Selling on online marketplaces: strategies and alternatives

Online marketplaces are changing the e-commerce landscape. For years, the market share of platforms like Amazon and Zalando has grown, driven partly by heavy investment in brand awareness and efficiency gains in how they run their business. As a result, these companies are shifting more and more from retailers toward technology companies, because it's technological development that lets them offer ever better quality at ever lower prices, something consumers greatly appreciate. The market share of online marketplaces keeps climbing, and a large share of all online purchases is expected to run through marketplaces in the coming years. But what does that mean for online stores, and how can you use the strengths of a marketplace to your advantage? This guide answers that question.

What is an online marketplace?

An online marketplace is a platform where many different products from different sellers are offered online. There are various types. For established online retailers and newcomers to e-commerce alike, a marketplace offers the advantage of not having to handle things like marketing, payments, fulfillment, storage, and customer service yourself. In return for this service, sellers pay the marketplace a fixed amount and/or a commission.

Which online marketplaces are there?

The best-known online marketplaces include Amazon, eBay, and Zalando, alongside international giants such as Alibaba and AliExpress in China and Rakuten in Japan. There are also many regional and niche marketplaces. To give you an overview, here are some of the types of marketplace you'll come across:

• Amazon: the market leader in many countries.

• eBay: one of the largest marketplaces, well known for used goods.

• Etsy: a marketplace for handmade products, vintage, and unique items.

• Alibaba and AliExpress: major marketplaces originating in China.

• Zalando: a marketplace for fashion and apparel.

• Rakuten: a leading marketplace in Japan, active in several markets.

• Niche marketplaces: platforms for refurbished electronics, second-hand and luxury fashion, or sustainable products.

How do you find the right online marketplace?

As you've seen, there's a large number of marketplaces, and choosing the right one is a decision only you can make. Factors to consider when choosing the optimal marketplace are:

• The level of fees: marketplaces act as intermediaries between you and your customers, and they want to be fairly compensated, usually through a commission on each sale and often an additional base fee. Check the fees before deciding on a marketplace.

• The reach and focus of the marketplace: look into the product focus and reach of each marketplace. Do you offer suitable products? A marketplace for sustainable products, for example, is only right for you if that's what you sell.

• The selling model used: most marketplaces work on a fixed-price basis, but some, like eBay, also use an auction model where the highest bidder wins, which means more planning risk for you as a seller.

• Usability: to list and sell your products efficiently, the marketplace's handling and usability should meet your needs.

• Competition: how much competition is there on the marketplace? Do you have the capacity to hold your own? The goal is to find the sweet spot: the marketplace should suit your product type but not be too crowded.

• The right integrations: if you also sell through your own online store, make sure the marketplace offers the right integrations. This saves a lot of work in handling your inventory and order management.

The strengths of an online marketplace

Setting up and running a marketplace yourself isn't easy, and you have to involve audiences on both sides of the business model. On the one hand, it has to be attractive for sellers to offer products on the marketplace; on the other, enough traffic has to be generated to the site. That's exactly where the strength of marketplaces lies. Their strong name recognition builds trust with consumers, and because marketplaces are often large, they have the resources to invest in continuously improving and streamlining their operations. This lets them offer an excellent customer experience that smaller online stores essentially can't match at that scale.

Which online stores can survive alongside marketplaces?

The rise of marketplaces is a threat to many, but by no means all, online stores. Stores whose goods offer few unique selling points and little unique value have a particularly hard time, and poor service and low product quality also endanger a store's survival. The new e-commerce landscape leaves room for four types of online store:

1. Online marketplaces

Companies that offer other retailers' products at a margin. With attractive prices they win new customers and retain them with a broad range and fast service. We increasingly see smaller marketplaces offering used or unique products for a specific target group. Creating a marketplace may sound interesting, but implementing it successfully is very difficult. Examples include second-hand fashion platforms and handmade marketplaces such as Etsy.

2. Specialized online stores

Specialized stores focus on a niche and on offering a particular product group or serving a single target audience. They win customers over with deep expertise and high-quality products, often in the hobby or leisure space, where quality and service matter more than price.

3. Unique products or brands

Online stores built entirely around a specific product or brand. These stores often sell high-quality products at premium prices. Because of the unique product value or selling point, consumers are willing to spend more.

4. An online store as an extension

Companies that sell mainly through other retailers and marketplaces while also running their own online store. Their focus is on quantity: selling as many products as possible. Having your own sales channel has the advantage of a better margin per item.

Selling on an online marketplace

The rise of marketplaces can be seen as a threat, but it also offers many retailers good opportunities. Through marketplaces, online sellers can reach a very large audience without having to handle shipping logistics or customer service themselves.

How do you place your products on a marketplace?

As with traditional markets, many sellers on marketplaces often want to sell identical goods. So simply listing your products is no longer enough; with heavy competition, you have to draw attention to yourself and your products. These tips help you place your products successfully:

• Create detailed and creative product descriptions: alongside an accurate description, you need to stand out with creativity, which creates emotion in customers and moves them to buy.

• Produce professional, appealing images: the more content, the better. Professionally created product images complement your description and leave a positive first impression.

• Provide as much product data as possible: like online stores, marketplaces face the challenge that customers can't judge the goods as well as in a physical store. This shows in the high return rates in fashion, where the right fit often only becomes clear when trying on. Prevent this by giving precise details on size, weight, and so on.

• Optimize for SEO: if customers can't find you, they won't buy from you. Make sure you list your products with SEO in mind, so you appear near the top of your potential customers' searches.

Advantages of selling via a marketplace vs. your own store

Selling via a marketplace offers advantages such as:

• The positive effect of the marketplace's overarching marketing

• Storage service

• A delivery network and extended delivery options

• Returns management

• Customer service

• Financial processing

• A satisfying shopping experience for customers

These are all advantages that individual sellers often struggle to access on a limited budget or with limited capacity, yet they clearly influence the volume you sell and the profit you make. Selling via marketplaces can benefit you because you can offer your customers more service while spending less time and money on everything else.

International sales

Some online stores also use marketplaces to expand into other countries. Through a marketplace you can offer products in other countries without much hassle, raising your brand awareness while testing whether there's demand for your offering in that market.

Finding new customers

A big advantage of marketplaces is that you reach buyers who would otherwise rarely come into contact with your business. Because these new customers find your products on a marketplace they know and trust, they're more likely to find their way to your own store later. This saves marketing costs and lets you expand with low risk.

Building your optimal assortment

With the marketplace's sales data you can build an assortment that's optimal for you and your customers, since you can see exactly which products are bought most often and are therefore most popular.

Disadvantages of selling via an online marketplace

There are two main disadvantages to selling via marketplaces:

Lower margins

Many online retailers complain about the high commission they have to pay. Commissions typically range from around 6.5% to 12.5% depending on the product category, often plus a fixed monthly base fee, and sometimes additional fees such as a link to your own store. The high commission is a reason many retailers choose not to sell on marketplaces. To work out what's cheapest for you, consider a range of factors:

• How much does running your own store cost you? Think of search ads, online marketing campaigns, SEO, web hosting, store maintenance, and so on.

• How many extra customers can you win by selling on a marketplace? Many retailers can sell larger volumes via marketplaces. Although the margin is smaller, they still make more profit because they have lower costs and can sell more.

• Are your own resources enough to always offer a satisfying shopping experience? Smooth customer service is essential. Stores that regularly get negative reviews, and that customers don't return to, put their survival at risk.

Little to no customer loyalty

Consumers who buy your products via a marketplace aren't your own direct customers, so in the long run you record lost revenue. As a seller on a marketplace, you may not send the marketplace's customers offers or messages that aren't directly related to the order. On top of that, your brand awareness with the buyer is limited to the name on your product page and packaging. There's therefore little chance that marketplace customers will remember which seller actually offered the product they bought. In the short term you can make more profit via a marketplace, but you don't build a loyal customer base, and you depend on the marketplace's sales strategy with little influence over your position against competitors.

3 strategies for online stores to deal with marketplaces

Want to keep selling successfully online? Then you have three strategies to choose from:

1. Do it yourself: focus on a niche and build a brand

If you decide not to sell via a marketplace, it's important to focus on a specific product or target audience. Position yourself as an expert in the field and sell only high-quality products. Selling to a specific audience? Check which range of products and services matches that audience's needs. By serving several customer needs, you not only increase revenue per customer but also gain "brand ambassadors" faster, who spread the word about your store.

If you choose this strategy, it's important to focus on customer loyalty and use your marketing budget wisely. Send mailings, use social media channels and retargeting ads, and make everything as personal as possible. The more loyalty you build, the greater the chance the customer buys from you again and recommends your store.

Personalization shouldn't end at checkout, so consider creating your own tracking experience too.

2. Omni-channel approach: use the marketplace strategically

As we've described, marketplaces also offer big advantages. The second strategy is to use those advantages while also working on your own store. For example, you can use a marketplace to sell your products abroad or reach many new buyers in a relatively short time. Since most marketplaces only charge a commission on sold products, every extra product sold means more profit, which is why businesses with high margins use this strategy to sell as many products as possible. If you sell via marketplaces, make sure customers who buy directly in your store get even better service by comparison, since you want to ensure customers buy your products mainly through your own store in future.

3. Sell only via a marketplace: focus on developing and marketing your range

The third option is to offer your products exclusively via marketplaces. This saves a lot of effort and cost, leaves you more time to develop your range, and lets you invest more in better marketing. This approach can be a good strategy for startups or part-time sellers for whom e-commerce isn't the core business. If you intend to sell exclusively via marketplaces, make sure you can meet the delivery commitments, since success depends heavily on the position you hold on the product pages. If you fail to keep your delivery promise (delivery time, availability, and so on), you risk slipping down the search results and selling less, and the risk of negative reviews rises, which sooner or later leads to lost revenue. After all, the marketplace also wants to offer the best possible service and prefers to work with reliable retailers.

The right shipping strategy for marketplace and online store

Whichever selling strategy you choose, whether you sell via a marketplace or your own store, it's worthless without the right shipping strategy. Sendcloud offers all-in-one shipping software that lets you optimize your shipping process, and it connects with the most popular marketplaces and shop systems. Why not book a free demo today and see for yourself?