The growth of online marketplaces such as Amazon and eBay means that it is entirely possible to build an online business without having a website. Many brands on Amazon are known as ‘FBA brands’ as they only sell through Amazon FBA. Online marketplaces should be part of every online retailer’s marketing mix as they have a lot going for them:
- Easy to set up. Little or no technical ability is needed to sell on online marketplaces.
- Massive, international customer base. When selling on a website, a seller must generate their traffic, but you get access to their enormous audience in exchange for a commission on marketplaces.
- No upfront fees. Most fees are charged on a commission basis, with no listing fees.
- Secure for buyer and seller. The marketplace takes charge of vetting buyers and seller and accepting payments, providing both sides with peace of mind.
- Support for sellers. Marketplaces offer added services such as postage which helps merchants to run their businesses.
However big marketplaces are, they are only part of the eCommerce ecosystem. Whilst online marketplaces are a fantastic way to start selling online, they have distinct disadvantages:
- Restrictive policies. When selling on marketplaces, the seller is bound by marketplace rules. These can restrict certain otherwise legitimate behaviours
- High fixed fees. Amazon charges 15% and eBay about 12% of every transaction
- Customer communications. Marketplaces typically prohibit their merchants from marketing directly to customers, so opportunities to encourage repeat business opportunities are limited. You do not ‘own’ the customer.
- (Too) Highly customer focused. One of the reasons why customer like marketplaces is that they are highly customer focused. Consequently, they make it easy to return items and dispute transactions.
- Unaccountable. It is possible to fall foul of marketplaces rules and have your account restricted or closed permanently. If you are solely dependent on marketplaces, that would be a disaster. It does happen. Be afraid.
By launching an eCommerce site, you can open new channels for your business and attract new customers. The table below compares the selling on a website and an online marketplace:
|Fees||None (payment provides will charge 1-3%)||5-20% eBay 7-17.5% Amazon|
|Marketing||Retailers do their own marketing||Market place drives traffic to listings via its user base.|
|Risks||Low||Marketplace closure, delisting or change terms and conditions|
|Technical requirements||Some technical knowledge needed to set up a website||Limited knowledge needed|