Modern Retail

A retailer’s guide to online marketplaces

Contributor: Andy Siviter, Director of Ecommerce, Croud

There’s a scramble right now to grab or defend a piece of ecommerce between the likes of Amazon, Facebook, eBay and co. Each knows that the most engaging and frictionless user experience will be key to winning consumers over and building demand – with retailers, brands and the advertising investment that will follow. 

UK lockdown orders have accelerated plans at the macro level for these big players and at the micro level for small businesses and manufacturers heavily reliant on revenues driven in stores either directly or via retailers. They must quickly transform and provide a good end-to-end experience – from brand and product discovery through to fulfilment online, often from a standing start. 

For the consumer it’s an exciting period of rapid disruption and an explosion of options, whilst for the business, difficult choices need to be made and a real sense of urgency is required to get up and running.

If you’re a small business just starting your online journey, marketplaces can be a great place to kick off. They often provide tried and tested systems and processes for things like transactions and fulfillment, making them a fast and convenient way to get your products in front of relevant shoppers in an environment that is already trusted. They are also known to play a key role in purchase journeys for a huge number of transactions that happen both online and offline.

Demystifying marketplaces

To help cut through all the noise, we’ve outlined the major ecommerce marketplaces to see what makes them similar and what makes them unique in terms of the way that they work, the audiences that can be reached and the tactics you can use to increase visibility.

By definition, a marketplace allows you to use its platforms and gain access and sell your products to its audiences as a third party in exchange for a fee. However, there are some key differences across the platforms in terms of how you access, set up and manage them. There are also a number of emerging e-retail and niche marketplace opportunities available that enable you to increase the visibility of your products using sponsored placements. Like shopping behaviours, popular platforms can vary from market to market and some will be better suited to your products and categories than others. 

Let’s start with Amazon.

As of January 2020, there are more than 150 million paid Prime members worldwide, 112 million of which are in the US. Amazon currently operates in 17 countries, with plans for further market expansion; it seems as though new fulfilment centres across the world are announced almost daily! And it has little reason to slow down, hitting the $1trillion valuation mark back in 2018 and continuing to boom during the coronavirus pandemic.

Understandably, with a marketplace the size of Amazon, there is more than one way to sell via the platform. You can be a third-party seller using Seller Central, whereby you have more control over brand positioning and profitability, though fees vary depending on the number of listings you have and the cost of the items being sold. The alternative – by invite only – is to sell wholesale to Amazon through Vendor Central.

But a key factor for finding success and opening up to the Prime audience is obtaining a ‘Prime badge’. With FBA and FBM this is possible; the latter requires complying with certain criteria and making assurances around fulfillment. We would generally recommend FBA to pretty much everyone because of the prime badge and the ability to ‘win’ the buy box more easily. FBM can however be the route for bigger, heavier items.

eBay

If you want to tap into the power of yet another channel with vast global market share, eBay is a great option. With 174 million active buyers on the marketplace, operating in 190 markets around the world, eBay is no longer just for collectors and consumers selling second-hand goods. There are 300,000 UK small businesses on the site. And to help support them during the coronavirus pandemic, eBay offered fee discounts, protected ‘Seller Performance’ if there were postage delays or issues, and gave advice on how to manage businesses in the case of temporary closure. During the pandemic, eBay UK welcomed a further 50,000 businesses onto the platform who were no longer able to function offline.

For all eBay sellers – individuals or businesses – there is the basic fee structure of insertion (listing your items) and final value (when your items sell, usually a flat 10% fee on the final sale price, capped at £250). eBay grants a lot of selling power, with those using its basic function avoiding any setup, monthly or annual fees. However, if you’d like to customise and invest more in your shopfront, you can subscribe to eBay Shops, where buyers can learn about you and your business. 

Etsy

Etsy is branded as the ‘shop for handmade, vintage, custom, and unique gifts’ and therefore is the ideal platform for those selling their own unique goods to users. The platform boasts more than 2.65 million active sellers and 17.12 million active buyers and has seen a steady 19% YOY growth in sellers and 15% in buyers. While it remains smaller than some of the other platforms listed, its loyal user base and intimacy makes for an authentic ‘vintage fair’ feel that Etsy users seek. Sellers are charged a listing fee of £0.20 for each item listed, and when you make a sale through Etsy you are charged a transaction fee of 5% of the price that has been displayed.

Etsy offers Etsy Ads and Offsite Ads to help users promote goods, where sellers are able to allocate budget to promote listings or shops. A seller is able to set a maximum daily budget which will not be exceeded by Etsy and bids on advertising space are deducted from an accounts balance. The process of selling on Etsy is easy to self manage which makes it perfect for individuals or smaller brands that are able to invest time into the platform, using it as a place to sell unique products outside of owned channels.

Tmall Global (part of Alibaba Group)

I’m sure we’ve all heard of the phenomenal rise of Alibaba and its incredible presence in China and South East Asia; as of June 2019, the company has 755 million active users, larger than the entire population of the United States. But perhaps lesser known is Tmall, part of the Alibaba Group, and so far the only e-commerce website part of the group that allows for third-party global sellers. 

Tmall.com is a marketplace geared towards China’s middle class, focused on large, multinational brands, and in 2014 it launched Tmall Global, allowing foreign retailers to start selling directly to Chinese consumers and enter the lucrative Chinese ecommerce market. Around 14,500 foreign brands sell into Tmall Global, but more than 80 per cent of those companies sold on the site for the very first time in 2016. 

The catch? It’s incredibly costly to set your business up on the platform, requiring a US$25,000 security deposit – though there are talks of lowering this — and not to mention shipping costs if your business is based in the UK. But for those with the means, the pay-off could be worth it, as long as key cultural considerations are taken into account.  

The popularity of domestic marketplaces in China is well beyond what it is in Europe. Marketplaces are the place to shop for Chinese consumers, with 85 percent of online sales in the country occurring through marketplaces. Localisation – of language and marketing nuances – and high customer service engagement are also expected from Chinese consumers. 

Final thoughts

Marketplaces and sponsored e-retail opportunities are here to stay. Beyond the big players we covered above, there are lots of other regional and niche platforms to consider, too. We should expect the options to keep growing too – almost every popular online, social and retail destination is looking at ways to introduce ad-supported marketplace and ecommerce models.

Contributor: Andy Siviter, Director of Ecommerce, Croud