Member Article

Marketplaces: opportunity and challenge for e-commerce companies

Marketplaces: an opportunity and a challenge for e-commerce companies

With 95% of UK retailers now selling via online marketplaces and almost half using them to trade overseas – marketplaces are likely to become an increasingly important sales channel for a lot of companies this year. Unsurprisingly, Amazon is proving the most popular site amongst UK companies with around 86% selling on the marketplace giant, followed by 68% on eBay. Spreadshirt already offers its best-selling products on Amazon Marketplaces in the UK, Germany, France and the USA. However, not all marketplaces are the same and while most offer an exciting new route-to-market for retailers, there are challenges that also need to be considered.

Let’s focus on the UK market leader. Figures show that Amazon continues to lead the online market with more e-commerce sales than anyone else — an expected $91 billion in sales in 2014, more than the next dozen largest e-tailers combined. One of the reasons behind Amazon’s success is the changing usage patterns of online shoppers. According to a study conducted by Forrester Research, nearly one-third of them now begin to search for a product on Amazon rather than using a search engine. Eric Schmidt, CEO at Google has also recently cited the marketplace as the company’s biggest competitor in search.

Amazon while often both feared and admired by online and offline retailers is the ultimate rival, as it thrives to beat competitors both on price and on service. It is also an exciting retailer that often leads the way in setting new standards for online shopping. And this certainly seems to be the case when looking at its current success in changing the way online shoppers are finding things. And selling online is about being found. Only then is the fabulousness of your products, or the quality of the user experience, revealed. And while it is true that good marketing and an SEO strategy can help any retailer be found online, you may be missing a trick if you’re not getting your products on to these external marketplaces since these are increasingly now people’s entry point to the web.

Our decision to become an Amazon Marketplace merchant was because I believe this channel can offer our sellers yet another important route to market. And it is a significant part of our company’s increasingly multichannel distribution model. Best-selling products on the Spreadshirt platform are now automatically transferred to Amazon in key markets, thus further extending the reach of our platform’s partners to customers and helping them interact on a wider scale with their target audience. In our experience Spreadshirt sellers whose products are offered on Amazon have reported a doubling, sometimes tripling, in revenue with internal surveys showing that due to the traction of the industry leader, average sales can increase by up to 140%, with some larger brands experiencing on average an increase of up to 200%.

Amazon however is not the only marketplace to consider, eBay now offers B2C routes and other, previously industry-only players such as the portal of U.S. company, Sears, are also entering the consumer market. This diversification of sales channels can only benefit the market so we’re making it an important part of our long-term strategy.

We have now set up an External Marketplaces unit as we expect the big names to push for global awareness and smaller marketplaces to appear, creating opportunities for specialised sellers to reach new audiences. Diversification of sales channels in general is a trend that all online retailers need to respond to.

While Amazon and eBay are the better known marketplaces in Europe, the US and Australia, if you look towards Russia or even further to Asia, you come across other large and locally very active online marketplaces such as Ozon or Tmall (which belongs to the Alibaba group) and Rakuten, all of which are in their own way and in their regions leading representatives. If you’re looking to expand into these regions, they might be worth considering.

It is also important to keep in mind that not all online marketplaces are the same. Amazon makes it easy for the customer to make a quick purchasing decision. Other marketplaces, like Rakuten however, with the tag line ‘Shopping is Entertainment’ focus more on the story. Here, sellers can be more individual, sharing stories with buyers and information on special features. Both approaches are interesting and might appeal to the same or very different companies.

With all the many benefits of selling on these external marketplaces, there are however some challenges retailers need to consider. For example, shipping and delivery expectations may well be different. Amazon customers, in our experience, expect very short delivery times, a particularly problematic undertaking for a print-on-demand company competing with companies selling ready-made products. Even with our optimised production facilities in Europe and USA (and since summer 2014, South America), and effective coordination of these, a separate business unit has had to be established in order to meet new customer expectations.

There is also the issue of higher returns rate on orders. For us, the only downside of doing business on Amazon has been that our print-on-demand offering is not as well understood than on our own platform. In external marketplaces, shoppers tend to order, try on at home, and send back for a refund if they don’t like it. This means that our returns are up, albeit to 6%, which is still reasonable compared to industry standards. It’s around 3% on our site, where shoppers understand the customisation and print-on-demand process.

It is clear that these marketplaces can drives sales. However, companies need to be prepared to deal with the challenges too. With competition online so fierce whatever your size, it’s important to provide a shopping experience that offers customers more than just the lowest price tag. Rather than competing with these marketplaces, they should be viewed as new routes to potential customers and as an opportunity to improve your practices.

Marketplaces are here to stay and they are bringing innovation and vitality to the retail sector – they are changing the way we shop for ever too. Our response should be to embrace this channel as it is helping develop the UK online and multichannel market. These marketplaces are preparing the retail sector for an increasingly omnichannel future and that can only be good thing.

This was posted in Bdaily's Members' News section by Philip Rooke .