Mariam Furmanau | Some weeks ago we wrote about traditional grocery entering the world of e-commerce. Despite being somewhat late to the party, food companies must jump through all the same operational hoops as their consumer goods counterparts had to more than a decade ago. But in the 1994, when e-commerce officially came into being with a sale of a Sting album, the options of these hoops were very limited, thus making the process of entering the online market a lot more direct. These days a new e-commerce vendor must first research which hoops are the best, how they all work together, what he needs to give up to have these hoops in the first place and is it all really PCI-compliant. The freedom to choose between a plethora of options leads to a daunting question - what is the optimal setup for your business?
An encyclopedia can be written about all the e-commerce options available, and then as soon as it is written, it will become outdated. Every element of the e-commerce chain is constantly transforming, becoming better, more efficient, intelligent and more intuitive. The ever-increasing speed and ease of adoption in the world of e-commerce ensures a level field for existing online stores and newcomers alike.
It helps that e-commerce has become a norm rather than a novelty reserved for the early adopters and risk-takers. Sure, there is and always will be a certain amount of risk involved with shopping online but a lot of it has been mitigated by improved technology in both the selling and payment processing and reasonable terms & conditions. And a portion of it has simply been accepted as a given by all concerned parties. E-commerce is not going anywhere any time soon, even with increasing number of high-profile data breaches at a number of institutions. Target’s 2013 data breach affected 41 million customers and cost the company $18.5 million, yet the retail giant recently greatly improved its mobile app and is actively competing with Amazon on price and convenience by offering 2-day delivery on most purchases, but without the pesky $119 Prime membership.
Let’s pause for a second and look at the e-commerce selling environment on a macro level. Zoomed out it is not very different than its brick-and-mortar predecessors. You still really have only two options: set up your own shop or sell within an existing store. It’s a boutique on a side street versus a shelf space in Whole Foods. Sure, nothing is that black-and-white. But when stripped of minute differences, all online selling options boil down to either standing proud (and alone) in front of your own homepage or fighting a global multitude of sellers for a sporting chance to sell to millions via an online marketplace.
The two alternative channels - own portal and online marketplaces - are not mutually exclusive; in fact, to maximize your sales and mitigate risk, you should follow an old finance rule and diversify, have both or more. StitchLabs research estimates that selling on one marketplace on average increases sales by 38% versus just having one’s own website, and selling on two marketplace could mean a 120% increase. Each option comes with its benefits and drawbacks. And while deciding on the most appropriate approach may take some time, you’d better think fast because here time really is money. So to put it succinctly: you better start somewhere, and the best somewhere is constantly evolving, is not too proprietary, works well with other things and is easy to understand.
No matter where you decide to sell, you have to remember your brand’s DNA and never compromise on it. There is enough flexibility in the world of e-commerce to bend it to your will. Jumping through its hoops should be on the way to success and not self-betrayal.
For our part we want to talk particularly about selling via online marketplaces, which Forbes defines as “a website or app that facilitates shipping from many different sources.” Marketplaces provide the (arguably) cheapest, quickest way to enter the online market and get yourself and your brand in front of a lot more people than you would be able to do on your own short of being featured in a POTUS tweet. If your website is like a solitary storefront, then online marketplaces are akin to a Turkish bazaar. Like any e-commerce website they have their own e-commerce platform and a payment processing system. They let you position your products in appropriate search categories, putting you in front of the more relevant subsection of the marketplace’s millions of consumers. And all you need to do is yell louder and make more enticing offers than dozens of other vendors selling the same thing on the same platform. Easy, right?
Well, it sure doesn’t have to be difficult. To start, if you are a completely new to the notion of online marketplaces, you have to figure out the audience of the marketplace you are eyeing, i.e. what do people come to buy there and how they make a purchase. There are three main considerations that would help you narrow down the choices:
- What kind of product do you sell? (i.e. food, health & beauty, electronics, clothing, etc.)
- Is your product one-of-a-kind / produced in small batches / made to order or mass produced?
- Is your product a low-priced or a luxury item?
To demonstrate, we have built a small illustration, positioning some of the most common marketplaces today along the measures of uniqueness and price. There are also a multitude of helpful sites on line, such as this one, that give you a features comparison across a number of marketplaces. But heed this warning, much like the aforementioned encyclopedia, these lists tend to become quickly outdated, so use them as a guide but still do your research!
Most likely you have been at the very least a consumer of the marketplaces on our illustration and already have a pretty good idea of where you want to sell your wares. Since the seller’s experience is very different from that of a consumer, you would need to refine your selection by researching the following features:
- Fees that you would have to pay to list and sell on the marketplace;
- The extent to which you can customize your storefront and is the storefront visible to consumers. On Amazon, for instance, only pro accounts can now have a storefront where to set the brand image and provide a single point of access to the brand, others must do with the basic Amazon item posting templates;
- Whether marketplace has or can offer a mobile-friendly shopping solution, and how good it is. This is especially important as, according to Forrester over one third of purchases are now done on smartphones and this number is projected to grow rapidly and clients will switch from a poorly-designed mobile site to a better one;
- Fulfillment options, i.e. who does it, the brand or the marketplace, and subsequent difference in margins. Fulfillment by Amazon has a very different pricing and operational structure than Fulfillment by Vendor on Amazon, one that can break the bank or triple your sales;
- Tools that are offered by the marketplace to help you analyze your performance, items such as sell-through, inventory levels, sales conversion, traffic analysis and order statistics;
- Penalties that the marketplace imposes for errors on the part of the vendor;
- Position that the marketplace takes in regards to customer service, i.e. is the brand allowed its own customer service policies or required to follow those of the marketplace, even to its own detriment;
- Availability of marketing tools either within the marketplace itself or via plug-ins to other apps;
- Support that the marketplace offers, free or paid, with setup and maintenance of your storefront;
This sounds like a lot of work; is selling via an online marketplace really worth your time and effort? The answer is resounding and emphatic “yes.” There is a term in e-commerce that defines the current consumers – omnichannel. They shop across more than one platform or medium, the medium were research or exposure took placed may not be the same as the purchase. For instance, they may get enthused about a product on Instagram but buy it later on Amazon, or they may have seen a used version on eBay but buy a new one for twice the price directly on the brand's site. The goal of the modern ecommerce retailer is to create a seamless brand presence across all sales channels, one that is self-complementary, cohesive, and consistent. Marketplaces are an integral part of this ecosystem and cannot be ignored.
And why choose just one marketplace when the sales growth potential is so much higher if you post on more? Technology has already arrived to offer a working solution. Platforms like SellBrite, ShopifyPlus and many others now give you the ability to post your products on more than one marketplace and manage them from a single dashboard. This is an extremely effective approach when product management is concerned. Listing creation and initial setup, both operationally and from a marketing point of view, still require exactly the same research to be done for each marketplace. But once you’re done with the initial setup, the time spent managing sales is paid back many times over.
Deciding on an optimal time to start selling via a marketplace is a bit tricky, if you can afford to wait for a more opportune moment, that is. Every product has its own seasonality, except for perhaps toilet paper and its cleaning kin. There are also very distinct discount seasons that apply to both off and online commerce, think Black Friday to Cyber Monday. But even more importantly, you will have to add a month or two for the ramp up, in order to set up your marketing strategy, test fulfillment process and learn the intricacies of the marketplace operations. We cannot stress the latter enough. Every marketplace has a long list of fees and penalties that a vendor must pay for not staying within the rules. Fees for not packing a shipping box correctly, for being sold out of an item, for taking too long to fulfill an order, and so on; they add up quickly and eat into your margins. At times your listing may even become suspended for things likes excessive return rate or negative feedback. Bottom line: launch a few months before the demand for your goods starts to grow to give yourself enough time to work out the kinks.
There is a reason why we did not start with the section on what your product should be. It is because the marketplace choice and consequent setup inevitably defines what products you choose to put online. Very often and especially when you are selling consumer goods that have close alternatives available for sale, your decision to sell via an online marketplace is organic and requires little tinkering with your product. But there are many instances where you have to make concessions and compromises. In all of these cases, you would be tempted to change your product to fit the new selling environment, which may not be the right approach. Here are a few important points to consider:
- Is selling via a marketplace in line with your brand’s image? Some products do not sell well, unless they are presented in a correct environment, which only your own site may provide. This is true for high-touch, luxury or perishable products.
- Is the product offering that you need to create for the marketplace sustainable for you in the long run? Some products have small margins that are nullified when selling fees and penalties on the marketplace are taken into consideration. Or by extension, marketplaces may require that you sell the item at a small discount below the MSRP, which also eats into your margins.
- If your product sold on the marketplace is different than the one you are selling on my own site, is it complimentary or disruptive to my own sales?
- Does fulfillment process required for your products fit in with the marketplace requirements? Oftentimes this is a very sticky point for high-touch or perishable products where the cost of shipping to meet the marketplace requirements has an inverse effect on the profit margins.
This article is meant to assist in you in establishing your presence on online marketplaces. But most likely you have already been selling your product. So do not be surprised if once you decide to join a marketplace to find a number of other vendors there, who have been selling your products. Some vendors you may know because you’ve sold to them in the past via your wholesale channel, others may be completely unknown to you. The listed prices can be below, at or above your MRSP (manufacturer’s suggested retail price).
This does present a curious issue of brand management, assuming that the products sold are truly yours. On one hand you do not want to alienate your wholesale customers, on the other selling online may be more profitable than your wholesale channel. On one hand you want to grow your sales overall but on the other, you always want to make sure that your brand is consistently presented, priced, and marketed to preserve its perceived value. And then there are instance where you have doubts whether your products sold by other retailers are genuine.
What is the right approach in this case? Unfortunately, there isn’t much you can do. That is the main drawback of the online selling space: you have limited control over where your goods go and whether and/or how they are sold by others. But if a similar issue in offline commerce is simply mitigated by geography and limited access, on the Internet everything is right there on the first page of Google search results. And despite the connected nature of online e-commerce, not every customer by far does research into whether they are buying from authorized resellers or if the price they are paying is reasonably close to MSRP. All of these concerns have a net negative effect on the value of your brand. You can mitigate some through a combination of the following:
- Detailed and restrictive reseller clauses in wholesale contracts;
- Liberal return policy for your products purchased elsewhere than your site;
- Free authentication services, if applicable;
- Contacting the seller directly to correct any mistakes in the listing or support information;
- In specific instances where your product is grossly misrepresented or not genuine, contacting the marketplace support. Most likely these sellers are in a breach of their seller agreement and their presence on the marketplace would be terminated.
A key lesson here is that it is good practice every once in a while to scan the web for your products and see where and how they are featured. Whoever said that Googling yourself is a sign of vanity was so wrong.