At first glance, online marketplaces like Amazon and eBay seem to be a creation of mutual benefit. Ecommerce store owners gain increased exposure for their products, and the marketplaces gain an expanded product range without having to increase inventory.
On closer inspection, the mutual benefits remain, but the reality is more nuanced. Should you expand your presence beyond your online store and start selling your products on Amazon and eBay?
The answer is… it depends. A marketplace strategy may be a boon for some retailers and a bust for others. There are a lot of variables that need to be taken into consideration, including the type of products you sell, the intensity of competition in your category, marketplace fees and restrictions, and so on.
There are, however, some pros and cons that apply across the board. In this post, we’ll explore those pros and cons, so you can make the decision of whether or not to sell on marketplaces well-informed as to the upsides and the downsides.
1. Increased Sales
The chief draw of selling on marketplaces such as Amazon and eBay is the scale of their online presence. Amazon alone draws nearly 85 million unique monthly visitors – that’s a heck of a lot of eyeballs! And those eyeballs can translate into higher sales volumes. According to an Amazon executive, sellers report an average 50% increase in sales when they join Amazon Marketplace.
2. Customer Acquisition
Nobody visits Amazon or eBay searching for your store. But they may be searching for – and discover – your products. Products they may not have discovered otherwise, or that they may have purchased from a competitor.
Once you’ve got a customer in the door, even if it is through a marketplace, you’ve got a chance to win repeat business through excellent service and fulfillment. This is especially the case if you’re selling products in a category that encourages frequent, repeated purchases such as hobby supplies or fishing gear.
3. Marketplace Infrastructure
Marketplaces are all about strength in numbers. This is as true for online marketplaces as it is for real world examples like farmer’s markets, shopping malls, and food trailer parks. The variety and all-in-one aspect of the marketplace can draw in lots of customers who prefer that kind of shopping experience. Online marketplaces also bring the additional layer of single-stream checkout and fulfilment support in order to create a seamless experience for buyers.
Cons of Selling on Amazon & eBay
While there are some significant upsides to selling on marketplaces, there are also some drawbacks that need to be considered.
1. Marketplace Fees
Setting up shop on a marketplace can potentially supercharge your sales, but it also exposes you to another cost center – marketplace fees. Most marketplace fees are deducted as a percentage of each sale, and can vary from site to site and even category to category. Before selling your products on a marketplace, you’ll want to make sure you have a good sense of your margins and a firm understanding of the marketplace’s fee structure. In highly commoditized, low-margin categories, the numbers may just not add up. See fees for selling on Amazon, and fees for selling on eBay.
2. Marketplace Infrastructure
While the marketplace infrastructure has many advantages, it’s important to remember that it can cut both ways. Marketplaces don’t exist to help you, but to help themselves. They want the focus to be on the products, not the sellers. And that means they might restrict the degree to which you can brand your presence, communicate with customers, dictate what items you can and cannot sell, and so on.
Additionally, there’s nothing to stop marketplace owners – in the case of Amazon, Sears, and so on – from “going to school” on third-party sellers, identifying popular products and stocking them themselves.
3. Keeping Inventory in Sync
A marketplace is essentially a second point of sale. And one that sometimes can’t be configured to talk to your shopping cart. In effect, both draw down the same inventory, but don’t sync with one another, making it challenging to understand your stock levels without lots of manual reconciliation. Fortunately, applications exist to help you aggregating orders from multiple sources and making sure your inventory stays in sync across all your stores.
How to Choose a Marketplace
As you weigh the pros and cons of selling on a marketplace, it’s also worthwhile to consider which marketplace you would join. The tempting answer is “all of them!”, but each marketplace has its own system, its own processes and limitations and quirks. Learning to navigate those can take time you probably don’t have, so it’s best to stick to one or two marketplaces unless you know you can support more.
Two of the largest and most well-known marketplaces are Amazon and eBay. Amazon’s Marketplace takes the sharper retail tack, and as a retailer itself Amazon provides tools to help third-party sellers become part of a seamless shopping experience, including “Fulfillment by Amazon”, which involves shipping your inventory in bulk to Amazon and letting them handle shipping.
eBay, on the other hand, is essentially a massive marketplace. Where Amazon focuses on the Amazon shopping experience, eBay offers seller tools and features that make it easier for you to feature your brand, as well as sell non-standard items.