The increasingly digital world compels businesses to establish an online presence in an effort to be where their customers are. This means considering every means possible to make sales, no matter what online platform will be in use. It is impossible to put selling on a marketplace into the equation, even when you have already set up your own shop.
A marketplace is a good option for those who are just starting out in online selling. Unlike an online shop, an online marketplace requires less time, effort, and knowledge to run properly. This method lets you sell your products without the expense of setting up an online store. It also means more flexibility when it comes to opportunities you can enjoy, including low start-up costs.
So, to sell or not to sell in the marketplace? That is the question. If you want to weigh your options first before leaping headlong into the exciting prospect of an online business, you have come to the right place. We are examining the pros and cons of selling in marketplaces.
Reasons Why You Should Sell in Online Marketplaces
There are various benefits when it comes to selling in online marketplaces. Here are just some of them:
Minimal Initial Investment
Starting your online business in a marketplace is relatively easy and cheap. It does not require a huge initial investment. You can sell your products without having to shell out exorbitant start-up costs such as paying for a designer, technical maintenance, hosting, and other important things that building a website entails.
Reduced Marketing Costs
Many popular marketplaces have such a huge following that you can enjoy a high volume of online traffic. This means you don’t have to spend a lot on advertising. People come in droves because they know that marketplaces have efficient delivery propositions, a broad choice of products, and competitive prices.
If you are looking for a steady stream of visitors, you can count on a marketplace. Of course, running Google ads can do your website well, but selling in a marketplace does away with that requirement.
Aids in Customer Research
Since marketplaces are popular with customers, they often visit the site not just to explore and buy products but also to use the platform in research. Transparency is guaranteed in a marketplace, whether it is the availability of the products, prices, or stock levels. If they want to compare prices and products, they can easily and conveniently do so in one marketplace. They will also find impartial reviews of products and services, which can give them the assurance they need before making a purchasing decision.
Flexible Operation Hours
Time zone constraints and differences that can affect trading hours are thrown out of the equation as most marketplaces are operating around the clock. Customers can easily shop whenever they feel the need to, and transactions can be processed no matter what time it is in different parts of the world. Your shop can be available to your potential customers 24/7.
Efficient and Convenient Logistics
One of the many strengths of marketplaces is the logistics and shipping aspect. Many marketplaces include free shipping in their selling points, usually done in a short timeframe. Fast and efficient shipping can be easily facilitated as most marketplaces provide storage and warehouses for products. As a seller, you won’t even need to lift a finger when making a sale.
Supplement Your Online Shop
Even if you already have an online shop, you can still benefit a lot from selling in a marketplace as it can be an additional channel for you to sell and market your products. It even opens new opportunities for an overseas market as the reach is wide and vast. Imagine getting your products to the world market with millions of potential customers.
Reasons Not to Sell in Online Marketplaces
While the benefits are a lot, marketplaces are not without its own set of disadvantages. Here are some of the reasons why it is not always a good idea.
You Don’t Own the Customers
This is the main caveat of a marketplace: your customers are not your customers. Even if your shop in the marketplace is doing great, it is impossible to export your customer database. You won’t be able to access important data and insights into your customers, including the order logs, purchase frequency, or average invoices. So, even if someone purchases from you, they often believe they bought from the marketplace and not from your shop. This makes it difficult for you to nurture your customers and cultivate brand loyalty.
You Don’t Own the Shop
While the marketplace does not incur costs in website hosting, design, and maintenance, the shop is not technically your own. It is like operating on rented land. Changes in the marketplace are beyond your control. This usually includes increasing fees during holiday months and changing rules and regulations, which can be pretty inconvenient on your part as you cannot control them.
The Competition Is Fierce
Yes, customers abound in an online marketplace. But it also means you are facing fierce competition from other shops, especially if you are selling the same products. It often leads to price wars. You will find it hard to stand out with hundreds of shops competing against you, often giving up on higher profit margins because you will want to attract customers with competitive prices. It becomes even more challenging as there’s not much control when it comes to your brand image.
To compound the problem, marketplaces also sell their own products. This makes them a tough competitor as they have a wealth of data and resources at their disposal, something that you don’t have access to.
Low Profit Margins
Another culprit in your success as an online seller is the probability of low-profit margins. Often, seller fees in a marketplace can be exorbitant. There will be monthly seller fees, per-item fees, closing fees, referral fees, and more. The marketplace often charges huge commissions for every product sold. You also need to remember that the percentage can vary depending on the product type.
Weak Brand Identity
If you heavily rely on a marketplace, you will find it difficult to develop your brand identity. People who buy from marketplaces recognize the name of the marketplace but often forget the specific name of the shop. Even if you get a significant volume of sales, the data will all go to waste because there are less opportunities for brand awareness.
You can’t even export your customer database so you can do retargeting. Unlike owning an e-commerce website where you can highlight and promote your brand, create a solid customer database and nurture them throughout the purchase cycle, and cultivate their trust and loyalty in the process.
Risk of Counterfeit Products
It can be a serious problem to many sellers. Some sellers will resort to selling counterfeits that can diminish the value of authentic products. If you are selling branded products, you will find yourself competing against shops that sell counterfeits for lower prices, all the while passing them off as authentic.
Examine the Benefits
Deciding whether to sell in a marketplace or not requires careful consideration. A lot of factors can influence your choice. Do you want to make it easy and convenient? Are you saving up on costs and minimizing risks? Or do you prefer to keep your eye out on the long-term benefits of having your own shop? Are you a risk taker? These questions will make you consider your choice properly.
Make it a point to weigh your options by taking a look at the advantages and disadvantages that we have presented. You should be able to examine if the benefits are worth the drawbacks.
You may even start by comparing two of the leading platforms in the e-commerce world – Amazon and Shopify. Who knows, you might be able to make it work through patience, perseverance, and determination.