The web can be compared to a road map. Its usefulness is unquestionable when it comes to knowing and meeting customers as well as sending products and services all over the world. Yet, as in every map, there are main and secondary roads, faster and longer solutions. Highways, if you will - like Google, Amazon, Booking, Tripadvisor or Emag - and smaller solutions, like groups, communities or proprietary sites. Highways are real giants of communication and business. As large as states, visited by millions of users, they act as intermediaries for the sale of goods and services between producers and local customers. They allow people to present their goods, do advertising, sell and - if we think of Amazon - they can even manage all deliveries. At the same time, they keep customer data to themselves and often lead retailers into a real last-ditch battle. Can you be a distributor of electronic/digital material in Romania without using eMag? Is it possible today to manage a bed & breakfast without having a profile on Booking.com? What kind of strategy should be adopted to take advantage, and at the same time defend one's business, from these giants? Is it right to be biased or is it necessary to exploit every available opportunity? We have collected 3 arguments for and 3 against so that you can make your own choices. The consultancy of Digital At Play is always at your disposal, contact us if you want to know more.
3 arguments for
1. Ease of use: It's not enough to have a website if no one visits it. After creating your site you need to communicate, invest money in advertising, create a community of interested users, send notifications and newsletters. Often you also have to manage social media. Even then the results are not certain. Giants like eMag or Amazon sell directly for you, saving you communication costs. 2. Cost consciousness: Selling online means putting resources and money into customer service and logistics. Often talking directly with consumers - sometimes even before they decide to buy - takes time and effort. Logistics, in itself, sometimes involves difficulty in tracking every order and handling every complaint. Large platforms are starting to offer these services to entrepreneurs who want to keep their investments to a minimum. 3. Clear direction: We have defined the web as a road map. Sometimes, however, we can refer to the internet as the sea. It's endless, complex and there are many directions to take. Platforms are a bit like compasses, they help guide your sales, they allow you to create a business plan that can hope to grow in a short time. They increase your ability to move your business faster towards a healthy situation.
3 arguments against
1. Commissions and fees:
Although a giant marketplace can be a great place to sell your goods, you should always ask yourself what's the rent that you have to pay in order to be on that marketplace. Most of these platforms work on a commission based model where you concede part of the profit per sale back to the platform. These costs will differ from one marketplace to another and can get very steep.
Furthermore the money you will get from sales won't immediately transfer into your company's bank account. Instead they will go to the marketplace's account and they will send you the final amount after they deduct their fees and commissions. This process can last up to 14 days. Please remember that terms and conditions for all the above can unilaterally change.
2. Brand identity and customer knowledge
The greatest risk of partnering with an online marketplace is losing your brand identity. The main objective of these platforms isn't to promote your store but their own image and their own brand identity at the cost of yours. Once you get listed customers will indeed see your products and sometimes a mention of who the original seller is, but they won't see any logo or custom visuals and copy. If you also own an online store, there will be no link towards that store. All sales are done and handled on the platform. Customers will never be exposed to your brand, they will never learn about you or what makes your business special and unique.
3. Cannibalizing your store:
Because most marketplaces are behemoths when it comes to resources, promotion and media, if you have a small or medium business you won't be able to keep up with their AdWords and Social Media strategies. A lot of traffic that was initially going to your website will move towards the marketplace. This might not be so worrying at first, but because of the highly competitive nature of these platforms. You will soon notice that you are locked in a cat and mouse game with the other sellers when it comes to price relevance and, what's worse is that you won't be able to leave the platform so easily because you risk losing revenue.
Also, because the marketplace takes a commission from your sales you will have to increase the prices of your products in order to cover the fee. This will create discrepancies between your webstore and the marketplace, which is a bad commercial practice.
Because some sellers are bigger than others usually the big ones are able to negotiate their commission with the marketplace. These sellers will always be able to offer lower prices than you, driving you to lower yours close to the supplier price of purchase and drastically decreasing your profit. Furthermore, big sellers usually order in big numbers so they are able to negotiate lower prices with their suppliers as well managing to undercut your prices almost every time.
Online marketplaces are both good and bad at the same time having a fair share of advantages and disadvantages.
If you are a big seller they can compliment your business while offering visibility and a steady revenue. You won’t get any demographics data and you won't be able to figure out who visits your product pages or extract any analytics in order to enhance the promotion strategy of your store and target specific audiences. At the same time you risk cannibalizing your own webstore visitation.
If you are a small seller the marketplace will handle everything for you, and in some cases they can even handle the storage and delivery of your products. Everything is easy and streamlined for the convenience of both you and your customers.
As a small to medium seller you risk cannibalizing your webstore if you have one as well as diluting your brand identity.
Furthermore a highly competitive price climate will possibly decrease your revenue in time because other sellers will undercut your prices. In turn this will drive you to use specific practices that will further drive your customers away from you.