The presence of third-party marketplaces are becoming increasingly more abundant. For the first time ever, Amazon has outpaced search engines as the first place a consumer product search originates.
Your initial reaction may be that it sounds like a no-brainer to list your products on a marketplace, especially Amazon. While this may be the case for some, others may want to think it through before jumping in head first. You need to consider what you want to get out of it and what you’re willing to give up.
Should I sell my products on a marketplace?
Great question! …and the answer is “it depends”. You must first determine if a marketplace fits into your overall go-to-market strategy. Whether it’s moving odd lots, old lots or big lots, take time to weigh the benefits and weaknesses of selling on a marketplace. It’s also helpful to think through if your customers buy products like yours on marketplaces and if your competitors sell in this channel.
- Grow sales
- Reach new markets
- Quickly build brand/product awareness
- Mitigate fraud risk
- You don’t own the customer
- Limited control of customer experience
- Selling costs can be prohibitive
- High support requirements
Which third-party marketplace is right for my business?
Each third-party marketplace has its own system, processes, limitations and quirks. With so many options, you need to ask yourself which marketplace(s) fit your target market, product mix, budget and resource capabilities.
Target markets in third-party marketplaces:
Review the product mix offered by each marketplace and the size of their respective audience to see what best fits your products. Request that the marketplace supply you with demographic data of who shops on their platform to see if it aligns with your target market and/or customer base. Amazon, Ebay, Wal-Mart and Jet.com offer a broader assortment of consumer goods (i.e. books, consumer electronics). However, if your product mix fits a specific niche, there is a chance a third-party marketplace exists that caters directly to products in your category. Crate and Barrel just extended their website to partners, creating a curated niche marketplace for home goods. Newegg offers automotive suppliers, electronics and sporting products, Rakuten.com specializes in computers and electronics as well, but also has home and garden and health and beauty. Poshmark is a niche marketplace of fashion goods that started as a way for people to sell unwanted items from their closets. Houzz is a Pinterest-like site focused on home remodeling. Marketplaces aren’t just for consumer products. Amazon Business and Alibaba offer specific marketplaces geared more toward the B2B business segment.
Be sure to research marketplaces to ensure they cater to your specific types of products and customers.
From a product mix point of view, this circles back to your go-to-market strategy for the marketplace. Some companies decide that old models, discontinued items, or underperforming items are where they start on their third-party selling journey. This strategy allows you to learn more about the platforms and how your product categories work within them. If you are a brand or manufacturer, these types of products are also usually low risk from a channel conflict perspective.
If you don’t have anything in that category, the next place to look would be your standard stock items. Regardless of what you list, review listings to see if similar or the exact same item exists on marketplace, find out the going rate and determine if you can compete.
Whether you have great pricing from a vendor, are the manufacturer or have some other built-in advantage, determine the items that can help you drive sales out of the gate.
Budget – Finding the Goldilocks zone in third-party marketplaces:
Just as critical as product fit, be sure to closely review the cost of selling on the marketplace. Marketplaces make their money by charging the seller a fee to list a product and in most cases a commission on what you sell. Review the marketplace list pricing of products that’s in line with what you want to offer. Knowing these pricing and margin variables is crucial to ensuring that you don’t price items too low to clear overhead or too high and not win enough orders.
What complicates things is that most platforms won’t let you list items for a higher price than you sell them for on your website, meaning you can’t raise your prices on the marketplace to account for their fees. You also can’t create a price war with yourself to push traffic to your site by undercutting your prices on a third-party marketplace. So, if your prices are already rock-bottom, your margins just got that much tighter.
While also reviewing costs to sell, look to see if the marketplace offers advertising to help promote your offering. For instance, Jet.com and Walmart.com don’t allow advertising, however Amazon and Ebay do. Amazon’s advertising is on a cost-per-click basis, similar to Google Adwords. Ebay’s advertising is unique in that they have different rates per category. With Ebay you also have the option of making your listing stand out with upgrades such as bold text, larger pictures and many other options.
Selling on a marketplace can be lucrative but make sure you understand all the fees necessary to successfully compete.
Similar to running your site there are things you need to do to support selling on a marketplace. If you’re selling a small handful of items this can be manageable but as your listing grows so does the work to maintain them. These support requirements include product setup and maintenance, managing pricing, inventory and order fulfillment logistics. Some of the same tactics to be successful on your site apply to a marketplace. For example–good images and clear descriptions leveraging keywords for search optimization.
It’s critical to understand how you will manage inventory that is potentially shared with your other channels. Your strategy here may vary depending on the types of products you are selling. If you are selling discontinued, slow moving or closeouts product lines with limited and finite inventory you may need to update said inventory more frequently than if you are selling your primary product lines with high inventory availability.
Keep in mind accurate product and inventory information, prompt order fulfillment, return handling, customer reviews, all these and more go into the marketplace’s measurement of customer service scores. If you fall below an acceptable level, you’ll get removed from the marketplace. So, make sure you have a plan for rock solid fulfillment and a strategy to influence your ratings.
If after reading all of this you’re thinking this is a lot to plan for, you’re right! We recommend you start small, perhaps limited product lines and only one or two marketplaces to begin with. If you find that third-party marketplaces are a good fit for your business, then you’ll need a strategy to expand. You’ll need to staff up or look at third parties like Channel Advisor and nChannel, who provide services and tools for everything from syndicating products and synchronizing pricing and inventory to centralized order management.