If you want to start selling online or if your company wants to diversify sales channels, marketplaces can potentially provide you with a range of opportunities. In this article, Capterra gives tips for businesses that want to learn how to sell on marketplaces.
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Marketplaces have been gaining more and more prominence in online sales. Canadian online sales in 2022 are predicted to reach US$79.8 billion and may reach a value of US$104 billion by 2025 if such a growth rate continues.
Though COVID-19 accelerated eCommerce growth and 85% of consumers now shop online, Canadian entrepreneurs are still slow to grasp e-commerce opportunities and leverage the use of online marketplaces in Canada. The same study reveals that only 46% of Canadian businesses have plans to sell online post-pandemic.
To succeed in selling on marketplaces, you should ideally have a solid plan covering how to select a marketplace software for your business and sell on a particular platform. Let’s first discuss what a marketplace is.
What is a marketplace?
A marketplace can be defined as a platform dedicated to the buying and selling of products or services, which are usually marketed by different merchants in the same space.
An ideal way to understand the concept of a marketplace could be to think of it as a shopping mall. Online marketplace platforms typically provide the structure and the merchants ‘rent’ space to build their stores and sell their goods, each with their own type of product and prices. In the language of eCommerce, merchants are also considered sellers by marketplace companies.
There can be different types of marketplaces, including:
- General marketplaces
You can find various products classified by different categories on this platform. Examples of this type of platform are: Amazon and Best Buy.
- Niche marketplaces
Such platforms typically focus on certain product categories. Categories could be specific to any industry —for example— sports, pets, beauty products, groceries, second-hand goods, etc. Examples of such platforms are Famous Footwear for shoes and Care to Beauty for beauty products.
- Service marketplace
Using this type of marketplace, service providers can connect with customers —individuals or companies— to serve their specific needs/demands. Some examples of service marketplaces are Thumbtack, TaskRabbit, and Helpers.
The infrastructure offered by these marketplaces can include a platform to promote products, enabling a payment gateway with the ability to accept different payment methods and provide support for delivery logistics.
Also, by joining a marketplace, the retailer can benefit from the influence of a brand already consolidated in the market. Generally, the advantage of selling on marketplaces is that they might receive a good daily flow of visits, which can directly contribute to the sales of companies still taking their first steps in eCommerce.
How can you choose a marketplace for your company?
Choosing a marketplace partner in each country can be confusing. Keeping this in mind, acting strategically and spending more time researching options may be essential. Here, we have gathered some tips that can potentially help you make a decision.
Select the type of marketplace
Consider the type of product you are selling. If you are dealing in a particular niche category, it could be worth looking for a platform focused on that market as it can attract more segmented consumers and generate a higher profit margin. However, if your catalogue is broad, it could be worth opting for a general marketplace option, which may give you a wider reach among consumers.
Identify your marketplace audience
Another important aspect of this choice could be analyzing the marketplace's target audience since the marketplace may attract different audience types, which can influence the type of products sold on the platform. Therefore, you should ideally analyze the advertising campaigns and brand language to find the marketplace that is more in tune with your business.
Check the commission rate offered
It can also be necessary to evaluate the costs charged by a marketplace. The most common of these can be platforms charging a commission rate on each sale made by the partner store, which could vary according to the marketplace. In addition, there could be platforms where the commission rate varies according to the product category. Generally, many marketplaces usually charge a fixed rate for each item sold.
Identify whether it offers logistics services
Marketplace companies often offer a complimentary delivery service or storage space for goods for a fee. Hiring this service means that the merchant will transfer responsibility for the delivery of their sold products to the marketplace, and this can help with the management of the online operation. These logistics services offer features such as tracking goods, reverse logistics (return/exchange services), and incident handling.
Ability to conveniently register products
When it comes to placing products on the platform, each marketplace is usually organized differently. In many cases, it can be necessary to register each item with its respective image and product description. Therefore, it can be important to evaluate how this type of registration can be carried out. Whether there is a possibility for automatic posting and how much staff time would be spent on this process.
How to sell on marketplaces?
The first step in selling on marketplaces is typically registration —which may be free of charge— on the chosen platform. But, after that, it can be necessary to think about actions ranging from the selection of products for sale to investment in marketing and also to consider the use of tools such as marketplace software to assist with management. Check out the most important issues to be considered in the process of selling through the marketplace below.
You should ideally consider product selection strategies for your catalogue when selling online. If you decide to sell larger products, you may need to think about higher freight costs and the possibility that they may take up more space in your inventory; look for options that can help your company increase profits and don’t burden the customer's budget in terms of the delivery price. In addition, many products could be highly competitive, so always try to look for items with some differentiating factors.
One of the essential elements of selling through a marketplace could be the positioning of ads, which may ensure good product visibility amid strong competition from retailers. To optimize this positioning and stimulate sales, you can potentially develop optimized titles and product descriptions using keyword research software and identify the most common consumer searches.
You may also build a good reputation for the online store with positive reviews, which could also be considered in the positioning of ads.
Several sales metrics could be available for measuring a business's performance, each with specific purposes. Choosing which sales metrics to use can entirely depend on what a company wants to measure.
For small to midsize enterprises (SMEs) entering the marketplace segment, some strategic metrics can be average revenue, conversion rate, acquisition cost per customer, and the number of retention and engagement opportunities.
Many marketplaces may also offer paid ads. By running an advertising campaign, a merchant can increase the visibility of their products in the eCommerce field and help it reach new audiences.
In general, the service is usually charged per click. The seller can define how much they will spend on the campaign and which products will be advertised. They may also extend paid advertising to Google search results. But before defining how much to invest in ads, it may be crucial to consider cash projections and the company's objectives in the short and medium term.
Stock organization and logistics
Stock management can be considered a significant component for eCommerce store owners, especially in a marketplace where sales flow can increase suddenly with the potential to generate errors in the logistics chain.
To prevent this, you can potentially think about automating inventory control, understand the production and shipping deadlines, and adopt secure mechanisms to send alerts whenever stocks reach a certain minimum quantity.
Many companies usually choose to invest in tools that ensure the integration of the enterprise resource planning (ERP) system with the marketplaces to simplify logistics management.
A big question: to sell or not to sell via the marketplace?
Now that you understand how to sell via a marketplace, you should ideally decide if this sales channel is right for your company.
If your company is in the process of digitization, starting to sell on a marketplace could be worthwhile, especially if you don't yet intend to invest in an online store of your own or in digital ads. Not only will it get you started with digital sales, but you may also gain experience by using this type of platform.
If, in your case, you already have a consolidated online operation, selling via the marketplace can be a good way to diversify the channels where your store exists and increase the reach of your brand. Regardless of your situation, always make sure to evaluate all commission rates and possible benefits that the marketplace could bring to your company before making any decision, so you can have more input to determine if this strategy makes sense for your company's future.