Most sellers are advised to choose only one or two channels to distribute their products. It’s good advice to get good at one before you launch multiple, but what if there are ways to sell on multiple marketplaces without overrunning your resources?
The most common strategy is to have a proprietary ecommerce shop (your own .com) and then launch your product on one big marketplace. But how do you choose which marketplace is the right one for your brand? Are you leaving money on the table if you only choose one?
The Rise of Marketplaces—What is Marketplace Selling?
The US was the first place where marketplaces started—Amazon being the major one. Now there are many more marketplaces, some serve a broad international market and some are localized, serving a single country or region. Plus most of the large retailers have turned their online presence to a marketplace model where customers can shop for products from multiple brands within the same web storefront.
Historically, retailers would purchase products from the sellers at wholesale prices, mark the products up, and manage the entire sales process. That model has been flipped in the marketplace model as marketplaces enable sellers to list their products, hold their own inventory, and manage their own fulfillment and customer service. In exchange, the marketplace charges a small transaction fee, usually a percent of the sales price.
The competition on marketplaces can be stiff, but mostly only for the major ones like Amazon. Sellers who have listed products there for years have their strategy really dialed in. But some of the competition is now coming from the marketplaces themselves, because they’ve started listing their own products as well.
Once all the small brands started listing products on marketplaces, the distributors figured out that they can use the generation to sell direct-to-consumer too, usually white label products. In essence the retailers and marketplace distributors have become brand owners as well.
Social Sites are the New Marketplace
As marketplaces are becoming the search engines of the internet, social media channels are picking up the trend and adding click-to-buy content as well. Consumer buying habits are largely shifting toward mobile sales because people are using their phones and mobile devices for literally everything these days.
Social sites like Instagram, Pinterest, and Tick Tock are all turning transactional. Soon people will have their credit card connected to any of their favorite social channels, so they’ll be able to swipe, click, and buy where they are already interacting (or doomscrolling, or gleefreshing).
What this means for sellers is a lot less traffic to their dedicated .com or brand website. It also means there’s an internet-sized amount of options when choosing where to sell.
How to Quantify the ROI of Marketplace Selling
Marketplaces are more than just a shopping site at this point. Most consumers are using marketplaces as a product discovery tool. Google and Amazon are the sites where most people go when searching for gifts or new products. Even a Google search has now turned into marketplace shopping with Google Shopping.
It’s really difficult to quantify in direct numbers what revenue is made by marketplace selling alone. Because success is largely dependent on search and on how the products and how well they are listed. The place that your products are listed, and how they appear will do more for your brand than any specific marketplace cart checkout will.
Rather than think about your sales volume from any single sales channel, what’s more important is optimizing your product pages for search. Are they listed in the places your target audience will find them? If you’re not where people are searching, your product will not be found, and people won’t buy it.
Find a marketplace with a good ratio of customers-to-sellers as well as customers-to-number-of-products. You’ll have less direct competition which means a higher percentage of sales for the effort.
Successful sellers look at the customer journey. There’s so much competition that if you are not proactive the chances of your product being first in a search is slim. This goes for your own brand .com as much as it does your product on each marketplace.
Which Marketplaces are Right for Your Brand?
There’s one big misconception in marketplace selling: Amazon is right for every brand.
It’s undeniably that Amazon is the biggest in terms of gross merchandise value (GMV), but it’s also the hardest marketplace to sell high volume because there’s so much competition. In 2020 there were an estimated 9.7 million Amazon sellers and 72.8 million Amazon Prime members—do you have what it takes to really stand out? No matter what category you’re in, you’re up against millions of products. Plus it’s hard to optimize for a high ranking page because everyone else is laser focused on their Amazon strategy.
There are many other marketplaces that might be a better fit, for less resources than Amazon. There are vertical-specific ones—for example Newegg or BestBuy have a lot of electronics—consumers might expect that your product will be there instead of Amazon. It’s often easier to compete on these sites. Niche marketplaces are an opportunity that many sellers overlook.
The other variable to look at is region. There are regional marketplaces, like in European countries for example, that should be factored into any international sales efforts.
Common Mistakes Sellers Make With Marketplace Selling
Often sellers try a new marketplace, but don’t know how to optimize their products so they don’t see any traction and leave too early. This mistake is made often and it can be very costly. Marketplace selling is not without effort to ensure your products will stand out.
“Amazon is a big search engine. If you have your own product you need to make sure people can find it easily. It’s better to make sure your marketing budget is spent upfront so that you see the sales velocity go up quickly. Only then will it have an influence on the organic ranking. Then you’ll get the attention you need.”
The other mistake sellers make is essential; you must have your logistics sorted out. It all comes down to customer satisfaction, and getting products to their end-destination quickly and accurately is paramount. Stock levels need to be accurate, shipping needs to be affordable or at least clear, and transit time needs to be extremely accurate. No one wants to pay extra or wait too long for their goods. If you say you’re going to ship it in 48 hours, you have to ship it in 48 hours. If you say it’s in stock, it has to be in stock. These are the factors that will get you negative reviews if you don’t meet your customer’s standards. Negative reviews will hurt your ranking which will lead to a quick decline in search, and consequently less sales.
Working Within Marketplace Rules
One of the hardest parts of marketplace selling is meeting the rules of the platform. Amazon, for example, is notorious for having very opaque rules and changing them with no notice (restricting warehouse space during the holiday season or prioritizing certain types of products during shipping surges).
“Amazon has very strict requirements and targets, in terms of shipping on time and labeling and all the various things we need to comply with. It’s nice to know we can count on DCL—DCL knows how to work with Amazon and that’s all taken care of.”
Some marketplaces have penalties if you sell over a certain threshold. Others will penalize you if you don’t have your customer service sorted out. Often you’ll get a warning first but if you don’t or can’t rectify the situation, your account may get blocked entirely. Having the right partners to help smooth this out is very important.
What are the best tools to be successful on a marketplace? The technology to automate your inventory across channels, plus the expertise to know how to grow your presence. Working with the right partners can give you both of these. A reputable third-party logistics provider will have the experience. They likely support many sellers on marketplaces, so they will already have the systems in place to help you get your product going. Plus by having existing relationships with the marketplaces you want to be on will take the mystery out of trying to figure out how to launch with that platform.
How to Compare Your Performance on Multiple Marketplaces
For ecommerce sellers it can be difficult to manage supplying products to these multiple sales channels. Keeping up with stock levels is extremely complicated when you have inventory to manage for many sites. For smaller companies with limited resources it’s particularly hard to decide which marketplace to work with in order to grow.
“We use DCL for getting products to our retailers, which have some complicated needs, for fulfilling orders that we sell on our website, for fulfilling orders that we sell through Amazon—and all of the technology behind that works seamlessly and has been really great from a business point of view.”
New developments in back-end support make it easy for sellers to integrate with multiple marketplaces. They can automate inventory management and also help pull data to make more informed decisions about sales performance, landing page optimization, and audience engagement. You can see historical data too, which is important to have when managing inventory, forecasting, and with returns management.
If you are looking for fulfillment support we’d love to hear from you. At DCL Logistics we support brands on multiple marketplaces, as well as dropshipping to retailers, direct-to-consumer, and much more.