Buying products in bulk secures a better price per unit. This fact means that sometimes, when a company decides to import articles, it does so in larger quantities than initially planned in order to achieve a greater profit margin. However, some companies make this decision without considering the sales capacity of their commercial channels so when confronted with an overstock, they end up deciding to sell their products in a marketplace.
These technological sales platforms, which have thousands or even millions of visitors every day, have great potential and are very different from having our own ecommerce. Selling products on both platforms at the same time is not incompatible, however. A thorough analysis of the advantages and disadvantages will be key before deciding whether to sell our products on this type of online marketplace.
Although marketplaces were initially created for professional or B2B businesses, the expansion of e-commerce in the last decade has transformed some of these shopping websites into the most famous in the world. The best-known examples of marketplaces today are undoubtedly Amazon, Aliexpress and Ebay. These e-commerce sites are where thousands of people connect every day to buy all different kinds of products.
Advantages of selling on a marketplace
Many companies began by selling their products on a marketplace before having their own website. In fact, there are cases of truly phenomenal sales, such as the company selling an express cooker that sold 14 million dollars in a single day on Amazon.com.
There are distinct advantages to putting our catalogue on a third-party website including;
No initial investment.
One of the main advantages of selling in a marketplace is that you do not have to invest in an online shop. Therefore, you don’t need a designer, any technical maintenance or to pay for hosting or domains. This means that you can start selling without investing a single cent.
High volume of visits and no need for advertising.
The rise of the marketplace has made these sites a brand and as a result, they receive thousands of visitors every day. For example, Amazon.com has 200 million unique visitors per month which makes advertising a completely unnecessary investment.
Trust in the brand… of the marketplace
As we see from the previous point, regular marketplace customers trust these platforms so much that they do not need any information about the seller.
Logistics
The logistics and shipping of marketplaces is a significant strength and is one of their main selling points. Many of these platforms offer “free shipping” in a short timeframe. This can even be in 2 hours on thousands of products in certain cases. This is possible since these online marketplaces offer sellers storage for their products in the marketplace’s warehouses, thus facilitating fast and efficient shipping.
The advantages are remarkable as we can see, and this is why some companies choose to opt for marketplaces as their only sales channel. Logically, this decision also has a number of disadvantages.
Disadvantages of selling on marketplaces
Some companies believe that selling their products on a marketplace is like “selling your soul to the Devil” and, although this is clearly an exaggeration, it is important to know that these sales platforms have their disadvantages, particularly over the medium and long term.
Competition and price wars
One of the main problems that companies often face is a lack of freedom in marketplaces. Although you are free to sell at the price you choose but with competition from tens, hundreds or thousands of other sellers selling the same products, you must set your prices in order to sell.
Your customers are not your customers
Even where you opt for more traditional logistics services where the company itself ships the products directly to the buyer, the buyer believes that they have bought from the marketplace and not the seller. This makes it very difficult for a company to build loyalty or to carry out subsequent marketing campaigns.
Great difficulty in building a brand
By relying heavily on the marketplace, sellers are hindered from successfully developing their own brand, which is something that companies often regret when they start to have a significant volume of sales and want to make the leap to their own commercial channel.
High commissions
The price of selling on marketplaces is usually made up of two variables. Firstly, a fairly affordable fixed monthly fee and secondly, a high commission on the products sold. This percentage usually varies depending on the type of product, and on websites such as Amazon it can easily reach 15% in certain categories of items.
Now that we have analysed the advantages and disadvantages of selling in a marketplace, it is time to consider whether this type of sales channel is the right channel for us. Although Marketplace selling provides advantages in terms of volume, profits can equally be significantly lower.
As import experts, we have to remember that if we are looking to buy products at a better unit price, buying in bulk is not the only solution. Having the support of a sourcing company ensures negotiation of a better price for our products, as well as optimizing the entire importation process, in order to avoid hidden cost overruns.