This post is by Linda Chew, Marketing Director at Jazva, a leading provider of cloud-based ecommerce solutions for online merchants.
Multichannel selling is going strong and no retailer wants to be left behind. While multichannel selling offers unlimited possibilities, it also poses challenges for the online seller.
Retailers today can set up shop in so many places, but not all channels will be ideal for their business. Retailers must consider a range of factors, including marketplace policies, hosting fees, operational complications, and different buying behaviors, among others, when approaching marketplace expansion.
U.S. ecommerce currently accounts for 8.4% of total retail sales, and it is consistently trending upwards and outpacing the growth of physical store sales. But it still has plenty of room for expansion. Forrester predicts that ecommerce will reach $523 billion in sales by 2020 in the U.S.
Most of this growth will be driven by third-party sellers on online marketplaces, particularly Amazon and eBay, the two marketplaces that make up about 95% of marketplace sales in the U.S. In fact, 65% of online shoppers feel comfortable purchasing from merchants they never heard of before on these marketplaces.
The marketplace model is a great equalizer as smaller retailers are realizing that they can effectively compete with bigger competitors, as their individual branding is no longer as crucial as the overall umbrella branding of the online marketplace – essentially erasing the competitive advantage of their larger competitors.
Over the years, these marketplaces have built a large and growing consumer base with specific expectations on price, convenience, relevance and credibility. Furthermore, consumers can find almost anything they want, a shopping bonanza!
Marketplace vs Webstore
With the advent and popularity of online marketplaces, are webstores dead? What is the value of a retailer’s website compared to selling only on marketplaces?
For starters, the direct webstore model offers flexibility and full control of the customer and brand experience. Shoppers will have the opportunity to learn more about the company, its other products and services, and may even choose to follow the brand on social media. A webstore lets retailers collect data, re-market to customers, and build customer loyalty. Webstores provide retailers the ability to build the brand and have greater control over brand building. If branding is important for the retailer, then a webstore is indispensable to their growth strategy.
By contrast, the look and feel of product listings are generic on most online marketplaces. When you sell on marketplaces, you have limited branding ability and you compete with other merchants that sell the same products. Marketplaces like Amazon and eBay tend to favor sellers with better ratings and more reviews.
Still, the marketplace model could mean increased visibility for your product, which means more sales, since most shoppers prefer to buy products from a trusted marketplace, rather than sift through search engine results. In fact, 55% of online shoppers turn to Amazon first instead of Google. Amazon has become a gatekeeper and reference point for product search.
If your product is unique or custom, it may be difficult to compete against better-known brands in a crowded marketplace. You may want to consider niche and community-driven marketplaces such as Etsy (more on this later). Emerging technology like artificial intelligence will continue to bolster product discovery in marketplaces, and could help shoppers find your products.
The direct model and the marketplace model have advantages and disadvantages. They are complementary and both necessary in today’s retail landscape, where it is all about maximizing your footprint on the internet. At minimum, you’ll need to invest in a webstore and sell on at least one marketplace. This requires more effort on the part of the seller, but multichannel selling is the new retail paradigm and there are tools which lessen the logistical complexity.
Overview of Leading Marketplaces
There is a proliferation of marketplaces, so retailers have choices but it also means figuring out which ones are the best for your business. Being on all of them will dilute your efforts, so it is important to be strategic.
Amazon Continues Its Domination
Amazon has built their brand on price and convenience, proven by their vast market share with more than 60 million Prime subscribers and 244 million active members. Third-party sellers on the Amazon Marketplace typically generate more orders than they do on any other channel, shopping cart or marketplace. In fact, about 49% of all units sold on Amazon are sold by third-party merchants.
So it may be tempting to think that the only place you need to sell on is Amazon, but competing against established sellers can be incredibly difficult. Amazon’s policy changes last year not only raised FBA prices and banned incentivized reviews, but also introduced brand gating fees, making it more difficult for resellers and arbitrage sellers.
Sellers are now only able to get reviews through Amazon’s Vine review program, which will likely favor Amazon vendors, trusted retailers and FBA sellers. Newer sellers may have to pay for sponsored product ads to compete for impressions.
Similarly, Amazon sellers must compete for the Buy Box. Even if your prices are cheaper, you may not get the Buy Box if there’s an FBA seller offering the same product, with better performance scores. Amazon is becoming a pay-to-play environment, so it may be wise to diversify your revenue stream.
Sellers should understand that selling on Amazon is not a business; it’s just a sales channel. There are many consumers looking for the best deals, comparing prices across channels. While it’s true that most consumers turn to Amazon first when shopping, 70% of shoppers said they consulted another retailer before making a purchase.
eBay is Transforming
Historically known as an auctions site, eBay now has a large base of avid shoppers and high-volume sellers. eBay has 155 million active buyers spending $83 billion annually. It offers an easy-to-use interface for selling, listing and managing inventory.
To stay relevant in an Amazon-dominated ecommerce space, eBay has been using artificial intelligence and structured data to improve the search experience and promote product discovery. eBay wants to drive consumer demand and deliver highly personalized shopping experiences by improving real-time product relevance for each and every consumer.
eBay can help sellers personalize their listings and deliver the right merchandise to the right buyers, at the right price, at the right time. More recently, AI was used to develop curated marketplaces, such as eBay Collective, a high-end furniture shop powered by visual search.
Perhaps even more so than Amazon, eBay tends to favor buyers over sellers. Many sellers are often frustrated by policies that seem too generous to buyers, whether that includes eBay’s 180-day return policy or the buyer’s ability to leave negative feedback even if the seller is not at fault. Fees on eBay can also vary based on the items you sell and the methods you use to sell them.
Emerging Marketplaces – Walmart and Jet.com
Big changes are underway with Walmart Marketplace as Marc Lore, founder of Jet.com, takes over the big-box retailer’s ecommerce operations. In the wake of Walmart’s $3.3 billion acquisition of Jet, several Walmart ecommerce executives have been replaced. These departures signal the drastic makeover Lore is working on to bolster Walmart’s online business.
Among other changes, Walmart.com will soon adopt Jet.com’s “smart basket” technology, a pricing engine that reduces a shopper’s purchase costs based on a range of metrics, such as buying items stocked in the same warehouse, foregoing return policies, or choosing a debit card for payment.
With more than 90 million unique visits, Walmart.com is one of the most visited ecommerce sites. According to Marketplace Pulse, an ecommerce analytics and insights company, Walmart now has more than 2,000 active third-party sellers on the marketplace, and they’re looking for more brands to expand their product assortment.
Sellers on Amazon or eBay should consider joining Walmart’s seller list as soon as possible, while there is still relatively little marketplace competition. Since Walmart enforces a strict pre-approval process, it prevents the scams and counterfeiting associated with eBay or Amazon. Retailers looking to join Walmart should use an integrated partner to speed up the approval process.
However, Walmart has not been able to shake its budget image, and more premium brands are reluctant to grant approval to their authorized sellers to sell their products on Walmart Marketplace.
While Walmart targets older consumers with families, Jet tends to market to price-conscious, tech-savvy millennials who are not particularly loyal to any specific marketplace. According to a survey by Field Agent, Jet.com shoppers are multichannel consumers, having made online purchases from Amazon (98%), Walmart (89%), eBay (84%), and Target (80%).
Based on the survey, price is the main factor driving purchases on Jet over Amazon. When it comes to “price promotions, sales, and/or discounts”, 52% of the respondents believe that Jet.com is superior to Amazon.
Today, Jet.com offers all shoppers free shipping with purchases of $35 and up, compared to Amazon’s $49 minimum for non-Prime subscribers. This is especially attractive to shoppers whose primary concern is price and not delivery speed.
According to Marc Lore, Jet.com shoppers were content with prices that were 4-5% cheaper than elsewhere, as long as they don’t have to worry about getting charged for fast shipment or annual subscription fees. In fact, studies and various price comparisons have shown that Jet.com often beats Amazon on price.
In most cases, Amazon no longer dominates the low-price battle as it once did. Instead, Amazon’s success increasingly relies on the strategy of turning casual shoppers into Prime subscribers. Once they’re members, their spending on Amazon tends to increase significantly compared to the average shopper.
Largely driven by convenience and fast delivery, Amazon shoppers don’t seem to mind that prices have crept upward. Some analysts have speculated that this is the reason why Amazon is quietly eliminating list prices: to raise prices without worrying about losing their loyal customer base.
Still, Jet is far from the “Amazon-killer” it was rumored to be, but it can certainly become a formidable player in retail, now backed by Walmart’s supplier clout, store network and customer reach. Jet typically ships 30% of orders in-house, while the remaining 70% is handled by brands and retailers that sell through the marketplace. But it is still too early to tell.
Other Marketplace Contenders
Seeing the success of the marketplace model, several major retailers including Sears, Newegg, and Rakuten, launched their own marketplaces, allowing third-party merchants to sell on their websites. Even virtual coupon shop Groupon launched their own marketplace, Groupon Stores, opening their platform to more merchants.
As more and more shoppers purchase goods online rather than in physical stores, many traditional retailers are also considering adopting a marketplace model, largely to provide their existing customers with the convenience of a diversified product selection and price comparisons.
Here are some marketplace options for high volume online merchants:
- Rakuten.com: Previously known as Buy.com, this Japanese-owned marketplace features categories such as computers and electronics, home appliances, health and beauty, and other products.
- Sears: Like Walmart, this big-box retailer launched their own marketplace and sells electronics, furniture, apparel, outdoor goods, lawn and garden, and many other products.
- Newegg: Newegg.com is an online retailer specializing in computers, electronics, gaming hardware, as well as automotive, industrial and office supplies.
While there is certainly a benefit to selling on less crowded marketplaces, many Amazon sellers believe that “low tier” marketplaces are not worth the costs and fees. Most of these merchants report poor-to-no sales when selling on lesser known retailer-operated marketplaces. They also express discontent with these marketplaces’ lack of seller support.
A good marketplace involves a well-designed user interface, a platform that drives consumer demand through relevance and personalization, and an excellent user experience built on convenience and trust – things that Amazon and eBay spent decades to build.
Third-party sellers must do their research and weigh the pros and cons when considering these retailer-operated marketplaces. The key is to understand which categories these marketplaces excel in, and what consumers expect from these marketplaces.
Niche & Community-Driven Marketplaces
Shoppers expect something different from every marketplace. Whether it’s because of the website’s design, the trusted reviews or the user interface, each platform has a specific culture or community. Amazon, for instance, primarily targets wealthier Americans that value convenience and product quality; whereas Jet.com shoppers attract younger shoppers who value price above all else.
Niche marketplaces such as Etsy and Zibbet are popular among the creative communities that seek specific products that would otherwise be lost in larger marketplaces. Products that are unique or creative may not get visibility or be undervalued on Amazon and eBay, since shoppers on those marketplaces expect low prices and great deals.
Here are a few niche marketplaces to consider if you sell unique products:
- Etsy: This online marketplace has a substantial consumer base of like-minded shoppers interested in handmade and vintage items.
- Houzz: Houzz is an online community geared towards home remodeling. Users can shop for products, share photos and find professionals in the marketplace.
- Reverb: Reverb is an online marketplace for musicians to buy and sell musical instruments and related equipment.
- Polyvore: A social commerce website focusing on fashion and home furnishings. Polyvore lets shoppers create collections and share them within the community.
Artists looking to get better value for their creative work should consider selling on community-curated marketplaces. These sites and communities attract specific buyers that value creative quality over price and convenience. Similarly, these marketplaces are built for casual sellers dealing in unique goods rather than high-volume orders.
Future of Marketplaces
The future of marketplaces is bright because it addresses our current cultural dynamics – sharing economy, personalized experience, a return to small business with niche expertise, and community. It’s also likely that marketplace buying will invariably become more complex. So far, retail marketplaces have offered a relatively simple buying process. But as shoppers get more savvy, online retailers will need to be more creative and innovative to entice shoppers.
Among some emerging trends we expect are:
- Group buying, where shoppers collaborate and place a large group order.
- More complex transactions that would involve higher-ticket purchases.
- Tailored products or purchases that require more pre-sale engagement.
Technology will be a key driver; in particular, virtual and augmented reality, which are getting a lot of buzz. There are numerous possibilities for VR and AR applications in retail and they will bring huge benefits for all types of retail businesses.
VR allows the buyer to “virtually” experience the product and examine it from different perspectives, giving them more confidence to buy the product. It can showcase products literally anywhere and spur impulse buying. VR can also lower the return rate by almost 23%, according to some industry estimates. Online purchase returns are proliferating and are one of the most costly challenges that online retailers face.
Developing an Intelligent Multi-Marketplace Strategy
The benefits of selling on marketplaces are obvious; foremost is the access to millions of shoppers ready to buy at the popular marketplaces. Given the enormous cost and effort required to drive traffic to your own website, this is enough reason to drive retailers to develop a multichannel strategy.
While multichannel selling has huge benefits, it is too simplistic to think that selling on multiple platforms will immediately drive more sales and profits. More listings and more traffic will do nothing if they are neither relevant to the consumer nor cater to their expectations, and if it costs you a fortune to fulfill orders.
Each marketplace needs to be evaluated carefully in consideration with your product offerings. Since every marketplace has its own set of rules and guidelines, ignoring them could lead to delays, negative reviews and lower seller rankings, resulting in a poor customer experience that could potentially get you penalized, suspended or banned from selling on that marketplace.
To be successful and get the return you’re looking for from marketplace selling, you’ll need to properly invest in a business infrastructure that can minimize technical barriers and streamline your ecommerce operations.
Often underestimated by sellers, supporting your multichannel selling with manual processes or stringing together disparate systems can be disastrous. There are too many moving pieces and it is just too difficult without automation. It will hurt your business and make you less competitive in this hyper-competitive market.
Marketplace success requires planning. The three core pillars of successful multichannel (multi-marketplace) strategy are:
Pillar One: Product Master Data Management
You will need a solid strategy for managing product data, such as images, content and price. Good product data is the differentiator between a good or poor shopping experience. However, managing product data is very labor intensive.
Generally, sellers starting out use their ecommerce platform to store their product master data, but this will only work if you solely sell through your webstore. Once you start expanding to marketplaces, these platforms are limited and not able to support multiple platforms and their requirements.
Once you start selling on marketplaces, you will need to consider a product information management system (PIM) which will serve as a central repository for your product master data. This will allow you to map fields from your product catalog to the required fields of each sales channel. This efficiency will help you get products to market faster.
Pillar Two: Multichannel Order Handling
Order management gets more complex the more channels you add. You’ll need to be able to track each order, whether it came from eBay or Walmart Marketplace, and you should be able to know if that order will be fulfilled by Amazon FBA or your dropshipper.
Order management is crucial for fulfilling orders timely and accurately. You’ll also need to track returns and expedited orders.
Pillar Three: Keeping Inventory in Sync
Without a centralized inventory management system, you risk having discrepancies across your channels. Overselling could happen very easily as you expand onto multiple marketplaces. You can’t afford having customers wait indefinitely until your products are back on stock. Similarly, you could lose out on sales if you understock because of poor inventory visibility.
Find a robust multichannel inventory management system with all the tools needed to sell effectively in each marketplace, such as a dynamic repricer, inventory control and reordering capabilities. Consider using an integrated partner to expand into a new marketplace, as this will simplify and expedite the process.
The Bottom Line
Online marketplaces and multichannel selling are amazing opportunities for retail success today and in the years to come. It is not a trend, but very much an integral part of retailing. If you are not on board yet, it is not whether you should be, but when.
Now is the time to start strategizing how this will look for your business and start building an infrastructure for successful multichannel selling.
Jazva provides the functionality online merchants need to handle high volume B2B and B2C sales, including automated listings, order fulfillment, inventory management, accounting, and more – all through one platform.
Jazva is also listed in the Web Retailer directory: Jazva listing.