Online Marketplace, Direct, or Both?

If you’ve been struggling with this question, you’re not alone. For most retailers, it’s not so much a question of an online marketplace or direct, but of both.

Last year, the top 100 global marketplaces sold more than $1.6 trillion worth of merchandise, an increase of 20%. Globally, the two giants are Amazon and Ali Baba, but more than half of their competitors exceeded the average growth rate.

The Importance of Online Marketplaces

Customers say they feel comfortable visiting online marketing sites and making their purchases. In the U.S. alone, another survey of online consumers reported that 92% of American consumers shopped online. The numbers are even more impressive with Mexican consumers reporting in at 99% followed by Europeans and Canadians at 96%. The top two reasons cited were better prices and discounted or free shipping.

Retailers already sell direct to the public but there are some advantages to also selling through an online marketplace. Besides having an extra venue on which to offer your products, many online marketing sites also open other doors globally. And for consumers who like to comparison shop, an online marketplace affords them the opportunity to make product comparisons on one site rather than hop around to several.

If you’re fairly new and still building up the business, being on an online marketplace saves you the task of advertising. This isn’t to say that you don’t need to advertise at all. You still need to publicize your own site.

Some retailers say the independent reviews of their products on online marketplaces have also been helpful and that they’ve sometimes discovered and met new suppliers there. Setup fees are generally low and usually offer much flexibility.

Questions to Consider

In considering and negotiating to be a part of an online marketplace, gather as much information as you can in your discussions.

• Fees: be aware that you’ll likely be charged a fee or commission for every sale on an online marketplace site.

• Terms: be sure to find out what kinds of terms and conditions there might be, particularly in communicating with customers and branding.

Who will be responsible for sticking and shipping? If the marketplace handles these, it saves you a lot of trouble. However, it also removes your ability to gather important customer information. If they ship, you will not have access to useful customer data, such as email addresses.

However, if your products have warranties, you can access important customer information when they register their products. The inclusion of a condition about registering warranties within a certain amount of time after purchase helps ensure immediate attention.

If you handle shipping, capture whatever information you can when fulfilling an order. Email addresses are sometimes included as are cell phone numbers.

Determine how much, if any, help and support you can expect to receive from the online marketplace owner. Some online marketplaces give more assistance to their high selling partners and little, if any, to the others. Finally, gain a clear understanding of how and when payments and financial reports will be sent to you.