken away
Marketplaces commissions are high and most vendors complain a lot of having very thin margins while selling goods on marketplaces.
At the same time, we have to understand marketplaces have invested a lot in creating their ecosystem and customer base, because of which we have all the above advantages.
4. They are not your customers
Yes! This is the most painful and bitter truth. Whatever x amount of sales you make through these marketplaces eventually these are not your customers.
But, it is not always true. Because if people love your product then they might come after you, finding you.
5. Brand Dilution
Selling on a marketplace can sometimes dilute a brand's identity, as products are presented in a similar format to competitors, making it harder to stand out and establish a unique brand voice.
6. Dependence on Marketplace Algorithms
Visibility and success on these platforms can be heavily influenced by the marketplace's internal algorithms, over which sellers have little control. Changes in these algorithms can significantly impact sales.
7. Limited Customer Data Access
Marketplaces usually restrict access to customer data, making it challenging for sellers to engage in direct marketing or build long-term relationships with their customers.
8. Potential for Copycat Products
There's a risk of exposure to copycats or counterfeit products, especially in marketplaces with less stringent vetting processes.
Strategic Considerations
Diversification: Balance sales between online marketplaces and other channels (like a proprietary website) to mitigate risks associated with over-reliance on a single platform.
Building a Brand Outside the Marketplace: Invest in building a strong brand presence outside the marketplace through social media, content marketing, and other channels to cultivate direct customer relationships.
Leveraging Analytics: Use analytics tools provided by the marketplace to gain insights into customer preferences and buying behaviour, which can inform product development and marketing strategies.
Additional Tips
Above we discussed that these are not your customers but there is a smart way to convert them to your direct customers.
Simply when you deliver a product, place a coupon on your website. So to get that discount they will come to your store. Slowly you can divert them directly to you.
Conclusion
If you love or hate the marketplace, you have to accept that they are helping you get sales, and whatever commissions and charges you pay are eventually to get sales. So think of it as a marketing budget.
Marketplaces are something from which you can’t run away, but find a proper strategy to utilize this platform in a better way. When we say omnichannel marketing marketplaces are going to be a part of it and can't be ignored.
