10 min

Online marketplaces

So, you've got a fantastic product (or an MLP!) that you're itching to share with the world.

You want to make a splash and build a brand people will love.

But, where do you start?

You could consider marketplaces.

These digital platforms have become the go-to destination for budding entrepreneurs and established brands to showcase their offerings and attract loyal customers.

We'll deep dive into marketplaces so you can examine if this channel is the right fit for you, your brand, and your customers!

The meteoric rise of online marketplaces

Marketplaces have been around for many years, but their popularity has recently skyrocketed.

There are many factors influencing this change, including the growth of ecommerce, the increasing number of people shopping online, and the rise of mobile commerce.

Let's quickly review what's out there:

  • Some of the most popular B2C marketplaces today are Amazon, eBay, and Etsy
  • In the B2B space, Faire and Alibaba are two of the most popular marketplaces
  • Additionally, there are many marketplaces that serve regional markets - Global Sources (Hong Kong), ThomasNet (North America), DHgate (China), TradeIndia, IndiaMart (India)

It’s important to note that the popularity and availability of these marketplaces varies depending on your location and chosen industry. Make sure to thoroughly research the best marketplace options based on your business's needs and goals.

Pros of marketplace selling

Online marketplaces have many benefits to help ecommerce businesses get started (and thrive!) in a competitive environment.

Some advantages inherent to marketplace selling are:

Access to a large customer base

By listing your product on a marketplace, you instantly gain access to a large pool of potential customers who are already actively looking for products to purchase.

This can help you quickly reach a larger audience and generate sales without having to invest too much into marketing campaigns.

💡Customer insight: Customers LOVE the convenience of shopping from multiple sellers in one place. This means they’re more likely to make a purchase!

Initial low costs of going to market

Setting up an ecommerce website from scratch can be costly and time-consuming, especially for smaller businesses with limited resources.

By selling through a marketplace, you can avoid the upfront costs of building and maintaining your own website, as well as the ongoing costs of hosting, maintaining, and updating it.

💡Customer insight: Lower overhead costs for sellers means the savings can be passed on to customers in the form of competitive pricing—which customers appreciate!

Built-in trust

Over the years, established marketplaces like Amazon and eBay have built reputations for reliability and trustworthiness—that built-in trust goes a long way!

Customers are more likely to trust marketplaces they’ve used before, and are (often) willing to pay a premium for the convenience and security of shopping on a well-known platform.

💡Customer insight: Trust in marketplaces translates to higher customer confidence in your products, leading to increased sales.

Simplified shipping and fulfillment

Shipping and fulfillment can be complex and time-consuming, especially for smaller businesses who may not have access to warehouse facilities (or when your warehouse is a room in your house!).

By using a marketplace, businesses can take advantage of built-in shipping and fulfillment solutions that streamline the entire process and reduce delivery times.

💡Customer insight: Fast and reliable shipping can improve customer satisfaction and loyalty!

Ability to test waters

Marketplaces can provide businesses with a low-risk way to test new markets and business models (like B2B and B2C).

By listing products on a marketplace, you can gauge demand and test pricing strategies without having to invest heavily in advertising or inventory.

Additionally, marketplaces provide access to new geographic markets that may be hard to reach otherwise, allowing businesses to expand their customer base and grow quickly.

💡Customer insight: The diverse product selection on marketplaces caters to various customer needs, making it easier for them to find unique and appealing items.

Cons of marketplace selling

While online marketplaces offer numerous advantages for businesses, it’s important to consider potential drawbacks, too.

These include:

Ownership of first-party customer data

When selling through a marketplace, you often won’t have access to the same valuable customer data you’d normally get from your ecommerce website.

This data can be crucial for marketing efforts and understanding customer preferences, making it more challenging to form long-term relationships and personalized marketing strategies.

Limited (to zero) brand recognition

Marketplaces often prioritize their own branding, leaving businesses with little opportunity to establish their own unique identity.

Consequently, customer loyalty can be difficult to build, and repeat purchases may be less likely.

🚀 Pro tip: Use social media and content marketing to build a strong, recognizable brand identity that connects with customers outside the marketplace.

On-demand delivery options

While marketplaces may offer built-in shipping and fulfillment solutions, they might not provide the on-demand or customized delivery options that customers increasingly expect.

This could limit a business's ability to meet customer expectations and stand out from competitors.

🚀 Pro tip: Explore partnering with local delivery services or logistics providers to offer flexible shipping options when selling through your own website or other sales channels.

Limited control over the shopping experience

Selling through a marketplace often means giving up control of critical aspects of your customer’s experience, like product page design, checkout process, and shipping and handling.

As a result, businesses may (again) struggle to create a memorable and cohesive brand experience.

🚀 Pro tip: Focus on creating a memorable, cohesive brand experience on your own website, where you have full control over design and user experience elements.

Competitive differentiation

The highly competitive nature of marketplaces can make it challenging for businesses to distinguish themselves from other sellers.

Consequently, attracting and retaining customers may be more difficult, as shoppers have numerous alternatives to choose from.

🚀 Pro tip: Offer unique products or bundles, exceptional customer service, or exclusive promotions to differentiate yourself from competitors in the marketplace.

Ballooning commissions and handling fees

Although marketplace fees are typically lower than the costs associated with building and maintaining an ecommerce website, these costs can accumulate over time and negatively impact your profit margins.

Additionally, marketplaces may change their fee structures, making it essential for businesses to stay aware of potential cost increases.

🚀 Pro tip: Regularly review your pricing strategy and consider adjusting prices to account for fees, while also exploring additional sales channels to diversify revenue sources.

Ownership of customer relationship

Relying on a marketplace's customer support can result in losing direct control over the customer relationship.

This lack of control may lead to inconsistencies in service quality, hampering efforts to cultivate a loyal customer base.

🚀 Pro tip: Offer top-notch customer service through your own channels, such as email or social media, to maintain a direct connection with your customers and create a positive brand experience.

The dark(er) side of selling through marketplaces like Amazon

Limited merchant support

Amazon's customer support is primarily focused on customers rather than sellers, which means sellers may face challenges when seeking support for issues related to their account, payments, and/or refunds.

👉 Customer impact: Customers may experience delays or inconsistencies in resolving their issues when sellers aren’t able to access adequate support from Amazon.

👉 Business impact: Sellers may feel frustrated and like they’re wasting time as they struggle to find solutions to their issues, potentially harming their business operations and revenue.

Private labeling of products

Amazon has been known to study successful products on its platform and create its own private-label versions.

This practice can lead to increased competition for sellers, as Amazon's products often receive prominent placement and marketing support.

👉 Customer impact: Customers may benefit from Amazon's lower-priced private label options but might miss out on the variety and uniqueness offered by independent sellers.

👉 Business Impact: Independent sellers face increased competition and potentially reduced sales, making it harder to succeed on the platform.

Limited pricing control

Amazon has a "Buy Box" feature that promotes a specific seller for a given product, which can significantly impact the seller's sales.

The Buy Box feature is largely determined by product price, shipping cost, and fulfillment time, which means that sellers have limited control over their product pricing and may need to lower their prices to win the Buy Box.

👉 Customer impact: Customers may find lower prices due to the competition for the Buy Box, but may also miss out on higher-quality products that are priced out of the running.

👉 Business impact: Sellers may need to lower their prices and sacrifice profit margins to win the Buy Box, which can negatively impact their overall revenue.

Anti-Amazon movement

There is a growing sentiment among consumers, small businesses, and advocacy groups against the ecommerce giant's business practices and dominance in the market.

This movement has gained traction due to various concerns, including Amazon's impact on small businesses, working conditions in fulfillment centers, data privacy, and antitrust issues.

More consumers are becoming conscious of the impact of their shopping choices on local businesses and communities.

As this movement gains traction, the consumer base that won't shop on Amazon is increasing.

Best practices for selling on marketplaces

All-in-all, selling on marketplaces can be a game-changer for your brand—but it's essential to play by the rules and stand out from the crowd!

Here are five best practices to keep in mind when venturing into online marketplaces:

1. Create a unique product listing

Imagine strolling down the virtual aisles of a marketplace, bombarded with an array of products.

What catches your eye?

The key to standing out is creating a unique and compelling product listing. Even though you have less control over your marketplace listing than other sales channels, your product description, images, and even your brand story should still create an emotional connection with your potential customers.

Let's break it down:

Captivating descriptions

Craft concise and persuasive descriptions that highlight the features and benefits of your product. Use language that resonates with your target audience and showcases the value your product brings to their lives.

Short and snappy sentences work like charm!

Eye-catching visuals

A picture is worth a thousand words, they say, and that couldn't be truer in the world of online marketplaces. Invest in high-quality product images that showcase your offering from multiple angles.

Consider adding lifestyle images or videos to demonstrate how your product fits seamlessly into your customers' lives.

According to BigCommerce, 78% of online shoppers consider product images to be the most influential factor when making a purchase.

So, make those images pop!

2. Excellent customer service

Ah, the sweet sound of satisfied customers singing your brand's praises.

Exceptional customer service goes a long way in winning the hearts of your buyers, even when you're operating within a marketplace.

Here's why it matters:

In a survey conducted by HubSpot, 90% of customers rated an "immediate" response as important or very important when they had a customer service question.

Make sure to respond promptly to customer inquiries and address their concerns and/or questions with care. Your attentiveness will leave a positive impression and build trust, fostering a loyal (and loving) customer base!

3. Optimize your pricing strategy

Staying competitive is crucial and how you price your product can make or break your success on marketplaces.

Finding the right balance between profitability and competitiveness is key.

Take the time to research your competitors' pricing strategies. Analyze their pricing models, discounts, and promotions. By understanding the market landscape, you can position your products strategically and offer attractive pricing that entices customers to choose your brand.

4. Leverage customer reviews and ratings

In the digital realm, word-of-mouth travels faster than ever! Harness the power of customer reviews and ratings to build trust and credibility on marketplaces.

Encourage feedback

According to BrightLocal, “46% of consumers feel that online business reviews are as trustworthy as personal recommendations from friends or family.

Actively encourage your customers to leave reviews after purchasing your product.

Offer incentives like discounts or freebies to motivate them. Positive reviews can influence potential customers and sway them towards choosing your brand.

Respond to reviews

Take the time to respond to both positive and negative reviews. Express gratitude to satisfied customers and address concerns raised by dissatisfied customers.

Demonstrating your attentiveness and willingness to rectify any issues can enhance your brand's reputation and loyalty.

Research by ReviewTrackers found that 53% of customers expect businesses to respond to their online review within a week.

So, be proactive and engage with your customers!

5. Implement Data-Driven Strategies

In the digital age, data is gold.

Utilize data-driven strategies to gain insights into customer behavior and optimize your marketplace presence:

Analyze sales data

Dive deep into your sales data to identify trends, popular products, and customer preferences.

This information can guide your decision-making process and help you tailor your offerings to meet customer demands effectively.

Leverage marketplace analytics tools

Many marketplaces provide analytics tools to sellers.

Take advantage of these tools to track metrics like conversion rates, click-through rates, and customer demographics. By leveraging these insights, you can refine your marketing strategies and optimize your product listings for better visibility.

Key Performance Indicators (KPIs) to measure your success on marketplaces

Launching your brand on marketplaces is an exciting endeavor, but how do you know if you're making waves and achieving your goals?

By using the right KPIs to measure your success, you can track your progress and make informed decisions.

Here are six essential marketplace KPIs to consider:

  1. Sales revenue: The ultimate measure of success on marketplaces is your sales revenue. Keep a close eye on your total sales and track the growth over time. Analyze revenue by product, category, or marketplace to identify your top-performing areas and optimize your strategies accordingly.
  2. Conversion Rate: Your conversion rate indicates the percentage of visitors who make a purchase. Monitoring this metric helps you understand how effective your product listings and marketing efforts are in driving conversions. Identify opportunities to optimize your listings, pricing, and customer experience to increase your conversion rate.
  3. Customer Acquisition Cost (CAC): CAC measures how much it costs you to acquire a new customer. Calculate the total marketing and advertising expenses divided by the number of new customers acquired within a specific timeframe. By tracking your CAC, you can evaluate the efficiency of your marketing campaigns and make adjustments to improve cost-effectiveness.
  4. Customer Lifetime Value (CLV): CLV represents the total value a customer brings to your business over their lifetime. It takes into account repeat purchases, average order value, and customer retention. By understanding your CLV, you can identify high-value customers and focus on strategies to maximize their loyalty and lifetime value.
  5. Customer Satisfaction (CSAT): CSAT measures customer satisfaction with your products, services, and overall shopping experience. Utilize post-purchase surveys or feedback ratings to collect customer satisfaction data. Address any issues raised and strive to improve customer satisfaction, as it directly impacts customer loyalty and brand reputation.
  6. Return on Ad Spend (ROAS): If you're investing in advertising on marketplaces, ROAS is a critical metric to track. It measures the revenue generated for every dollar spent on advertising campaigns. Analyze the performance of different ad campaigns, keywords, and targeting strategies to optimize your ROAS and ensure your ad spend generates a positive return.

Key takeaways

Marketplaces offer a vibrant stage for your brand's debut, but success requires a well-rounded approach.

By creating unique product listings, delivering excellent customer service, optimizing your pricing strategy, leveraging customer reviews and ratings, and implementing data-driven strategies, you can maximize your impact and build a brand that customers will love.

So, step onto the marketplace stage with confidence and let your brand shine!

Next, we’ll explore direct-to-consumer (DTC) selling.

Building blocks: Crafting a brand that inspires love
Direct-to-consumer (DTC)
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