Marketplaces… Are they worth it?

Article topics

1. What is a marketplace?
2. What are the pros of marketplaces?
3. What are the cons of marketplaces?
4. Expert tips for making the most out of marketplaces

When you have a product or service you want to sell online, getting started can feel daunting.

You have to buy a domain, choose a platform, and work out how you’re going to market your site to your customers – it’s a lot to take in!

If you want to start selling quickly on an already-established website, marketplaces are a viable option – but they’re not without their disadvantages.

In this article we’ll explain what marketplaces are, the pros and cons of using them, and help you decide if they’re the right operating model for your business.

What is a marketplace?

A marketplace is a platform which connects people looking to sell their products with people looking to buy them.

In return for facilitating a successful sale, the marketplace receives compensation, typically in the form of a commission or a fixed fee.

The biggest marketplace in the UK is Amazon, which sells everything from clothes and shoes to business supplies and electronics. According to Statista, Amazon.co.uk receives over 345 million monthly visits!

You can sell services on marketplaces too. For example, Fiverr is a popular marketplace where freelancers can sell their services to businesses and other freelancers.

Other marketplaces targeted at service users include Airbnb, Uber, and TaskRabbit.

What are the pros of marketplaces?

Marketplaces are easy to get started on and are relatively low risk. With most marketplaces (but not all), you only pay a fee or commission if you sell a product or service, meaning you have nothing to lose.

Most marketplaces are well-established and highly popular with customers. This means you can jump right in and start selling products without having to establish a baseline level of trust with customers. Plus, as many marketplaces are international, you can sell your products easily to people in other countries.

Another key benefit is that the marketplace does most of the work for you. Many marketplaces have significant marketing campaigns in place to drive customers to the platform – Amazon, Etsy, and eBay all show TV ads in the UK.

Most marketplaces can handle basic customer queries, deliveries, and returns for you too, saving valuable time and resources.

What are the cons of marketplaces?

Marketplaces can be highly competitive – there may be many other businesses selling the same products that you are. This can make it hard to stand out, or may even mean you need to lower your prices to get sales.

You’re bound by the terms and conditions of the platform, meaning you have to use the marketplace’s branding, site layout, and payment processors, as well as abide by any rules that

are in place. Not only this, but there’s the risk that the marketplace could change its terms and conditions while you’re in partnership with it.

Finally, it can be challenging to build a relationship with customers on marketplaces. You’re not in a position to market directly to buyers through the platform, for example, using email or SMS marketing, making it hard to encourage repeat purchases.

Many marketplace users are driven by deals and value for money, meaning they’re not guaranteed to be loyal to your business.

Expert tips for making the most out of marketplaces

Marketplaces can be competitive, but there are things you can do to increase the chances of making that all-important sale.

Here’s what you need to consider in order to sell successfully on the marketplace of your choice.

1. Choose the right type of marketplace

According to recent research, the typical seller is active across six different marketplaces.

This makes sense – you can build up a presence across different platforms, and if something goes wrong, you have other marketplaces to fall back on.

However, it’s definitely not a case of picking a marketplace and crossing your fingers; you need to choose the right type of marketplace for your specific requirements.

Marketplaces can be divided into two main types: horizontal and vertical.

Horizontal marketplaces sell a wide range of unrelated products to a wide range of customers. For example, Amazon and eBay.

Vertical marketplaces sell a smaller range of products to a specific industry or sector. For example, Vinted or Poshmark, which specialise in pre-loved fashion.

While horizontal marketplaces have a wider reach, there is more competition. While vertical marketplaces have less reach, it’s far easier to stand out and build relationships.

The right type of marketplace for you depends on the range of products you sell and who you want to sell to. Knowing your target audience is key.

There are other things you need to consider when determining the right marketplace for your products, including:

• What commission and fees does the platform take? Some platforms take a commission on each sale, while others charge a fee per product you advertise
• What restrictions are in place? Some platforms won’t let you sell specific products. There may also be rules against selling off platform or sanctions if customers leave too many negative reviews
• What additional services does the platform offer? For example, Amazon offers Brand Registry, a suite of tools to protect your brand from copyright infringement

2. Optimise your product listings

Marketplaces, especially horizontal ones, can be extremely competitive. Amazon alone sells over 600 million products!

This means it’s vital to optimise your product listings. Not only to answer your customers’ questions but also to include the keywords and phrases they’re searching for, both in the search engines and in the platform itself.

Here are some of our top tips for creating product listings that encourage customers to buy:

• Research the algorithm of your marketplace. Different platforms put an emphasis on different things. For example, eBay optimises listings based on how complete the listing is, your track record as a seller, and the price of the item
• Choose the right category for your product to increase visibility. A good technique is to research similar products to see how they are listed
• Carry out keyword research to understand what your customers search for to find your products. Some keyword research tools like AnswerThePublic, Keyword Tool Dominator, and Soovle, let you search specific marketplace platforms like Amazon and Etsy to provide additional insight
• Understand your target audience and their pain points. What problems do your products solve? You can use this information to write your copy
• Upload high-quality product images. Make sure your products are well-lit and that your photos show the products from a variety of angles. Videos can be useful too
• Encourage existing customers to leave reviews. Most platforms will let you send an email to customers asking for a review, and you can also include a leaflet or card inside their order

3. Consider PPC advertising

Some marketplaces offer pay-per-click advertising (PPC), which you can use to get a priority placement in the search engine results, or even a mention on a competitor’s product page.

You typically pay every time someone clicks on your ad, although some ad types are charged based on the number of views.

There are a wide variety of ads you can take advantage of, depending on the marketplace you use. For example, Amazon offers ads not only on Amazon.co.uk, but also on Fire TV and Prime Video.

Ads work well if you operate in a highly competitive product category or sell products that are identical or similar to your competitors. But they’re not the right option for every business and need regular management and optimisation to drive the best results.

4. Combine with a bespoke eCommerce store

So far, we’ve talked about using marketplaces to sell your products or setting up an eCommerce store for your business.

However, there’s nothing stopping you from using both.

This provides you with the best of both worlds. You can use a marketplace to promote your products to new audiences, and use your website to build relationships with established customers.

If it’s allowed in the terms and conditions, you can even encourage your marketplace customers to buy from you directly to get a better deal.

Many eCommerce platforms offer apps and extensions you can use to manage your marketplace listings and orders directly from your website. For example, Shopify Marketplace Connect allows you to sell on platforms like Amazon, eBay, and Walmart.

So: Marketplaces… Are they worth it?

Marketplaces can be an excellent way to sell your products, especially if you:

• Want to test the waters to see if your product will sell before spending money on a website
• Want to sell to international customers without setting up localised websites
• Run a side hustle in your spare time and don’t have time to manage a website

However, there is a lot of competition, and if you choose the wrong marketplace, you may find you spend more on fees than you earn in sales. It’s important to do your research before you start listing your products.

An eCommerce website of your very own is the best bet if you don’t want to pay fees and want more control over the user experience. And the plus side is… Building and marketing it isn’t as expensive as you might think!

At Xigen, we can help you create the perfect eCommerce store. We’ll help you choose the right platform, create a stunning site that drives sales, and help you develop an all-encompassing marketing strategy.

(And if you do want to sell on marketplaces at the same time, we’ll get you up and running there too.)

Contact us today, and see why we’re the eCommerce agency of choice across the UK.