Last week we received a question from one of our peers: "How do you guys see market places evolve?". The source of this question was a conversation with somebody who started selling on marketplaces, with great success. Such a great success, he even considers closing his webshop and start focussing on selling on marketplaces only.
Well, this is food for thought!
Is this really the future of e-commerce? Will we all migrate to Amazon, Bol.com or Zalando? At Radikal, we don't believe so. There's a lot of context we can bring into the debate.
Yes, marketplaces can create a big stream of revenue for your business. You'll also reach a larger audience than you would probably never reach with your webshop (or at least not without paying for it). You no longer have to worry about creating the best performance marketing strategy or the perfect marketing mix.
But if you want to retarget customers on the marketplace, you will have to pay those marketing places to retarget them. Also, take into consideration that those marketplaces take a big piece of the pie as well. You're giving away 20% of your selling price and you'll have to take some costs, like shipping or return fees. And last but not least, if you fail to deliver you'll be penalised...
An interesting aspect of selling on marketplaces is the price rules and how to act on your competitor's inventory level and prices.
What about your brand identity and brand loyalty?
A big part of your webshop is your story and your brand identity. How will you translate those brand values towards your audience?
You can compare this to selling soap in a supermarket or through a specialised store with tailored advice and a fun shopping experience. A customer that scrolls through Amazon will not get a meaningful impact or impression of your brand. So how can you create a loyal customer through a marketplace? Will you be able to add loyalty points and win a customer for life?
Should you sell on marketplaces?
It depends on the product. Are you manufacturing the product yourself? Then you can set higher profit margins. Another advantage is that there will be no competition on your product and you are in control of the competition. If you are in the reselling business, it will probably be a low margin and high volume game. We have seen some really successful cases with that strategy but it's not easy to get started.
Don't put all your eggs in one basket. If you are successful in a marketplace and get awesome reviews, great! Keep it that way. But try to get other channels up and running as well. It's always possible that you have a mismatch in stock, a bad review or another issue that can get you banned or penalised. Imagine this being your sole place for income → stress incoming.
Another con for us: when you are only selling on marketplaces you will not be able to let your most powerful marketing tool unleash its potential. There are strict rules to be followed when sending out emails to Amazon clients:
Amazon has strict guidelines about the types of emails you can send to buyers. The email you send to buyers cannot contain any of the following:
- Links to any website
- Seller logos if they contain or display a link to the seller's website
- Any marketing message or promotion
- Any promotions for additional products or referrals to third-party products or promotions
So you can say goodbye to birthday discounts, early access drops or updates about new products. Your beautifully tailored Klaviyo flows will be obsolete.
If it fits your business, product and culture it's really a good call to sell on marketplaces. However, the experience and customer relationship will not be built through this strategy. And will we massively close our webshops in 5 years? For sure not!