Navigating the Growing Range of Online Marketplaces for Retailers
The coronavirus pandemic has created a battleground for the likes of Amazon.com, Facebook, and Walmart, each looking to grab or defend e-commerce opportunities as more consumers shift to online shopping. Each knows the power of trying to create the most engaging and frictionless experience because this is key to winning consumers, building demand and, ultimately, attracting further investment from retailers, brands and advertising.
While quarantine and shelter-in-place orders have accelerated plans at the macro level for these big players, small and midsized businesses have also been impacted at the micro level, especially those reliant on revenues driven in stores. This has prompted a number of important questions for retailers: Where is the best online home for my products? Which third-party seller can help reach the right audience? How does e-commerce enable increased business traction?
Consumers have never been so spoiled for choice. And now, businesses must fight to ensure they can each get a slice of the pie. The migration to online has been a long time coming, but the coronavirus pandemic has launched us full throttle into digital transformation. Businesses need to make speedy, smart decisions if they want to succeed long term.
For retailers looking to digitize, a logical first step is to utilize existing online marketplaces. These established platforms are tried and tested with an already solid consumer base, meaning that they're perfect for businesses looking to test the waters of e-commerce.
Each online marketplace has its own unique way of operating, with the various existing platforms servicing different audiences and preferring different tactics. To demystify what’s already out there, here’s a breakdown of the major e-commerce players and which marketplace is best suited to what business.
Let’s Start With Amazon
Amazon is a giant of e-commerce. There are more than 150 million paid Prime members worldwide, and 112 million of those are in the U.S. alone. The sheer size of Amazon's marketplace is one of its biggest benefits, and presents retailers with more than one way of selling.
The most simple way of selling on Amazon is via "Seller Central," where businesses are able to join the marketplace as a third-party seller. Seller Central allows a brand to self-manage its online presence on Amazon via a single seller account, granting a business complete control over pricing, positioning and profitability. The alternative to this is to sell on Amazon through "Vendor Central," an invite-only platform that makes Amazon a full-time distributor of a company's products. This method increases brand visibility, but hands much more control over to Amazon.
One of the most crucial factors for a business finding success on Amazon is achieving a "Prime badge," which opens a business up to Amazon Prime audiences. This is possible by both FBA (fulfilment by Amazon) and FBM (fulfilment by merchant). However, if a business chooses to adhere to FBM, it must ensure it complies with strict criteria to meet Amazon’s fulfilment standards. If a business has set its sights on the Prime badge, then FBA is the recommended route to take and makes products far more likely to be visible to consumers. However, that’s not to say that FBM isn't an option. For some businesses with larger, heavier items, a custom fulfilment promise may be more suitable.
eBay is another global marketplace that makes up a huge share of the e-commerce market. Operating in 190 markets worldwide, eBay boasts over 182 million active buyers, showing that it has grown larger than the second-hand, online yard-sale typecast it once used to be. According to a 2019 report from eBay, 96 percent of its U.S. small business sellers export and reach an average of 17 different foreign countries with their products.
eBay is simple to use and there's a basic structure of insertion fees and final value — i.e., there's a price to list items and usually a percentage taken by eBay on any items that are sold. This is usually a flat fee of 10 percent of the final sale price, and is capped at $750. With eBay, the power is in the hands of the seller; it's really up to the business how much money to invest in the marketplace. The simplicity of the selling structure means that there are no hidden costs and brands are able to have full control over sales. There is, however, always the option to invest more and subscribe to eBay Shops, where sellers are able to customize shopfronts and give buyers more information on the business.
Walmart's e-commerce presence has grown rapidly over the past few years to outgrow eBay in scale, and a recent partnership with Shopify has seen the number of new sellers on the platform skyrocket. With more than 440 million customers, Walmart’s growth is predicted to continue on an upward trajectory. With the introduction of Walmart+, the retailer's subscription service, Walmart stands in direct competition with Amazon Prime. Walmart’s key differentiator to Amazon is its in-store customer data, which allows the retailer to gain information on what products appeal to audiences and make informed decisions on stock.
Selling on Walmart is invite only, and therefore there are no monthly, annual or initial setup fees. Instead, Walmart uses a commission fee model, which makes it a great option for larger sellers with an already well-established brand. The platform is fairly new, but is fast becoming a go-to for consumers. Research predicts that its e-commerce sales will likely represent around 5 percent of total U.S. e-commerce sales in 2020. Walmart has also seen accelerated growth throughout the coronavirus pandemic, with consumers turning to online shopping and trusted marketplaces. For well-established brands that are lucky enough to be invited onto the platform, Walmart provides a large audience of willing buyers.
Tmall Global (part of Alibaba Group)
Tmall Global may be the lesser known part of Alibaba, but if the rise of its parent group in the East is anything to go by, businesses will be eager to explore the opportunities it brings. Alibaba has more than 755 million active users, which is more than twice the size of the entire U.S. population. Tmall Global is Alibaba’s first venture into global sales, allowing third-party sellers to be a part of the e-commerce platform.
Tmall Global allows retailers the opportunity to expand into the Chinese market, which is one of the biggest e-commerce markets in the world. The marketplace is a leading innovator in e-commerce and supports its online sellers with a wealth of consumer data and insights to aid sales. Unlike other marketplaces, Tmall Global makes its data accessible, which can help brands to build knowledge of their international clientele. The platform also invests in the likes of live shopping, providing consumers an engaging experience by constantly reimagining e-commerce.
This does, however, come at rather a hefty price, with businesses being required to pay a security deposit lump sum of $25,000. And that’s on top of any shipping costs that might be incurred should you be U.S.-based. However, if it’s a price that can be afforded, it’s one that could pay off, as businesses will reap the rewards of an entire new market and customer base.
The convenience, choice and luxury of online shopping is something that consumers have quickly grown accustomed to, and businesses cannot afford to miss out on the sales generated online. Marketplaces and e-retail are a perfect way for businesses wishing to expand their online offering to enter into the world of e-commerce with ease, introducing products to new audiences around the globe. No matter the size of the business, there’s a marketplace out there that can help to drive sales. It’s important for brands to think about their audiences carefully and consider which marketplace is the best home for them.
Andy Siviter is the director of e-commerce at Croud, a global digital marketing agency.