Why to Sell on an eCommerce Marketplace?

With the growing internet penetration and large number of consumers purchasing goods online, there is no doubt that idea to sell online is part of every retailer’s strategic plan which they can’t avoid.  There are numerous ways which a retailer can opt for selling online apart from starting an ecommerce website of their own, retailer can even sell their products to the e-retail website or even offer their products to the people through a marketplace.

Ways to sell online

A retailer can start with its own exclusive store but in order to understand the demands of its category online selling on other pure-play aggregaters or marketplaces can be a good bet.

In case one choose to create own website, one can get higher margins, larger control, customised ecommerce experience, brand loyalty, higher scalability, but it might be costly as setting and promoting a niche portal requires high investments. Whereas if one choose to sell by e-retail  website, one can still sell online via sourcing model to ecommerce players. Still going for this option, provides lesser control on brands and products, provides low margin and provide less probability of sales as other competitors are also selling along. But if one chooses to sell by a Marketplace, one can experiment their products online with certain control and by leveraging the reach of the marketplace and its value added services.

Marketplace is a quick way to go online and is independent of other channels; let’s understand why selling on a marketplace can be  a good strategy:

Quick go to market: As everything is well settled, one doesn’t need to do anything, other then to setup and upload the catalog.

Testing of your brands ecommerce viability: By selling on a marketplace one can actually can get data of how customer will respond to their brand if they get online; before one actually build own store.

Pricing strategy: Marketplace provide an opportunity to the sellers to test prices, seller can easily test prices as their products will be sold with products of different brands.

Marketing and branding medium: Marketplaces provides brands and sellers a platform to take their offerings across geographies and generate a wider demand. Also special promotions on the marketplace can perform as a good marketing spend.

Get rid of customer acquisition cost: To generate traffic on a website is the biggest challenge for any ecommerce venture, to get users on the website is also not a simple task as huge customer acquisition costs is involved. But when  you are selling on a marketplace, you don’t need to worry about generating customer traffic or getting visitors on their website as the marketplace has own growing customer base; it gives opportunity to sellers to directly engage with a ready base of consumers. Thus its a cost effective way of getting customers.

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Low startup cost: Lets compare the cost involved in setting up a new ecommerce website with selling on a marketplace, as a marketplace has all things in place, and the customer base, so the retailer has to hardly make investment on anything other than just the cost involved in registering on the marketplace. Thus minimal cost is involved in selling on a marketplace in comparison to cost involved in setting up a new website; as one has to pay for web hosting, technology, advertising, team, logistics etc. Umang Midha who is one of the retailer at various marketplaces says that there is a lot of cost involved in maintaining the website which is a big issue for a retailer thus selling on a marketplace is a less costly setting.

What experts say

Mudit Khosla, CEO, Tradus:  If one choose to sell through a marketplace, then there is a very less requirement of a working capital, unless there is a deal; there are no rentals involved.

Ankur Sethi, Founder & CEO, Nupinch.com: If any local retailer wants to reach to a million customers to just showcase the products, he’ll end up spending some fairly huge cash. Whilst, these marketplaces act as a channel partner & help you reach millions of users, to some really deep parts of the countries & in turn push your sales exponentially.

Muralikrishnan, Country Manager, eBay India: Online marketplace is a great entrepreneurial platform, which provides faster growth avenues at a lower-cost of distribution; it increases sales as the seller can now reach a broad spectrum of consumers from outside of his physical reach. Moreover, sellers can maximize pricing as operational costs are minimal. In other inventory-based models, companies typically buy, stock & sell which results in greater working capital requirement & efficient inventory management. This also requires proper demand forecasting, logistics & supply chain expertise, etc resulting in high operational costs.

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How to make most out of your marketplace

  • Sign-up on all possible marketplaces.
  • Be open to experimentation, offer schemes, discounts, sales, etc.
  • Learn everything that you want to know about selling online.
  • Request marketplace to provide you analytics of your products, how customer is responding to you products.
  • Encourage customer feedback on your products.
  • Use your own marketing channels make aware your offline customers about your online presence.

Leading Marketplaces in India

Marketplace is model which is not only beneficiary for the sellers but also for the marketplace itself; the fact that marketplace model has lower working capital requirement offers and consequently offers better return on investment has resulted in many pure play marketplaces being launched in the country, says Praveen Sinha, CEO, Jabong. Many other ecommerce companies have also launched their own assisted or managed marketplaces which are a hybrid.

Comparative Chart

Challenges involved for a Marketplace & Seller    

Though there are various reasons which shows marketplace as a good model for the marketplace as well as the sellers, there are less risks involved for the seller while selling through the mode of marketplace but for a marketplace to set up and work is extremely a difficult business. In terms of execution marketplace is tougher than traditional E-Commerce or retail model and requires highly sophisticated technology platform and distributed approach towards services, says one of the expert. This also requires the items to be procured and checked for quality in real time i.e. after the customer has placed the order or relies on the different quality standards followed by different vendors/suppliers. This many a times results in diluted customer experience. To solve this is operationally complex and requires system integration with the vendors, inventory syncing efficient inbound logistics. Even after seamless integration marketplace service cannot be as prompt as own inventory, says Praveen.

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In case of a big or established seller there are less challenges as it may have a big team for customer service, operations, technical team, etc to manage issues; but for a small retailer it becomes difficult to manage all this due to small team size.

Choosing a right Marketplace

Every marketplace has its own kind of processes, requirement, and offering which they make to the sellers on their website. With so many marketplaces available for the sellers where they have to just sign in and start selling, but it’s important for the sellers to pick up the right marketplace. And this selection depends on what you are selling and to whom, as each kind of marketplace has its own niche of prices, products and even customers.

Customers must understand what is the product they want to sell; which website will provide them right TG and positioning, retailer need to decide where their product will sit right keeping in mind their USP and the USP of the marketplace as well. One of the main thing which the seller keep in mind while choosing a marketplace is number of orders he will get, so he must make a check of traffic on the website.

Do check about the marketplace

  • Stability
  • Reputation
  • Reviews and feedback
  • Policies
  • Must make quick payments
  • Immediate results

Most importantly the seller must make a check that the marketplace they are choosing must be seller friendly; at times seller face issue in case the product is returned; Umang explains that there are chances that the marketplace may be biased towards the buyer, for example  in case a buyer rejects the product many a times it happens that the marketplace accepts the product without even questioning the buyer, thus this may incur loss for the seller.

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  • Apurva

    Is there a good reason why Snapdeal.com was ommitted from the list of current marketplaces?

    Context: I am from Snapdeal and I was surprized to see the miss as Snapdeal has been one of the earliest and the largest adopters of this model.