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Third-party Marketplaces: What Merchants Must Know

Many online merchants have adopted third party marketplaces. They have been seduced by promises of easy revenue growth and enabled by software solutions which make it effortless to sell their goods on those sites.

It’s a fact that marketplaces can pay dividends for merchants, at least for pre-tax earnings. That’s the great news. But in this guide, I will review the larger picture.

When a shopper purchases from marketplaces such as Amazon or Sears.com, it is typically those brands that benefit when the transaction goes well. Shoppers pay little attention to the market merchant who initially listed the goods and shipped the product.

The exception is when there are issues.

In those situations, marketplaces can point fingers at the merchant, irrespective of whether the problem was inside the merchant’s control. To put it differently, the merchant receives little credit for smooth transactions and has blamed for problem ones. That’s not the ideal way for merchants to build their brands.

What’s the End Game?

Many merchants simply jump-in to market selling before creating a plan that anticipates the dangers and opportunities. Those merchants risk becoming replaceable middlemen within the long term.

In actuality, any online merchant that does not have significant influence on the supply of the best-selling goods, or who does not grow and efficiently implement a solid brand and business strategy, will find it increasingly tough to thrive over the long term.

With that in mind, here are five reasons to not market on third-party marketplaces.

1. You Will Be Lucky to Turn a Profit

Marketplaces like Amazon get 15 percent or more of earnings, making turning a profit hard.

In circumstances where there is sufficient margin to pay the 15 percent, you can be certain the market will pay attention. Online retailers my firm has worked with often realize that the marketplaces finally cut them out and purchase merchandise direct from their providers.

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In those circumstances, not only do merchants overlook sales they were creating from this market, they will also see sales decline in their most important shops as marketplaces ramp their search advertising for those products.

2. You Are Building Another Person’s Brand

It’s the market’s brand, none, that benefits the most when a transaction goes smoothly.

Huge merchants like Amazon create marketplaces, in part, to expand the reach of their brands across tens of thousands of SKUs without expanding their overhead costs. They understand shoppers prefer the convenience of purchasing from one or many online shops that provide everything they need.

It is not a foregone conclusion, but that marketplaces will dominate ecommerce. Many online retailers have learned how to compete successfully. Successful merchants think creatively about how they supply products and implement thoughtful marketing and business strategies.

3. You’re Creating Duplicate Content

When you feed your product descriptions to marketplaces you give them the capacity to use that content. If your product feed comprises the very same descriptions which are on your website, the market could receive primary credit, and search engines could tag you as a copycat.

We have seen this situation harm the positions of hundreds of merchants. Dealing with these issues can be complicated, but you’ve got options. By way of instance, you could reformat your feed to provide uniquely composed or computer-generated content to marketplaces.

4. You’re Making Paid Marketing Less Efficient

Marketplaces generate traffic and revenue using a number of the very same channels you do, such as pay-per-click text advertisements and Product Listing Ads. As you feed your merchandise to more marketplaces you will notice those marketplaces bidding against you in search results, which concurrently reduces your visitors and raises your cost-per-click.

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My group observed this recently with a merchant who produces everything it sells, and which recently made its products available on dozens of marketplaces.

The merchant’s Product Listing Ads in Google Shopping were doing exceptionally well until a few weeks ago when marketplaces packed out its listings on lucrative search terms. As the manufacturer, this merchant benefited from sales through these marketplaces, but just after ceding a large revenue share and losing the branding advantage of selling to the consumer directly.

5. You’re Spreading Yourself Too Thin

As an ecommerce executive or business owner, your most valuable asset is the time. While marketplaces appear to give the promise of easy sales with no risk, the sales are not always simple, and the risk can be greater than you think.

To truly capitalize on market selling over the long term, your efforts should be supported by a wider strategy that addresses supply-chain-control and the chance to create repeat sales and referrals from your satisfied clients.

That is important work, and it does not happen overnight. If you jump into market selling unprepared, you might wind up wasting time.

If you are serious about market selling, experimentation with a limited range of your stock on a couple of marketplaces. Do not go all in until you have considered the long-term consequences.

Conclusion

Experienced marketplace sellers, like individuals who’ve sold on eBay for 10 or more years, have learned the hard way the importance of controlling their own fate. Several have branched out to concentrate on creating and advertising their own standalone ecommerce websites.

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Other merchants are now rushing into marketplaces without considering the drawbacks. Think carefully about your market strategy. Don’t let market sales cannibalize your efforts on your primary shop.

Many merchants have the opportunity to cultivate their standalone sites instantly, and without much danger. By way of instance, they could drive repeat sales through email marketing, or concentrate on acquiring new clients using Product Listing Ads on Google Shopping.

In a nutshell, maximize revenue growth in your own shop and produce a long-term plan for it before making market selling a priority.


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