We are all familiar with online marketplaces – even if what they are and how they work isn’t 100% clear (but it soon will be). If you’ve shopped on Amazon or browsed eBay auctions, you’ve experienced an online marketplace. For retailers, your experience with online marketplaces may have been positive (and lucrative), negative, or somewhere in between. At DotcomWeavers, we are online marketplace experts, whether it’s creating them from scratch or optimizing content on existing marketplaces.
There are many types of marketplaces out there. To become an expert requires research and practice. With a few key insights, most of us can learn everything we need to know about buying and selling on the online marketplaces. In our online marketplace guide we’ll explore:
At the end, we will also provide information about setting up your own online marketplace – but before that:
An online marketplace is a type of eCommerce site where third parties can list and sell products and services. These items usually appear in a vendor-specific web store within the online marketplace. Unlike individual eCommerce sites, the marketplace operator processes the sales transactions. After approval, the marketplace operator alerts the vendor or wholesaler, who fulfills the order (sometimes called drop shipping).
Online marketplaces let users search for and compare a variety of related products from different vendors before buying. Amazon.com is the marketplace that everyone is familiar with, so we’ll use it as an example. The process for buyers is as follows:
Though online marketplaces have been around for almost 20 years, they exploded around 2014 as the primary online sales platform. The best online marketplaces feature highly organized information architecture. This makes it easy for customers to find what they want. The more organized and intuitive a marketplace is, the better the user experience, which means more sales.
Some marketplaces sell general interest products that meet a wide variety of needs, while others are segment specific. Since marketplaces aggregate products, there is usually better selection and availability than in vendor-specific online retail stores. Also, prices may be more competitive.
Here are a few examples of popular online marketplaces (and links to get started selling on them):
We live in a multichannel sales world. To be competitive today, retailers must be agile in how, when, and where they sell their products. For most, this means selling on an online marketplace in addition to their own website. Online marketplaces increase opportunities for product exposure, and many, such as Amazon, benefit from incredible brand recognition.
Amit Bhaiya, CEO and co-founder of DotcomWeavers says, “successful eCommerce businesses need the capability to sell anywhere, but also the discipline to sell in only the highest ROI channels.”
There are many benefits (and some drawbacks) to each online marketplace. So, if you are considering setting up shop in an online marketplace (or three), you should be aware of pros and cons.
New sales channels. Whether you are getting started or are an online sales veteran, marketplaces are a great way to increase your reach. For a fee, you get instant access to a functional sales platform and a new place to sell your products.
Easy setup. Compared to creating your own website, setting up shop in an online marketplace is easy (more on this below). While fees vary from one marketplace to another, the benefits can be worth it.
Reduced marketing costs. Many marketplaces offer marketing or advertising benefits for joining as a vendor. Because marketplaces get (generally) much more traffic than single brand websites, you may find that you don’t have to spend as much on banner ads, PPC, or other marketing endeavors.
Higher traffic. When you sell on a marketplace, you don’t have to worry as much about getting people in front of your product. They will come. Whether they buy is up to how you present it. We’ll explore this in detail, don’t worry!
Streamlined navigation / categories. One of the biggest issues with smaller online stores is that many people have trouble finding what they want. Marketplaces, on the other hand, are usually well organized. They must be to help people find what they want to buy. The easier it is for someone to find something, the happier they’ll be.
Pre-existing sales formula. Building a streamlined sales flow takes time, and many businesses find it more convenient (and cheaper) to use a proven sales formula. All successful online marketplaces have a sales structure that works.
Sales and data reports. If you have an online store, you must track and analyze sales data on top of everything else. Even if you know how the process takes a lot of time. Most online marketplaces do this already and generate a sales report for each vendor to monitor performance.
Credibility. The major online marketplaces – Amazon, eBay, Etsy, etc. – are household names and therefore credible. Millions (or more) people shop on them daily, which means your brand gets a certain level of trust by selling your products there.
Seller fees. On an online marketplace, you may experience increased sales, but be ready for fees. These are usually a percentage of each sale, though the specifics vary by the marketplace. Do your research and make sure the fees are in line with your profit goals. Also, keep in mind that pricing on marketplaces can be extremely competitive and you may find yourself selling for less than you might elsewhere online.
Reduced customer data. When you make a sale from your website, you gain user data to use in future marketing efforts. With most online marketplaces, you cannot export your customer database because you don’t own it.
Wes Rangel, Director of Business Development at DotcomWeavers says, “marketplaces build customer databases at sellers’ expense – so make sure the sales you earn there are worth it.”
One caveat: marketplaces can be a good way to test your products and learn who your real market is.
Strict requirements. The bigger and more credible the marketplace, the more requirements sellers must meet. This means meeting basic (and sometimes tough) delivery periods, content quality, and even customer service quality.
Limited flexibility. One of the prices you pay for an established sales platform is limited control. You must operate within the content constraints of the marketplace, and you can’t take the catalog you built with you.
Competitors are highlighted. In your personal marketplace web store, your competitors – and their similar products – will have a presence. You must compete in quality and price, as well as product details and images. Make sure yours are the best.
Inventory issues. Make sure your business website or inventory management system can synchronize with the online marketplace. Without the ability to connect separate points of sale, your inventory levels can become confused.
Understanding the pros and cons of marketplace commerce is the first step toward building a strong – and profitable – marketplace strategy. It may seem like an easy solution for eCommerce businesses, but certain factors such as product type, competition, fees, and restrictions are important determining factors. For businesses interested or ready to get started selling on an online marketplace, this next section is for you.
So, you want to start selling your products on an online marketplace. Great! Though there are a lot of considerations to make before setting up shop, getting started on an online marketplace is easy.
Step 1: Register your business to sell online. If you’ve already done this, proceed to step 2. If not, it’s time to decide what type of business registration is right for you. You’ll need this information when registering with a marketplace. We’ve included a few common forms of registration below, but depending on what you do and how you do it, others may apply.
Don’t forget your tax registrations, either! For more information about business and tax registrations, click here.
Step 2: Register as a seller on your marketplace of choice.
Once you’re registered and have all documents in place, it’s time to pick your marketplace and register on it as a seller. Most marketplaces will have a section devoted to sellers and an FAQ for how to get started. You’ll need the following information:
Once you input this information and confirm your registration, you’re ready to move to the final step and start selling!
Step 3: List your product
Once you’re registered, you should have your own vendor account page accessible from the seller portal. From there, you can start adding your products for listing on the marketplace. All online marketplaces will have a template where you can create a new product entry, enter product information (size, color, model, etc.), upload images, and publish. You can always do this manually, one at a time. Depending on the marketplace, you might also be able to upload product listings in bulk via spreadsheets.
Remember, competition can be fierce on marketplaces, so you need to make sure your products stand out and engage customers. In the final section of our online marketplace guide, we’ll show you how to create product listings that earn sales.
Before you optimize your products, remember to take advantage of the to create a company landing page within the marketplace. Most marketplaces have this feature. Brand identity is critical for earning customer trust, and you do this by creating an enjoyable user experience through a good story. You’ll likely be able to post brand information, photos, and videos on your company page. This is where your story should start. Talk about the brand mission and values, what the owner’s inspiration was, and why the brand makes a difference.
Next, you should continue the brand story with your products. In an article on Improving Website Performance for More Conversions, we discussed optimizing product content. The same rules apply to your product listings on marketplaces, though you will have to follow the marketplace content guidelines.
Selling on a marketplace makes it easy to assess your competition. You are also in an environment where you can make instant improvements to your content and see how it impacts your performance among competitors. If your product content reads and looks better than anyone else’s, there’s a good chance that customers will opt to buy yours. However, you also need to work hard to maintain your competitive edge. Of course, if the competition has better content, it’s easy to see what you need to change. The challenge is doing it. To reap success in an online marketplace, you must make constant, gradual improvements.
If you have a great idea to aggregate many diverse or segment-specific vendors and products in one place, you may want to create your own marketplace. At DotcomWeavers we’ve created online marketplaces for clients across a variety of industries from scratch. As you saw above, site architecture and user experience are essential. When developing a marketplace, we do extensive market research before embarking on our project process. For a brief look at the online marketplaces we’ve created, check out the links below.
Of course, creating online marketplaces is a big topic g topic that deserves an article all its own, so that’s what exactly what we did. To get complete information about setting up your own online marketplace and how we’ve done this for some of our clients, check out our latest White Paper.
In conclusion, online marketplaces can be great options for businesses that want to test new products or add an additional sales channel. Unlike personal web stores, marketplaces require you to play by the rules – their rules – but the rewards can often be worth it. If you found this article helpful, or you’ve had a positive or negative experience with online marketplaces, please tell us about it in the comments section.
For more information about online marketplaces, eCommerce websites, or to get your project started, please contact us today.