Online shopping is an integral part of today’s shopping experience, and this fact won’t change any time soon. However, from a consumer perspective, the plethora of buying options online is nothing short of overwhelming.
ECommerce businesses likely feel just as overwhelmed with exactly where and how to sell their products to the right audience, with the main choice being whether to sell products through an already-established digital marketplace or to instead create a unique website of their own.
The numbers speak for themselves, as there is a clear correlation between the growth of platforms such as Amazon and the number of third-party marketplaces available to brands. In 2019, Amazon’s total revenue was over 250 billion with nearly 200 billion of that revenue coming from a third-party Amazon service.
It’s important that businesses understand that there isn’t a one-size-fits-all solution; what works for one eCommerce brand may not be as successful for another. There are many different factors to consider when making the right choice about what channel is right for you, all of which we will discuss below.
What Is the Marketplace?
The ‘marketplace’ refers to a website in which the products sold come from a variety of different vendors. Think of a marketplace as a digital mall that allows shoppers to browse different products from different brands all in one place.
Marketplaces can exist on their own, but they are usually a part of a bigger company or platform that has already established itself as a trustworthy place to shop.
There are three different parties included in a marketplace: the marketplace administrator, the vendor and the customer. Examples of marketplaces that you’ve likely heard of include Etsy, Amazon and eBay. Facebook also has a marketplace that is utilized consistently except the “brands” are Facebook users.
These larger companies are in charge of maintaining and overseeing the website and offering a safe shopping experience for both vendors and consumers. Once a consumer makes a marketplace purchase, the marketplace vendor does not ship the item, the vendor does.
Digital marketplaces make money by charging the vendor a small commission for the transaction. Some marketplaces may instead operate on a flat-fee basis that is paid by vendors monthly. And some marketplaces may operate on a combination of the two business models.
If you’re in the process of establishing an eCommerce company but you aren’t sure where to start, consider the following pros and cons to each marketing avenue.
One extremely popular online marketplace is Etsy. Founded in 2005, Etsy is particularly known for being an arts and crafts marketplace for both eCommerce brands as well as individuals who want a platform to sell their products.
Etsy is not specific to the United States. In fact, it connects millions of people from all over the world, giving consumers access to browse and purchase thousands of unique items, many of them handmade, all at their fingertips.
This particular digital eCommerce platform earns revenue in the following ways:
- 20 cents per listing charged to the seller
- Etsy takes a seller’s commission at a fixed rate of 3.5 percent, however, they allow all vendors to set their own prices
- Additional special features are available to merchants at an additional cost. For example, it allows vendors to set a featured product.
Etsy has become so popular for a variety of reasons; it revealed that 67 percent of users are women, so its initial growth came from women talking about their favorite products and shops with one another. It also allows for developers to create their own Esty-powered apps, allowing for small business owners to feel even more empowered to excel.
The platform has solidified itself as a go-to source for unique items and gifts from small vendors across the world. It brings the idea of “support local” to life.
What’s an article on eCommerce marketplaces without mentioning Amazon? Amazon is such a large part of our culture today that it hardly needs an introduction. But did you know that there is an Amazon Marketplace?
Yes, that’s right. There is a subset of Amazon called Amazon Marketplace and it allows for approved third parties to sell their products to Amazon’s consumers. The marketplace portion of the platform is so seamlessly integrated into the platform that users may not be aware that there is a difference. Here’s what you should know.
When you purchase a product through Amazon.com, you are purchasing items directly from Amazon’s product inventory. Many consumers may not realize that Amazon Marketplace exists because it is so seamlessly integrated into the platform. The money from your purchase will go directly to Amazon.
Amazon Marketplace, however, allows third-party vendors to sell directly under the Amazon umbrella. When a purchase is made, both Amazon and the vendor receive a portion of the profits. Both new and used items are available to purchase from Amazon Marketplace, unlike Amazon who sells only new products.
It’s not surprising that Amazon is particularly selective about what vendors they allow to sell through their site. Plus, only certain countries may participate in selling products on Amazon Marketplace and all sellers need to have financial accounts that are registered properly.
If you’re interested in becoming an Amazon seller, you’ll first need to create a seller’s account. This is the hub in which you will post products and product descriptions, and other relevant details the shopper will seek out when they’re deciding whether or not to make a purchase.
Amazon currently offers two plans: the Individual plan chargers sellers $.99 every time an item is sold. This plan is ideal for vendors who are just getting started on the platform.
The second plan is referred to as a Professional plan and it costs Amazon Sellers $39.99 for an unlimited number of purchases. A referral fee is also collected after each sale, and this amount depends on the product category in which you are selling.
You can read more about becoming an Amazon Seller to better understand whether or not you qualify.
Another example of an online marketplace where eCommerce stores can thrive is eBay. Although eBay hit its peak popularity about a decade ago, it is still a great option for eCommerce vendors who want to break into a new digital platform.
Originally, eBay charged users with an insertion fee that was based on the starting bid for the item in addition to the amount that the item sold for. These fees added up quickly for consumers and made it difficult to keep customers around.
Now, eBay’s model is a bit more lenient, with every seller getting a limited number of free listings on their account. Today, eBay charges a final value fee of 10 percent of the final sale price. Streamlining this process has made it easier for both vendors and consumers to understand.
As a vendor on eBay, brand trust is an extremely important factor to consider. Congregate as many 5-star reviews as you can to help ensure that consumers will feel comfortable making a purchase from your digital storefront.
Running Your Own eCommerce Site
The other alternative to using a third-party is setting up your own eCommerce platform. Instead of selling your products through a shared digital marketplace, you can instead create your own eCommerce site specific to your company.
There are many considerations that should be evaluated when companies are in the process of building their own platforms, such as costs, time to get established, functionality and scalability. While many companies have successfully launched their own eCommerce sites, there is not a one-size-fits-all solution for brands.
Opting to run your own eCommerce site is undoubtedly more time-consuming than using a marketplace, especially at the beginning. However, brands can see big payoffs once they have their own site operating the way they want it to.
For some eCommerce companies, it makes more sense to opt out of third-party marketplaces such as Etsy or Amazon because there are eCommerce platforms like Shopify or Magento that allow for more customization.
The Website is Built in a Familiar Way
Already-established eCommerce platforms allow for small businesses to get up and running regardless of their size. Generally speaking, there are three different types of eCommerce platforms: open-source platforms, software as a service (Saas), and commerce as a service (CaaS).
Small eCommerce startups may choose to opt for a turnkey platform such as Shopify while other more established eCommerce brands may want an open-source platform such as Magento. Regardless of the platform, there is more control over the functionality and aesthetic of your site.
SEO capabilities are also significantly more advanced and tailored to your brand goals through a custom website. Create custom goals, track keywords that are relevant to your brand and create a catalog of content that is linked back to your website. With time, you will begin to see SEO results in a way that you cannot if you lean on a digital marketplace.
Another reason companies may opt out of a digital marketplace is the fact that they can’t show off their custom website. Your website provides important brand insights to your consumer that some companies simply aren’t willing to give up.
It’s an opportunity to connect with your audience through the right visuals, messaging and overall branding. Taking that out of the equation does more harm than good for some brands.
A unique website can match your unique brand. Show off product images, use quirky messaging or make the checkout process a breeze.
Plus, a custom website gives you a leg up in the world of search engine optimization (SEO). HTML experts can play a role in building your site from the ground up, being mindful of SEO best practices along the way.
Benefits of Selling on a Digital Marketplace
On the flip side, there are many different benefits to selling your products on a digital marketplace.
First and foremost, they are booming in popularity. For example, Amazon is expected to own 50 percent of US market shares by 2021. Tapping into these markets will undoubtedly bring more eyes to your brand, as this is where millions of consumers choose to shop on a daily basis.
You don’t need to convince people to leave their favorite sites to click on yours, which is a huge benefit brands should consider. Changing consumer behavior is a difficult part of the marketing process, but digital marketplaces eliminate this need.
Plus, it is a cost-efficient strategy that doesn’t require companies to shell out thousands on marketing in order to see good results. Marketing giants have already established themselves as important players in the field, so tapping into their marketplace can be hugely beneficial to your eCommerce brand.
Brand trust is one of the biggest marketing benefits of selling through a digital marketplace. If you are selling products under the umbrella of a site like Amazon or Etsy, buyers will be faster to trust your company, too.
Generally, consumers trust the marketplace and its offerings, so the fact that your brand is already associated with a trusted vendor like Amazon can give you an immediate leg up on your competition.
Already Browsing these Sites
Consider the popularity of many digital marketplaces. As millions of consumers naturally spend their time browsing through these sites, the chances that they come across one of your products at some point is high. Simply scrolling through product pages or seeing related products can help drum-up interest.
Digital Marketplace Benefits
There are also plenty of marketing benefits to selling through the marketplace. Consider the following.
Fast Set Up
Typical eCommerce vendors need to take the time to set up a functional yet personable site to attract their customers and sell their products. This process can be time-consuming and expensive, further delaying the process of selling to your consumers.
There are many considerations when building an eCommerce website: is it SEO-friendly? Is it representative of my brand? Is it easy to navigate? Does it utilize high-quality, optimized images? All of these considerations can be skipped when selling through a marketplace.
When you tap into platforms like Etsy, eBay or Amazon, the sites are already established. All of the moving parts behind the scenes such as financial transactions, hosting, processing orders, design and fulfillment are already taken care of. Your task list when selling on a marketplace is significantly more succinct.
No Need to Hire a Developer
Traditional eCommerce sites work with developers to build their website to their liking. This process typically takes a significant amount of time, as your website is the most important aspect of any eCommerce business.
When vendors opt to sell through a marketplace, there is no need to build a website from the ground-up. The vendor already has an established, trusted website that users know how to operate. This makes the process of finally selling products to your consumers that much faster.
In addition, many eCommerce sites also need to consider creating different versions of their website in different languages. This can be a time-consuming, tedious and expensive project. With larger platforms such as Amazon or Etsy, language barriers are a non-issue.
Benefits of Running Your Own eCommerce Site
Consider the following marketing benefits of running your own eCommerce site.
Integrate All Marketing Channels
When you have your own website, you can easily display all of your marketing channels in one place. Your content marketing, SEO, PPC, email marketing, blogs, custom graphics and any other marketing channels you utilize, will all be in one spot.
Having all of your information and efforts in one place can not only help improve how you operate and run your site, but it is also easier for consumers when they can find everything they need in one place.
Access to More Analytics
The data and analytics behind your brand can help you make helpful changes in the future. When you run your own eCommerce website, you get access to endless amounts of data to help drive your future digital marketing efforts.
Google Analytics is an especially helpful tool that you can set up to track and report your website traffic. Once you know the data behind how your consumers like to spend their time and money online, you can better meet their needs.
Build a More Personable Relationship
Choosing to sell your products through your own website can have a positive impact with your relationship with your consumers. Their shopping experience is significantly more personable and customized when they browse your products through your website.
If your consumer has any questions or needs more information about a product, they can easily get in touch with you. Digital marketplaces may make it more difficult for consumers to interact with the brand directly.
Digital Marketplace Benefits
Gain Access to New Audiences
The clientele who is browsing websites like Amazon, Etsy or eBay is a lot broader than the group of people that you’re trying to target. If you show up in the right place at the right time, you can tap into a new audience that may not have noticed your brand before.
It Can Be an Additional Marketing Channel
Choosing to market through a third party doesn’t have to be your end-all, be-all marketing strategy. It can simply be another channel that you want to explore to cast a wider net and gain new customers.
So, Is Selling Through a Marketplace or Custom Website Better?
It’s hard to give one clear answer as there are impressive and noteworthy benefits to both sides. Brands may need to experiment with both paths to determine the best approach for them.
One successful approach is to start your digital marketing efforts on a digital marketplace while you continue working on getting your custom site fully functional.
Because there is significantly less work involved in marketing your products through a marketplace, you can begin to market your product as soon as you can. Selling on a marketplace is also usually affordable. While you are gaining traction on a new marketplace, continue to build your eCommerce business and custom website.
As you figure out what approach works for your eCommerce brand, lean into it and capitalize on it.
Finding the right selling method may take a bit of trial and error, but your niche audience is out there somewhere. The right tools and the right team can make all of the difference in the success of your brand. After all, it’s not realistic that you can tackle the needs of running your business while also worrying about your marketing needs.
Our team at Catapult Revenue would be happy to chat with you about your marketing needs and help you determine what approach is best for your company.
If you prefer to get started with a free full marketing assessment, fill out your information to learn more.