Table of contents
- What are Online Marketplaces?
- Which Online Marketplace is Right For You?
- What e-commerce business model should you adopt?
- Product Data for Marketplaces
- Optimize your Product Content
- Advertising – Optimize Product Information
- Order Fulfillment- What are your options?
What are Online Marketplaces?
Online marketplaces have become increasingly popular over the past few years. Shoppers are flocking to these platforms in huge numbers, for the convenience of shopping in one place. Competition on these marketplaces is fierce, there are a number of sellers on the platform competing for the lowest prices, and the best customer experience, moving products worth trillions of dollars.
Before we dive into the topic, let us first understand what makes online marketplaces so popular. At its core, an online marketplace is an e-commerce site where different sellers can sell different products to a variety of buyers. Buyers and sellers can sign up, make their accounts, browse/list products to buy/sell, and make the purchase/sale on the platform.
Since 2014, online marketplaces have seen an overall growth of $3 trillion in revenue, with more than 50% of global ecommerce sales for the past year recorded solely from these marketplaces.
What top marketplaces take pride in, is connecting the right buyer with the right seller, making the process of buying and selling easy. These platforms often have their own list of conventions to govern transactions, protecting the interests of both the buyer and seller, making it a win-win situation for everyone. A question most people often ask is what exactly do online marketplaces have for shoppers, retailers, and manufacturers, that makes them so popular among all three alike?
The opportunity to sell on these platforms is huge, but what does it mean for brands and manufacturers? Where do they stand and how can they capitalize on it? Let’s find out.
Online Marketplaces for Retailers
For retailers, the greatest advantage of being on an online marketplace is the zero or little cost to start. Instead of starting from scratch to set up their own store, sellers can sign up instantly on a marketplace to start selling to millions of potential buyers. On top of that, various marketplaces aid with logistics, analytics, and other aspects of operations, leaving just the marketing to sellers. Due to ease of setting up and guaranteed results, today there are millions of online retailers on these platforms, moving thousands of products per minute.
Online Marketplaces for Sellers
For manufactures, online marketplaces can become an alternative channel of revenue or extension of their own stores. Partnering up with retailers on these platforms, manufacturers can reach out to far more shoppers and move products in far greater quantities than their dedicated online sites. Presence on online marketplaces also helps manufacturers build a larger digital footprint, get more impressions, better SEO, and ultimately better brand recognizability. But a lot of it depends on the product information being disseminated in the right manner. In fact, improving product content has proven to be a key factor for online growth and expansion.
Online Marketplaces for Shoppers
For shoppers, online marketplaces bring more variety of choices. Instead of visiting several different sites, on a marketplace, they can run searches to find similar products from several brands, searching by the product type, price, features, or other attributes. Looking at different brands at the same time, while comparing features, prices, and deals, shoppers can make better, well-informed buying decisions. This is more or less similar to traditional departmental stores, which were a huge hit back in the days, offering multiple brands under the same roof. Another added advantage of shopping on these platforms is getting great discount deals due to massive competition.
Which Online Marketplace is Right For You?
While manufacturers can get their products listed on hundreds of marketplaces, each marketplace has its own unique benefits and targets a different segment of buyers.
For manufacturers, it is really important to identify what sort of marketplaces are best for business, where not only their potential buyers can be found, but also the retailers they can collaborate with.
Some manufacturers might find niche market places might be more suitable than general platforms, for example, Etsy is a better platform for indie art makers, the chances of a hand made Persian rug being sold on Etsy is higher than that on Amazon, while for most, general marketplaces do the trick.
Some of the biggest online marketplaces that generate the highest number of sales globally include:
These sites combined serve more than 1 billion consumers worldwide. We’ll discuss each one briefly.
Amazon needs no introduction. It is the most renowned online marketplace in the world, and for many reasons. The company has a base of over 300 million customers and a website that offers an array of products.
The platform facilitates consumers through multiple programs such as “Fulfillment By Amazon” which makes it really easy to sort, store, and pack products. Programs as such help save on storage costs, but Amazon charges a high percentage fee for each sale. Additionally, with so many sellers in the marketplace, competition becomes tough and it’s hard to stand out unless of course, your product listing stands out with great content.
Amazon targets different demographics from teenagers to those aged above 60. Most consumers on this website seek a variety of reasonably priced products for immediate delivery. Consumers on the website are those that value convenience and time over anything.
With each second, Amazon records $4,722 in sales. Each minute, those sales amount to $283,000, and this averages to $17 million an hour. 75% of shoppers do most of their shopping on Amazon, allowing retailers to reach one of the largest customer bases for online shopping.
Etsy is the largest online marketplace for craft products. It specializes in handmade and vintage products. With over 54 million members and 35 million buyers, the online marketplace has a well-established customer base.
The website makes it convenient for sellers to create promotions and coupon codes, and for customers to use them. The company also offers Facebook integration, allowing sellers to access a larger audience.
As Etsy’s brand revolves around unique and handmade items, most customers are women that value one-of-a-kind products. Etsy’s co-founder Robert Kalin stated:
“Many people now want their buying habits to reflect their values”.
By providing the feel of a tight-knit community, Etsy enhances customer experience. Deliveries also come with customized packaging which makes the platform an ideal place to order gifts.
The first 40 listings are free for retailers. Following on, the list of rates becomes extensive. The marketplace charges $.20 per item for four months and 5 percent of the transaction fee and other variable fees.
AliExpress is an online shopping website run by Alibaba in China.
With over 700 million online buyers, AliExpress allows retailers to access one of the world’s largest markets; China. The marketplace targets international customers to buy from local Chinese businesses and is second only to Amazon for international sales.
Shoppers on AliExpress’s online website are usually looking for products that are cheap and meet their needs.
In the last year, AliExpress has attracted 104% new users to its website. The biggest edge of AliExpress comes down to its reach to the Chinese market which is incomparable to that of Amazon.
Walmart, one of the largest retail chains in the US, now has a well-established online marketplace as well, that is effectively targeting millennials. The marketplace is adding more personalized elements to the shopping experience for customers, allowing sellers to enhance their offerings through the website.
Walmart has joined hands with FedEx to offer a 37% discount to shipments dispatched through them. This has built a bubble of trust for customers as both Walmart and FedEx are long-time players in the market while making it really easy for sellers and manufacturers alike to move products in high volume.
Through the promise of affordable prices and trusted quality, Walmart suits people from all walks of life. Any person in search of goods for everyday use forms part of Walmart’s target audience. And when a product is marketed the right way, it is guaranteed to lead to purchase.
Walmart’s e-commerce sales form 5% of the total e-commerce sales within the United States. In May 2020, Walmart.com had 438.5 million visits, up from 294.5 million visits in February 2020.
eBay is another leading online retailing website. The company charges a lower processing fee from sellers as compared to Amazon. The website also has great search engine optimization (SEO), increasing the chances of customers landing on eBay products through google searches. Another advantage is high savings on shipping costs, which can go up to almost 52%. The lower shipping costs will make seller listings more attractive to buyers.
Buyers in this online marketplace are in search of the cheapest products that fit their needs. As eBay is one of the oldest online marketplaces, its users have become accustomed to the website. Thus, the website attracts long-time customers looking for specific products, and your product data has to be convincing enough to close a sale.
eBay gives businesses access to almost 168 million active buyers across the world. Brands on the website get plenty of opportunities to grow and expand in 190 markets around the world.
While the marketplaces we discussed above may be the most popular ones, these are not your only options, you do not have to be limited to them. There are a plethora of niche marketplaces that you can further explore to find your ideal customers.
What e-commerce business model should you adopt?
Once you have identified marketplaces that best suit your interests, you need to figure out how to conduct business on them. There are several different models that can be used to sell on these platforms and each has its own benefits and challenges. Choosing the right model is one of the most important factors towards success on these platforms. Manufacturers need to figure out what models best suit their supply chain, budget, time and risk tolerance. The two most popular models are:
1. Directly Selling to Consumer (D2C):
D2C or Direct-To-Consumer refers to when businesses directly sell to end-consumers without involving third party intermediaries. With D2C, a company not only produces its own goods, but also distributes them with their own sales channels.
The concept is not new, businesses have marketed, packaged and sold their products, all in-house, as back as the 16th century. While D2C allows companies to make more profit, the real attraction lies in control over brand reputation, and crafting a dedicated shopping experience.
Medium/Small businesses however cannot not always afford that. A lot of this has to do with budget constraints; the high cost and effort of setting up sales and distribution networks, but with Online Marketplaces things have changed. On these platforms, you can set up shop with hardly an effort, at a very minimal cost, and first importantly get started the very next day.
Today more and more companies are opting for D2C e-commerce and have their own branded stores, but one reality that does not change even online, is that you cannot be present everywhere at all times.
The world wide web is huge and your customers are everywhere, while having a D2C store helps build brand reputation, limiting yourself to just that can make you miss out on a lot of opportunities. Even bigger brands acknowledge the potential of online retail, and the exponential outreach the model offers, which takes us to our second option.
2. Traditional Retail (B2C) :
While D2C is also a subset of Business-To-Consumer (B2C), what’s a more traditional form of retail is manufacturers engaging middlemen to make the sale for them. The middle men, called retailers, make profits on top of the price they pay to the manufacturer for the products. In return they take care of marketing, distributing and selling the product. Retailers far larger in number, can get your products out to more people as part of a collective effort. Shopping Malls, department stores, restaurant chains are all examples of B2C retail. The term really took off with the boom in the dot com era, when people initially started selling services and products on the internet.
What retailers do is provide the manpower, infrastructure, and space that manufacturers can’t afford on their own. Manufacturers alone with a dedicated store may reach thousands of buyers on a marketplace, the number can exponentially increase when retailers are engaged. According to a stat, there are 3.64 million retailers just on Amazon, imagine the reach and amount of products they can move for you. However, one thing that retail sales does not cater to, is the customer shopping experience.
Product Data for Marketplaces
With retail sales, manufacturers may enjoy far more outreach, and in most cases higher sales and profits, but one thing the retailers cannot guarantee is protecting your brand image and the shopping experience around your product. And it’s only logical, dealing with thousands of products from a hundred different manufacturers, there’s only as much attention you can dedicate to each individual item. Often this ends up with Product Information for certain entries left incomplete or inaccurate. Sometimes the product descriptions get muddled up, with the wrong models put up with wrong features. While this may cause:
1. Return and Refunds for the seller, operating at large volume and low-profit, often it does not matter to resellers and retailers if they have to even completely refund or even compensate on top of it for a bad sale. Also for most retailers, insurance covers sales that go raw, and at the end of the day, a bad sale it’s just a number for them, and numbers can be recovered.
2. Reduced Brand Equity and that is something, a retailer directly is not affected by. A faulty, unpopular product can always be replaced by one from another brand. Who this hurts, is the manufacturer, who’s name is plastered on the product. Negative reviews may come pouring in and soon because of inaccurate information on a few certain stores, the manufacturer may find their brand losing market equity.
And that’s not all. Products listed with information that’s not complete or has key features missing may never appeal or engage customers, who have a lot of options to choose from these online marketplaces and may move to a similar product from a competing manufacturer. Another fact that cannot be ignored is many sales after online browsing, happens offline. So your products not being listed with the right product information, cannot only hurt your brand online but also negatively impacts offline sales.
Optimize your Product Content
Manufacturers need to ensure that their products are listed with correct specifications and details, no matter what the platform, and for a very good reason. Customers today won’t stop at one place when they run across your product and will look them up on more channels, compare prices, even compare them with similar products, and when they find inconsistencies or inaccuracies, that reflects really damages their trust.
While it’s impossible to govern each and every listing by third-party retailers, what manufacturers can do is consolidate product information on one single platform, and have that as a single source of truth, a reference for retailers.
This can be achieved with a Product Information Management (PIM) tool. With a PIM, manufacturers can collect product data, optimize it to meet requirements of various online marketplaces, and then put it out for retailers to upload on their platforms. Compared to traditional practices of maintaining excel sheets or pdfs, this ensures retailers don’t have to figure out which files to use for their listings, and chances of making errors are considerably diminished.
With Apimio, you can go one step further and invite retailers straight to your PIM. The platform acts as a communication layer between vendors and retailers, Retailers will have their own dashboard and login, where they can not only view the catalogs made avilable to them, but also get notification when any updates are made.
Furthermore, retailers can configure the data coming from vendors, to go straight to their stores on online marketplaces, so there is no human involvement. Forming a pipeline for product data feeds would completely remove the human element at retailers end, not only making operations easier for them, but also allows manufacturers to govern what goes where and update it whenever they want to. And this requires minimal configuration, with pre-built connectors, a pipeline can be formed within minutes.
Advertising – Optimize Product Information
Another thing manufacturers need to ensure is to produce enough product content to advertise the product properly. Advertising starts from essential product information, attributes such as:
- Product Name
- Model Number
- Product Images
- SEO description and tags
Once you have the basic attributes collected, you need to work on adding more value to content. Add in description videos, product reviews, 3D models, user manuals, product comparisons, and whatever you can, to make your product stand out. Competing on an online marketplace is tough and when you don’t go the extra mile, your product may not stand out. You can again make use of a PIM to collect all the content regarding the product. The added advantage of creating entries on a PIM is that, the system would alert you if you are missing out on some important fields, or do not have the right values in them, with a PIM you don’t need to look out on what fields to add, platforms such as Apimio make sure that your entries are complete, accurate and do not miss out on important details.
Order Fulfillment- What are your options?
Another important thing manufacturers need to think about is order fulfillment. Fulfilling orders on marketplaces can be a bit tricky, since a lot of selling opportunities depend on the account ratings you maintain. For late shipments, you can be fined and multiple failed shipments can take you below the threshold and get your store suspended. For manufacturers making direct sales it’s important to choose for the safest and most trustworthy shipping services. But even engaging retailers may not absolve the duty of fulfillment completely from them. How retail sales is happening online, there are several different models of fulfillment available, the more the manufacturer is involved, the higher the margins of profits for them. Some of these models include:
This is when store owners choose to take responsibility for fulfilling orders themselves. Considered the most risky and costly option, it’s important for sellers to have inventory at all items, and stock in advance for the sales they are making. Further it’s important that the right shipping service is leveraged to get those specific goods safely and timely for customers. For manufacturers, this involves the least risk but at the same time they have no control. Sellers not conducting business properly, ultimately end up hurting not just their reputation but the manufacturer’s as well.
2. Third-party fulfillment:
In third party fulfillment, sellers leverage another organization to store, package and ship their products to the customer. In most cases, the third party is the Online Marketplace itself such as Amazon, eBay and AliExpress. With Amazon’s FBA, sellers can stock products in Amazon’s own warehouse and get their efficient shipping network to dispatch the orders for them. This involves least risk for both sellers and merchants, third-party fulfillment services such as Amazon FBA qualify your products as prime, and customers tend to trust those more than others and are likely to order products with those tags.
Perhaps the most popular form of fulfillment on online marketplaces, this involves sellers owning no inventory, and just listing products on their stores, and making the order with manufacturers for the specific product only when an order is placed on their store. The manufacturer then directly ships the order to the end consumer. This involves least risk for sellers, who do not have to order products in bulk and then face the chances of those products never being ordered. For manufacturers the model allows them to hold onto more profit rates and not cater to bulk discounts. But the challenge it does create for them is shipping the product in time. If done right, this allows them to ensure their end consumers get the best experience and orders are always shipped right from their end. One important consideration to make here is choosing the right shipping service. Some of the most trustworthy include:
United Parcel Services (UPS) is one of the world’s largest courier services that offers several courier solutions catered to an individual or business’s needs. The company is known for its reliability and operational excellence in over 220 countries.
DHL is another global courier service provider that has been a long time player in the market. It is one of the fastest ways to ship products around the world. However, the company’s shipment charges are higher than those of competitors.
- Federal Express (FedEx):
FedEx has operations in over 220 countries and is known for its overnight shipping. Its large scale operations allow the company to provide shipping services at much cheaper rates and is able to provide real-time updates to its customers.
Are you ready to start selling on an online marketplace today? If not, what’s holding you back?
If you are not sure how to manage product information or list products, Get in touch with us today and we will help you set up shop! Or Sign Up for free on APIMIO and check out for yourself how you can efficiently collect and optimize product information and put it out for your retail partners!
And whatever you do, do not miss out on the chances to hit millions of customers and retailers on these marketplaces waiting to purchase/sell your products!