Congratulations. You’ve built and deployed a successful e-commerce business with steady traffic, growing revenues and loyal customers.
However, it turns out that your successful e-commerce store isn’t the only digital platform in town. In fact, it could be the smallest. Giants like Amazon and Walmart get far more traffic and potential customers for your products than you will likely ever see on your own site.
According to PYMNTS, Amazon alone represented more than half of all U.S. digital sales in 2020. The giant captures a staggering 3% of all consumer spending. That’s impossible to ignore, and it’s one of the reasons why marketplaces can represent the next major leap in your e-commerce sales.
As you expand and move to sell through marketplaces, here are several considerations, warnings and suggestions to get you started.
Understand exact product and operational costs
Your current cost of doing business on your website will be different from the cost of doing business in marketplaces. It’s essential that you understand the exact operational costs prior to jumping in. Marketplaces can take a double-digit percentage of your sales, which can easily erode most (if not all) of your profit. That doesn’t factor in additional costs from operating in a different space (which we’ll explore throughout the article). You need a precise baseline to plan from so you can calculate how much volume you’ll need to make the profit you want.
Different shipping and return expectations
Part of those additional operational costs can come from shipping and returns. For example, Amazon’s Prime benefits have set rapid delivery and frictionless returns as the standard on the platform. Consumers want their Amazon items fast, regardless of actual need. You may not be providing that speed in your current operations, and the additional costs and operational tasks need to be planned for. In marketplaces with preferred, free or expedited shipping, you’ll have to factor those expenses into prices to keep customers who routinely turn away from paying for shipping.
Value-added marketplace services may alleviate some headaches
There can be some serious efficiencies from standardizing a marketplace’s value-added services (like fulfillment). For example, Amazon claims that it can raise sales by double digits when a seller also uses it for fulfillment, and the majority of sellers tend to use marketplaces for fulfillment for sales and operational benefits. Again, however, you’ll need to factor in the costs of setting up those additional operations, the fees charged, the expertise needed to manage them, and meeting the standards that the marketplace sets.
Different technical, search and marketing skills
Each additional marketplace is a different platform and ecosystem with its own tools and operations. It’s unlikely you have expertise in those systems. At the start, look to turn to any number of experts who specialize in promoting products in specific marketplaces. Outsourcing that until you build up those skills internally can get you going faster and reduce errors. Again, those additional costs will cut into your profit.
Leverage unique marketplace features
One great example of optimizing a marketplace is understanding its specific categories and sales drivers. On Amazon, 40% of sellers have products in “Home and Kitchen” for a good reason: It’s the top-selling category. You will want to list the same product in multiple appropriate categories. That’s just one example of specialized optimization you’ll need to target on a marketplace-by-marketplace basis.
Customer control and loyalty
Marketplaces guard their customer identities. For example, Amazon controls virtually all of the customer information and uses its systems for all contact, making it difficult to directly market to marketplace customers. Some products may have the opportunity for warranty or other registration, which would allow you to add that customer to your database (if you’re the manufacturer). Some sellers try tricks like sneaking in flyers, offers and other things during fulfillment; however, those can often violate marketplace agreements and could put you at legal risk.
Success draws attention and competition
The more marketplaces you enter, the more visible you are and the more competition you’ll have. If you’re selling something that isn’t patented and is a commodity, then anyone else can copy and try to outsell you. It’s a bit of a “Commodity Catch-22.” You need marketplaces to promote and sell far and wide to achieve volume, but you’re also absorbing more risk.
More than 6 million third parties have expanded their direct e-commerce operations to sell on Amazon, and there are millions more on other marketplaces. Most brands and sellers simply cannot ignore the opportunity to get those customers and grow their business. Fully understanding your operational costs, getting the right specialized skills and taking a few precautions can help ensure a successful marketplace journey.
This post was originally published on Forbes Technology Council.