We live in an age of Total Commerce, where retailers need to be available to customers on whichever channel they prefer to shop and on whichever device they choose.
Adapting to this new competitive landscape is the most pressing challenge facing brands today and it requires agility, strong partnerships, and a clear strategy to turn opportunities into sustainable, long-term growth.
Central to that strategy is establishing a presence on marketplaces and other sales channels. But what are online marketplaces, what are their benefits, and what are the key steps to being successful on online marketplaces?
For many brands and retailers, addressing these questions is essential to thriving in a Total Commerce world.
An online marketplace is a platform that allows shopping from many different sellers. The platform presents the inventory of other businesses to the audience. And it is that access to the audience that is one of the reasons that an effective marketplace strategy is so important.
We are all familiar with the biggest marketplaces, such as Amazon and eBay, but these are just two big players in a diverse and rapidly expanding ecosystem.
Online marketplaces have been a growing force in retail for two decades, but there is no question that the pandemic has given a phenomenal boost to that growth.
According to figures from Mirakl, the sector grew at 80% in the last quarter of 2020, twice the growth rate of the rest of ecommerce. With much of traditional retail disrupted or closed, sellers have had to adapt quickly. The growth has been driven by a 46% increase in the intake of new merchants and a 24% increase in the value of the goods they are selling on marketplaces.
The primary appeal of marketplaces for many consumers is choice. Consumer behavior is evolving fast and, with more and more shopper journeys starting on marketplaces, sellers who do not have a presence are missing out on a potentially huge opportunity. Even at the early stages of the pandemic, research by Wunderman Thompson Commerce in March 2020 suggested that around half of all shopper journeys were starting with a search just on the Amazon platform alone.
For sellers, marketplaces offer a quick route to wider domestic and international audiences. The potential has grown even further as a new pattern of consumer behavior has become more entrenched. Research by eMarketer prior to the pandemic found that regular marketplace shoppers were even more likely to begin their search on a platform and for Amazon Prime members who are likely to make an online purchase every week, the proportion leaps to 8 in 10. During 2020 Amazon added 30 million Prime members in the US to reach a market of over 140 million consumers.
As well as huge marketplaces like Amazon, eBay, Alibaba and Walmart, there are also vertical marketplaces which cater for particular categories.
These more specialist marketplaces can be substantial in their own right and may be crucial for selling certain types of item.
For example, ASOS and Poshmark are well known clothing marketplaces, while Wayfair offers furniture. Within these verticals there are additional levels of specialization, such as Farfetch offering luxury clothing and Wolf & Badger catering for brands that lead on sustainability.
When reaching these diverse audiences, marketplaces provide a buying experience that is consistent across markets. This allows retailers to test new territories and to scale their business at pace, often with reduced risk and minimal logistical effort.
Economies of scale mean marketplaces can sometimes warehouse stock and fulfill orders for a lower fee than retailers could achieve on their own. In fact, it can be as simple as listing products on additional country sites and utilizing services like Amazon’s FBA Export program to deliver the purchase to the customer.
A key for any retail brand establishing themselves on online marketplaces is knowing where to find their core audience.
This could be on one or more marketplaces, which is why many sellers adopt a hybrid approach using one of the large players for general reach and then adding a more niche offering that appeals to a brand attribute.
It often takes time to discover where your potential audience is most reachable and, with only a limited relationship with the customer available via each marketplace, that analysis is most likely done on a cost-benefit basis.
It may take a few months to see numbers go in the right direction, even with large volumes of sales on a marketplace. That is because most platforms will not allow the cheapest product in a category to appear at the top of the listings immediately.
Sellers need to establish a track record of customers receiving goods as promised and providing positive feedback.
Only once a retailer has demonstrated their good reputation and focus on customer service can they expect to see their search listings improve. Some marketplaces have specific customer service targets and sellers may find themselves penalized if they underperform.
From the outset it’s important that retailers invest in backend processes, like automated fulfillment. They will probably need to put in place a number of distribution arrangements so that orders can be processed both by themselves as well as by a marketplace.
This, in turn, means stock needs to be optimally spread around a number of logistics hubs to quickly respond to orders. For UK-based sellers this has become a particular challenge since Brexit as trade with much of Europe involves new trade barriers and custom duties to be navigated. Addressing these challenges in advance is vital for success.
Price remains a central concern for shoppers and essential to a retailer’s competitive advantage. Sellers must also plan around the different cost structures associated with their listings, such as marketing costs, warehousing and returns.
For example, the Fulfillment by Amazon program handles storage and shipping logistics but charges a fee for each item. Etsy’s offsite ads program may promote a brand’s products across high traffic sites but that will incur advertising fees based on the number of sales those ads produce. With each element of a marketplace business potentially attracting these costs, assessing and managing these costs in line with profit margins is also a key requirement for selling on marketplaces.
There are a myriad of niche and national marketplaces for sellers to choose from, but almost any marketplace strategy will include establishing a presence on one of the large, global platforms.
Active Users: 310 Million worldwide
Monthly Fee: $39.99 USD (check local currency)
Thanks to its global presence, increasing popularity and extensive reach, Amazon is a great marketplace to list your products on.
Amazon's full-year 2021 net sales increased by 22% to $469.8bn, so it provides a significant opportunity for you to generate more sales and ultimately grow your business.
Amazon also operates a highly successful fulfilment service, Fulfilment by Amazon (FBA), which enables merchants to reach the marketplace’s most active and loyal customer base – Amazon Prime users.
Amazon is the biggest marketplace in the world and operates 13 international sites, so also provides a lower risk channel to expand cross-border and reach new customers in other geographical markets.
If you're planning on expanding your Amazon business, ensuring that you have the infrastructure in place to scale without error is crucial. We've covered everything you need to know here.
Active Users: 182 Million worldwide
Monthly Fee: $7.95 USD (check local currency)
With 23 international sites, eBay is another global player with 182 million active users worldwide. Commission ranges from 7-11% and the monthly fee is $7.95. The company offers a wide range of tools and resources to help online retailers, including their fulfilment service eBay Global Shipping Programme (GSP). Sellers also have the option to open an eBay Shop to benefit from better branding opportunities and promotional tools.
This is an ideal platform to list on if you sell handmade products, unique designs or vintage goods. With a loyal and growing customer base, Etsy now has over 45 million users globally. While there is no monthly fee, sellers are charged $0.20 per listing and a 5% commission on each item sold. There is also a 5% shipping transaction fee as well as a 15% charge for offsite ads when a sale is made.
With over 25 million active users worldwide, Fruugo operates in 46 different countries and provides the ability to translate product listings into 28 languages, making it ideal for sellers looking to reach international markets. In fact, 85% of sales on the platform are cross-border. There is no monthly fee or listing fee but a commission of 15% is charged on each sale as well as a 2.35% funds processing fee. An additional benefit for merchants is that Fruugo provides automatic currency conversion meaning sellers pass currency risks to the platform.
For more online marketplaces, Linnworks' complete list of online marketplaces across the globe is a good resource. In the meantime, here are some additional marketplaces to expand your reach and grow your business.
For a complete list of online marketplaces across the globe, download the guide below.
Speak to us to find out how Linnworks can connect and automate your commerce operations so you can capture every revenue opportunity.