Entrepreneurs who want to sell products on the Internet today wonder whether it is better to build an eCommerce site, or just to simply sell their products on an online marketplace such as Amazon and eBay. The answer depends on an individual’s preferences.
Where a marketplace strategy may be a boon for some retailers it could be a bane for others, but how it affects a business depends on a number of variables. This includes the type of products one sells, the kind of market one is operating in, intensity of competition in a particular category, marketplace fees and restrictions, and a dozen more factors.
Low startup cost and free upfront traffic are two of the most significant advantages of using a marketplace to sell a product. One won’t have to pay a top class website development company to build an eCommerce site and pay a hosting fees every month for it. However, the biggest drawback of using such sites is that one will need to pay a small fee to have their item listed and then will need to pay a percentage of each completed sale.
According to Umang Midha, owner at Effects Industrial Concepts, Indian Merchants are not in a position to compete with the leading eCommerce players flushed with funds and working on a ‘Stock & Sell’ model. Marketplaces are the best and the most economical way for merchants to sell their products Online.
However, on the darker side, merchants need to keep on satisfying the buyers for all their fair/unfair acts. Tough performance targets, set by the Marketplaces, are to be met to stay in business. All Marketplaces work on the model of promoting the best price, so merchants have no choice but to target large volumes & have wafer thin margins. “There are many more challenges and it’s basically the game of survival of the toughest.” he highlights.
Before taking the first step…
In order to start selling on an online marketplace, it is very crucial to have a little backdrop on how different marketplaces operate. In general there are two types of marketplaces — traditional marketplaces who work on dump and sell model and those who host flash sales.
Traditional marketplaces allow each brand to maintain its own shop and control the inventory. These kind of marketplaces generally take low commission — around 10% to 12% per sale. Moreover, they allow merchants to directly interact with the customer, address concerns and redress returns accordingly.
The second type of marketplaces who host flash sales work on the basis of purchase-order. That is, when a customer buys a product, the marketplace raises a purchase order for the same to the brand owner and processes the order. The downside to such a model is that the store owner is never in touch with the end customer and has to rely completely on the marketplace to act as a mediator. These marketplaces operates on somewhere around 30% to 60% commission per sale.
Before moving ahead with the setting up of your store on an online marketplace, it is important to understand how they operate in order to get most out of it.
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Feature Image: Mint