With ecommerce becoming an increasingly important fixture for retail companies, many are looking at additional ways to potentially increase online revenue. Traditionally, ecommerce success relied solely on the company’s own website. However, more and more businesses are turning towards online marketplaces, such as the hugely successful Amazon and eBay.
The Pros It’s certainly easy to understand the appeal; firstly they offer an opportunity for a company to be featured on a website that receives millions of visits with many online shoppers choosing to use them above a product’s official website. This ‘consumer’ choice is often driven by a belief that bargains can be found and in many cases this belief is true. Both eBay and Amazon offer new and used items side by side and allow their affiliates to openly compete on price. Everything from the headline cost, through to delivery options, can be seen; meaning that the same product can be found at multiple price points, each with a slightly different benefits for the customer to choose from. In addition to price comparison, both marketplace examples are well established and have built good reputations based on trust. Customers know that they are engaging with sites that have strong secure payment options and are protected by governed returns policies. Some affiliates even decide to exclusively use the shop within a shop format; utilising their own site purely as an online brochure.
The Cons While the above Pros are true, searching a little deeper can reveal some negatives that shouldn’t be overlooked. Firstly, while becoming an affiliate means greater visibility, it also means greater competition. Unless you have a registered product that only you can sell, the previously mentioned benefits can quickly lose value. For example, you might be selling a new mobile phone, yet displayed next to your product is not only your competitors listing of the same handset, but also affiliates selling used models. In addition, Amazon themselves also sell directly; essentially becoming your biggest competitor. Amazon monitor sales in order to identify new product opportunities, meaning there is no reason for them not to try and undercut you and keep all the profit. Another side effect is that whilst your products may be reaching a larger audience, your brand may not be. How many times have you purchased from the same seller on Amazon or eBay? In most cases very few, yet you return to the marketplace because you’ve had a good experience. It’s the marketplaces’ brand that continues to grow rather than the individual supplier. Finally, being featured on an online marketplace comes at a price. Much like a traditional market stall seller having to pay for their stall, online marketplace affiliates in most cases have to pay a percentage of the sale price, and in Amazon’s case, a yearly subscription charge as well.
Measuring results So, with the blend of pros and cons mentioned, are marketplaces a hindrance or a help? As with many opportunities the key to success comes through careful research and testing. For example, eBay is an ideal place to sell clearance items where smaller profit margins are acceptable and although Amazon demands more in terms of commitment, there is still an opportunity to sell items that are exclusive to your business. Setting a timescale and carefully monitoring sales and results over the chosen period will quickly determine whether online marketplaces are right for your business.