Online ecommerce marketplaces have been around since 1995 when eBay and Craigslist were founded.
Since then, they have grown in popularity, offering a convenient way for consumers to search for, compare, and buy goods and services from different vendors.
Today, there are countless online marketplaces, including major names such as Amazon and Alibaba, as well as smaller, niche marketplaces. In 2019, shoppers spent $2.03 trillion on the world’s top 100 online marketplaces, this accounted for 58% of all eCommerce sales.
And their influence is only set to grow. New marketplaces are popping up all the time – Facebook recently launched Facebook Shops in the UK, for example. By the end of 2021, the number of digital shoppers is predicted to exceed 2.14 billion globally.
In this guide, we’ll look at how online marketplaces work, the benefits of selling via an online market place, and more.
What is an online marketplace?
An online marketplace is an e-commerce platform, where products or services are sold by a number of different third parties – like the online version of a traditional market.
Popular online marketplaces include Amazon, eBay, Etsy, and Facebook Marketplace, but there are plenty more out there, including many for sellers of really niche products or services.
What are the benefits of selling through an online ecommerce marketplace?
Selling through an online marketplace offers a number of benefits for e-commerce businesses, including:
Easy to get started and maintain
Online marketplaces make the ecommerce process simpler, especially for those who are new to selling online. Because the infrastructure is already there, there is no need to build a website, saving the seller both time and money. Sellers simply need to add and update their product listings.
The more complex aspects of selling, such as payments, are also handled by the marketplace.
Access to an established audience
Because marketplaces are already established and trusted, consumers feel comfortable making purchases from them. As a result, they will often search for products through them, rather than looking for new, unknown eCommerce sites.
The most iconic marketplaces such as Amazon have millions of shoppers searching for products, meaning you don’t have to try too hard to attract potential customers.
Reduced marketing costs
Compared to other selling channels, online marketplaces offer reduced marketing costs. When you sell through an online marketplace, you will benefit from the platform’s inhouse marketing campaigns, improving your reach without you needing to do any extra work.
The challenges of selling through an online ecommerce marketplace
It’s important to remember that there are also some disadvantages associated with selling through an online marketplace.
High competition levels
Because multiple sellers can sell the same or similar products through any one online marketplace, competition is high. You’ll need to compete with other sellers for potential customers’ attention and there’s a risk that you won’t stand out.
In addition to this, your competitors can actually target consumers who visit your product listings and even place ads for their products on your pages.
Many people who buy products through a marketplace think they are buying from the marketplace itself, they don’t realise they are actually buying from a totally separate brand and may never know you exist.
This means, when it comes to buying the product again, they will return to the marketplace, but won’t necessarily buy it from your store.
Fees and commission
Selling through an online marketplace isn’t free – you will usually be required to pay commission on each sale, and potentially fees on top. This eats into your profit margins. However, once you know the costs involved, you can factor them into your pricing.
Online marketplace vs e-commerce site
Online marketplaces differ from standard e-commerce sites in a number of ways.
Firstly, while an online marketplace tends to attract a higher number of visitors than standard e-commerce sites, there are more people selling on the platform, meaning competition is high. When selling through your own e-commerce site, once a potential customer lands on your site, there is no competition, but you need to put more effort in to get them on to your site in the first place.
It is also usually quicker to get set up and start selling through an online marketplace. Unlike a standard e-commerce site, there is no need to invest time and money in setting up your own site, paying for the hosting, and maintaining the site.
However, it’s important to keep in mind that selling through an online marketplace isn’t usually free. You will typically be required to pay the marketplace commission on sales and there may also be fees.
It’s also important to remember that, when you sell through your own site, you create your own, unique brand that buyers can engage with. This isn’t always possible with an online marketplace.
Getting set up on an online marketplace
If you’re considering selling your goods or services through an online marketplace, there are a number of steps to take:
Firstly, do your research. Where are your target market buying products or services likes yours? Where are your competitors selling their products or services?
The next step is to identify the costs involved with the various platforms you’re considering. What are the pricing structures? How much commission will you be expected to pay? Are there any additional fees?
Shipping options vary from platform to platform – some require you to send products out yourself when you receive an order, while others will fulfil orders on your behalf if you provide them with stock.
Once you have a good understanding of the costs involved, you will need to calculate how you would price your goods for each marketplace and see how this compares to your competitors.
Get set up and ready to sell!
All that’s left to do is set up your account and start selling. The set up process will vary from marketplace to marketplace, but they are all designed to be as simple and straight forward as possible.
E-commerce accounting for online marketplace sellers
Once you’re set up and selling, it’s important to stay on top of your accounting. The best way to do this is by seeking the advice of an experienced, specialist eCommerce accountant who will have the expertise to help.
Top tips for boosting your online ecommerce marketplace sales
Once your store is live on your online marketplace, your focus will be on generating as many sales as possible. Here are our top tips for maximising those all-important ecommerce marketplace sales:
Sponsored listings – these will ensure that your listings are highlighted and clearly visible towards the top of search results when potential buyers are looking for products like yours.
Paid ads – using paid ads will display ads for your site in relevant spots across the marketplace.
Social media – sharing your brand’s listings via social media accounts will help direct buyers directly to your store and boost your potential audience. Check out our guide to Facebook ads here.
Product descriptions – ensure your product listings are not only accurate, clear, and engaging to read, but that they are also optimised for search. This means including all the relevant keywords – think about what your potential customers might be searching for when looking for products like yours.
Customer service – always provide the best possible level of customer service to every customer. This will encourage them to return to your online store and recommend you to others, and it will also boost your rating via reviews on the marketplace.
Whether you have a store up and running or are looking for some expert advice on how to get started with your online ecommerce marketplace, our team of specialist e-commerce accountants is happy to chat. Let’s talk and maximise the growth of your e-commerce store.
The best time to act is now.