Online marketplaces are an option that may be interesting for companies that want to sell on the Internet and generate business in the field of electronic commerce. Marketplaces are a kind of online shopping portal, where you can find products served by different companies, but under the umbrella of a single brand that serves sort of like a shopping mall.
There are many sites that act as a marketplace and buyers often do not realize that they are actually a showcase of a known brand that offers a range of products from different vendors. For example, they are online services marketplaces like Amazon, eBay or AliExpress, which sell products directly as well as allowing third parties to offer their own products to the consumers who visit their website.
These services are interested in third-party companies selling on their site because they can offer a wider range of products and perform better in search engine results. In return, the third party pays a fee for using their technology, brand and customer traffic access, among other services, which can be a win-win relationship for many businesses who want to sell online.
Advantages of selling in an online marketplace
Selling in a marketplace can present advantages for companies who want to start selling online, such as:
- Access to a consolidated channel that has significant traffic of potential customers. Leading to increased sales.
- You can sell under the umbrella of a stronger brand, enabling you to expand borders without investing in marketing campaigns to publicize your product(s).
- It is less technologically and financially intensive as building your own online store from scratch. With online marketplaces there is only the technical effort of integration with the chosen service.
- You reach a higher level of technology at lower costs of maintenance, due to economies of scale the efforts being distributed across multiple parties.
Marketplaces may not be interesting to all businesses, since they are a number of restrictions to them as well. For example, they include:
- The marketplace sets the rules, not sellers. Therefore, there is a risk that the rules change at the whim of a majority or because of pressure from vendors with more power and so there is a chance that other sellers might not get the sales they are looking for.
- The marketplace service has a cost that needs to be inculcated in the final product/shipping charges to ensure that the profit of the seller is not curtailed. This means that businesses with higher margins can offer the same product at lower prices thus driving customers to them and leaving newer competitors in the dust.
- Third-party sellers are usually relegated in priority as the marketplace itself is usually stronger than most vendors. For instance, Amazon allows sellers to offer the same product that it does but they cannot offer it at a price less than theirs.
- The marketplace is dictating the rules on technology and design, which are not always optimal for integration with vendors. Therefore, there is a risk of technological rigidity.
- Payments can be a headache, as the marketplace decides what payment options can be used and who distributes the proceeds within the agreed deadlines. In some cases, these deadlines may be too broad and offer no incentive to the vendors. Furthermore, there may be stringent refund policies that put too much in the court of the customers.
In conclusion, marketplaces are an option to consider to sell on the online channel. Companies that use such a service can access customers that they otherwise would not have without a major effort on their own part.