Online marketplaces – the cornerstone of successful retailing
Online marketplaces are the most popular places for online shopping on a global scale. There is not a single retailer that can compete with them in terms of a yearly turnover, and there are more than a few good reasons why this is the fact. Simply, the volume of trades generated on the top online marketplaces makes a largest portion of sales made online in B2C segment. Also, the volume of offers is simply mesmerizing, as there are numerous leading retailers selling there, plus most of the smaller ones. That combination makes them one of the most important channels for anyone who wants to sell online. We will here take a look at the main reasons why this is a trend, what they have to offer and which marketplaces should be considered as best options, with the accent on smaller and medium retailers, as they can benefit the most from these places.
The entire discussion will be split in 3 different segments:
• What are the trends concerning online marketplaces
• What a retailer can get from entering them and how
• Which marketplaces are the most important
Online marketplaces – the trends
The most obvious and the most important trend is that the global online market is growing rapidly, and the main engine behind this growth lies within marketplaces. It is enough just to think of eBay, Amazon, or Alibaba and we can get an approximate idea of the sheer size of those companies and the impact they have on global online selling trends. These companies are present in almost every country in the world, and have long ago expanded their reach from eCommerce sphere. Now they are dictating trends in various spheres of global economy, and that makes the growth indications stable and permanent.
The very fact that these financial behemoths are behind everything that happens in the world of online trade means the future developments can be easily predicted. They have the financial power to turn the online market in any direction they wish and deem necessary, and they have the expertise to predict the future in pretty accurate way. Also, over the years, these huge companies have accumulated human resources that can efficiently execute any strategy the companies come up with.
Smaller marketplaces such as Rakuten or Coolshop are more focused on certain geographies and can provide the better exposure there, but as for the main directions of future developments, the big ones are the right ones to follow. They are capable to take over the smaller providers if these come up with something that would revolutionize the industry. Still, this is not something that is very likely, as the big guys always keep an eye on everything, and are usually much better in predicting and inventing features that will define the future developments.
Online marketplaces – the benefits
Benefits of selling via any eCommerce marketplace mentioned are huge, and they come in several forms:
• Extension of the reach
• Improved branding
• Multichannel capabilities
• Omnichannel capabilities
• Penetration of new markets
Whether we like it or not, there are people who are accustomed to shopping on marketplaces. These potential customers are rarely opting to change their shopping habits, and they are almost exclusively using online marketplaces to find what they are looking for.
It is easy to explain why this is the case, as the marketplaces include more than one merchant, so they are able to pick the one that gives them the best service in the way they want it. The number of such customers is increasing year on year, so being present on the marketplaces is something that is simply essential if you wish to reach them. Even the largest of the retailers worldwide whose yearly turnover is measured in billions of dollars are there. It says a lot about the potential. After all, if it works fort the best in the business, it will most certainly work for you as well (if you do everything properly, of course).
This segment is important both for retailers and brands, but the new brands can really capitalize on the opportunity. Simply, the branding is an operation that really requires massive effort and a lot of investments, especially today when the global market tends to lean towards clustering. Big players are buying off smaller ones and incorporate their services or products into their own portfolios, and that really makes anything related to branding for start-ups pretty hard.
The big corporations have all the financial and human resources they need to easily outplay any startup or small company, and tackling these issues can be really frustrating, and in many cases – futile.
This is where marketplaces can play a big role. The best way to reach millions of customers, and increase brand awareness is lying there. It requires much less effort to open a merchant on the marketplace and exploit their audience to present your brand than to invest in standard marketing campaigns. Also, using marketplaces as a platform for branding generates revenue. Even if you are just starting with the brand, some of the people seeing it will actually make a purchase, and each purchase will generate revenue and profit. This is completely opposite to the standard marketing options and can really give you a kick that will launch you towards the safer waters.
Multichannel online trade became a thing lately in the world of digital commerce. The main idea behind the approach is that the customers can get exposed to your offers no matter what sales channel they might prefer.
If we look back at what was said about size of the marketplaces and the shopping habits of potential customers, it becomes crystal clear why online marketplaces are a backbone of this approach. There are so many of them, and they can be run simultaneously, so every single customer out there can easily be reached.
Of course, there are several technicalities connected to the multichannel trade and you definitely need to pay attention to them in order to simplify the operations. Running sales on each marketplace separately might prove to be too complicated and uncomfortable, so you should think of using the approach which allows you to run them all from a single spot. This allows better control of the operations, and most importantly, allows a unified stock for all channels, which greatly reduces the chances of making mistakes and selling things that you don’t have anymore. This can be pretty upsetting for the customers, so avoiding it as much as possible is always a good idea.
So, how do you reach this? Pretty simple – you should use an integrated approach. Most of the best eCommerce platforms provide connectors to the marketplaces and allow running the operations there and through the standard channel from the same spot. In some cases they provide those marketplace connectors on their own, while in other they use 3rd party services. Whatever might be the case, it is possible to integrate marketplace operations into your standard eCommerce system and you should do that as soon as you have the chance. It will also decrease the need for manpower, as fewer operators will be able to cover all the channels you are using, reduce the costs of running the business, increase profitability, and as we mentioned already – eliminate the potential for making mistakes.
Running several shops on different marketplaces or even shops in different countries within the single marketplace is quite possible in this way, and that gives you the chance to achieve a real multichannel trade setup for your business.
A step further concerning the services you wish to provide to your customers would be entering the omnichannel trade mode. This also requires marketplaces to be involved, but there are some significant differences compared to the multichannel setup.
While in multichannel trade the focus is in simply opening all available channels and reaching customers using any of them, in omnichannel approach it all revolves around the idea of providing a unified customer journey.
In this approach, the customer is allowed to buy anywhere (marketplaces, your dedicated online store, or your brick and mortar shops) and to receive delivery in any way they prefer. It can include standard delivery methods, but also shop online – pick at store, buy in store – deliver to home, and other options.
In this way, the conversion rates are skyrocketing, and your business benefits on all levels. Still, this is something that requires really significant investments, and it should be done only if you are capable of covering the expenses. Medium sized companies should think about it, while start-ups and small enterprises are not the ideal candidates to exploit this approach.
New market penetration
Expanding from the country of origin into other markets often proves to be a very hard step for brands and retailers. Simply, the brand awareness in new markets is in most cases non-existent, the investment in opening the new shop are there, and the beginning is often plagued by financial losses.
In order to prevent this, you should consider selling on marketplaces first in those geographies. As we mentioned before, this gives you the exposure, and allows starting branding there at the lowest possible rates.
Even if you are going to launch standard branding and marketing campaigns in those geographies, including marketplaces presence is more than recommended.
The most important online marketplaces
These are just a few most important marketplaces, and short description of benefits they can provide (with the focus to UK based retailers and brands):
This is one of the 3 largest marketplaces globally, and it is present in almost every country in the world. Rules for selling on Amazon are rather strict, but not impossible to follow. If you decide to sell on Amazon, you will need to open an Amazon merchant account and connect it to your native system (in cases when you wish to run the operations from a single spot). Benefits are best seen in gaining a huge exposure to the clients in the geography you decide to operate at.
eBay is another member of the “big 3”. Selling on eBay is much less complex than on Amazon, and it offers also an opportunity to create custom eBay store that will additionally help branding efforts as the store can be customised to resemble the standard store you are using. Due to the ease of implementation and the additional features, paired with a huge popularity of this marketplace, running your business on eBay is definitely one of the most important steps towards the success.
Alibaba has a huge market share, especially in Asia. As a marketplace that is heavily focused on Chinese market, it provides a unique opportunity to reach over 2 billion potential customers that live in the region. Competition is rather stiff there, and the pricing policy (when it comes to merchants) can be quite frustrating for the companies coming from the west, but it should be considered as one of the channels for sales. Consulting your digital consulting agency is a wise move before starting anything on Alibaba.
Although there is a Rakuten global service, this marketplace is mostly focused on Germany, France, and Japan. These are rather powerful and rich markets, and going there can prove to be a very good idea. Rakuten also allows customised online shops, so it can be used in branding efforts in the same way as eBay. Combining the two in certain region can be more than a rewarding option.
Coolshop is a smaller marketplace that originated in Scandinavian countries, but today it reaches out to UK, Netherlands, and some other European countries. Although this is a local marketplace that does not have a global reach, their popularity in Scandinavia and announced availability of customised Coolshop shops make it more than interesting for smaller and medium businesses in case they wish to operate in the area.
These are just the basics on online marketplaces, and any action you wish to take using them should be discussed with the experts prior to engagement. We at Studioworx are at your disposal for these purposes. You can contact us via our website or via phone whenever it suits you.