Online market places are causing a change in the e-commerce landscape. For several years we have seen the market share of e-commerce platforms such as Amazon.com grow. This growth is partly due to large investments in brand recognition and making business processes more efficient. As a result, these companies appear less and less on retailers and more on tech companies. It is the technological developments that ensure that they can offer more and more value at a lower price. Something that the consumer is only too happy to benefit from. As a result, we see the market share increasing and it is expected that over 40 years of online purchases will be made via market places. But what does this mean for web shops and how can you benefit from the rise of online marketplaces? You read it in this blog.
What is an online marketplace?
An online marketplace is a place where products from different sellers are offered. Online marketplaces come in various forms. An online marketplace often supports sellers by taking on business activities such as marketing, payments, fulfillment, warehousing and customer service. In exchange for this service the seller pays a fixed amount and / or a commission to the online marketplace.
The most famous market places are Amazon, and Alibaba. One of the largest e-commerce players is Amazon.com.
The power of online marketplaces
Setting up and maintaining an online marketplace and selling goods online is not easy. You have to deal with target groups on both sides of your business model. On the one hand you have to make it interesting for sellers to offer products on the marketplace and on the other hand you have to ensure sufficient traffic to your website. But that is exactly where the power of online market places lies. The great name recognition ensures consumer confidence and because online marketplaces often have a large size, they can invest a lot in making business processes better and more efficient. This ensures that they can offer an excellent customer experience, which is almost unbeatable due to smaller web shops.
Which web shops survive the rise of online marketplaces?
The rise of selling goods online is a threat for many webshops, but not for all. The web shops that will struggle to remain are companies that trade in commodities and products with little unique value. Even poor service and low-quality products are killing for the continuity of a web shop.
In the new e-commerce landscape there is only room for four types of webshops:
1. Online market places
Companies that offer products from other retailers and earn a margin on this. These companies attract new customers with attractive prices and retain customers thanks to the wide range and fast service. We are increasingly seeing smaller market places that offer second-hand or unique products for a specific target group. Starting an online marketplace may sound very interesting, but it is also incredibly difficult to realize.
2. Specialized web shops
They focus on a niche and specialize in offering one product group or serving one target group. These types of companies win customers through in-depth knowledge and high-quality products. Often it is about hobby or work-related products where quality and service are more important than price.
3. Unique products or brands
A selling goods online that is built around a unique product or brand. These webshops often sell high quality products for a premium price. Because of the unique value of the product, consumers are prepared to pay more money.
4. A webshop as an extension
Companies that mainly sell through other retailers and market places, and also manage selling goods online. The focus for these companies is on selling as many products as possible. The advantage of having your own channel is that more margin is left per item sold.
Sell via online market places
The emergence of online marketplaces can of course be seen as a threat, but for many retailers it offers opportunities. You reach an incredibly large audience through online market places and you are not responsible for logistics and customer service.
Benefits of selling through online marketplaces
When you selling goods online marketplace you benefit from :
- Power of overarching marketing
- Warehousing service
- Delivery network and comprehensive delivery options
- Return management
- Customer service
- Financial settlement
- Good customer experience
These are all parts that you can not easily deliver yourself due to a limited budget or limited capacity. But each and every one of them has a big impact on the number of products sold and your final profit. That is why selling through marketplaces can be beneficial, because your customers can offer more service and less time and money on peripheral issues.
There are also web shops that use online market places to expand to other countries. This is something that makes the arrival of Amazon to the other countries even more interesting. Through an online marketplace you can in fact easily offer products in other countries and in this way build brand awareness and discover if there is a demand for your products.
Find new customers
A big advantage of selling goods online is that you reach shoppers who would otherwise never have come into contact with your company. Because they now come across the products at a trusted marketplace, they are more likely to find their way to your own webshop in the future. This saves you marketing costs and you can grow at a low risk.
Build the ultimate range
In addition, you can put together an ideal assortment via your results on marketplaces. You can finally see which products are bought the most and are therefore popular.
Disadvantages of selling goods online
There are two major disadvantages associated with
selling goods online :
1. Loss of profit margin
Many online retailers complain about the high commission that they have to pay. For example, it varies from 5% on selected electronics to 25% on jewelery. In addition, you also pay a fixed mediation fee per item sold. The high commission is therefore the reason for many retailers not to sell on online market places. To determine what is the best choice for you, you have to consider a number of factors:
- How much does running your own webshop cost? Think of: Adwords, online marketing campaigns, SEO optimization, web hosting, webshop maintenance etc.
- How many additional customers can generate an online marketplace? Many retailers are able to sell many more products via marketplaces. They may contribute to the margin, but they ultimately gain more profit because they make less costs themselves and sell more products.
- Do you have sufficient resources to provide consumers with a good shopping experience at all times? Providing a smooth customer experience is essential. Webshops that regularly receive negative reviews and where customers do not come back, have trouble keeping up.
2. Little to no customer loyalty
Consumers who buy your products through an online marketplace are not your customers and therefore you lose out on long-term income. As a seller on an online marketplace you can not approach the customer with offers or messages that have nothing to do with the product they have ordered. The brand awareness of the consumer is also limited to a name on the product page and the packaging in which the article is delivered.
The chance that this person remembers which company he or she has ordered is therefore extremely small. In the short term, you may gain more profit through a marketplace, but you do not build a loyal customer base. You also depend on the decisions that the online marketplace makes and you have little influence on your position with respect to competitors.
3 webshop strategies for the emergence of selling goods online
Do you want to continue selling goods online in the near future? Then you have the choice of 3 strategies:
1. Do it yourself: focus on a niche and build a brand
If you choose not to sell via an online marketplace, it is important that you focus on a specific product or a specific target group. Put yourself in the market as the expert in that field and sell only high-quality products. Do you sell to a specific target group? See which products and services fit the needs of that target group. By fulfilling multiple needs, you not only earn more per customer, but you also create ambassadors faster and more brand awareness.
If you choose this strategy, it is important to focus on customer retention and to be smart with your marketing budget. Use mailings, social media channels and retargeting advertisements and try to make everything as personal as possible. The more customer loyalty you create, the greater the chance that the customer will come back and recommend your webshop to others.
2. Omnichannel approach: use marketplaces with a purpose
As we wrote before, marketplaces have many advantages. The second strategy is therefore to use these advantages and also to work on your own web shop. For example, you can use an online marketplace to sell abroad or to reach many new people in a short time. Because most online marketplaces only charge a commission on sold products, every extra product sold only means more profit. Companies with a high profit margin therefore use this strategy to sell as many products as possible.
Do you choose to also sell via market places? Then make sure that customers who buy via your webshop get even more service. After all, you want to ensure that existing customers purchase your products through your own webshop.
3. Marketplace only: focus on developing and marketing your product
The third option is to sell exclusively through market places. This saves you a lot of work and costs. This means you have more time to develop your products and you can use the money to market your products better. This can be a good strategy for starting / part-time retailers where e-commerce is not the core business.
Are you planning to sell exclusively through marketplaces? Then make sure that you can fulfill the liver promise to the online marketplace. The success of selling via online market places depends to a large extent on the position you occupy on the product pages. If you are unable to meet the delivery promise (delivery time, availability, etc.), there is a good chance that you will fall back into the search results and sell fewer products. In addition, the chance of negative reviews is larger, so you will eventually see your sales fall. Finally, the online marketplace wants to offer the best service and therefore prefers to do business with a retailer who has his affairs in order.
Are you planning to compete with online marketplaces and set up your own successful webshop? Then your shipping strategy is decisive for your success. we know all about it and we are happy to help you. Feel free to contact us for questions!