What is a marketplace and is it worth selling through them?
The term marketplace is no longer a novelty in our vocabulary. On the contrary, they are growing like mushrooms after the rain. Globally known marketplaces such as Amazon or Ebay are complemented by specialized ones that cater to a specific segment. The question is – how should we approach this trend? Should we try selling through a marketplace or should we rather turn our backs on them and continue to develop our own e-shop?
Are you wondering if selling on a marketplace is right for you? Then keep reading! This article summarizes all the advantages and disadvantages that marketplaces offer. Find out if this method can bring something new to your e-commerce business.
What is a marketplace?
A marketplace is a platform that connects sellers and customers in one place. It's usually a website or app that offers products from multiple vendors through an online interface. Think of a marketplace as a virtual marketplace where anyone interested can sell, provided they meet the requirements. Even those without their own online store can participate. Some of the most well-known marketplaces in our region include Amazon, Ebay, TEMU, Alza, Kaufland, and Allegro.
How does a marketplace work?
On a single website, buyers have access to a vast amount of products from various sellers. This means they can conveniently purchase everything they need in one basket and even choose which seller to buy from if multiple vendors offer the same product. They can select their preferred payment and delivery methods and complete the entire order process within the marketplace.
On the other hand, sellers need to register, go through verification, and add their assortment to the marketplace's offerings. Depending on the chosen marketplace and its different account types, sellers can choose advanced advertising options or other benefits and settings. A marketplace functions as an independent sales channel. It has its own servers, databases, payment gateways, and automated processes that handle the entire sale. The reward for selling through the platform is usually a commission, and in the case of advanced settings, a payment based on the chosen account type.
What is the share of marketplaces in e-commerce abroad and here?
While marketplaces are gaining popularity here as well, it's still early days. Major players like Amazon and Ebay haven't even entered our market yet. On the other hand, we've seen Zalando for a few years now, and in recent months, the orange Asian giant TEMU has arrived, planning to attract European sellers as well.
ui42 TIP: TEMU's expansion into our market may have improved the mood for customers who prefer cheap purchases from Asian countries, but it has caused wrinkles for local e-shops. Their PPC advertising costs have increased because TEMU's competition has challenged many advertisers. Are you one of them? You can read more about the behind-the-scenes details and the figures this marketplace invested in its massive campaign in an article on our blog.
Back to the numbers. While China is booming, with the most popular marketplace, Taobao, achieving global leadership, online sales through marketplaces still have lower popularity in Europe, specifically in Slovakia. However, the trend continues to rise, and it's estimated that it will also be the case here. Just to give you an idea, while Taobao reached $723.8 billion in sales in 2023, it's aiming for an incredible $762 billion in 2024.
According to statistics from 2022, as much as 47% of online purchases worldwide took place through marketplace platforms. Current figures speak of roughly 60% globally (with Asian countries reaching the highest levels, where marketplace trade makes up approximately 80% of the share), and in our region, we're currently somewhere around 10%. However, trends are usually reliable; it just takes a while for them to reach us.
Which marketplaces are the most prominent in Slovakia?
Even though they haven't reached such high percentages here yet, you've definitely heard of them. According to current statistics, the TOP marketplace platforms ranking in Slovakia for April 2024 look like this:
aliexpress.com
temu.com
drmax.sk
mall.sk
kaufland.sk
Among local marketplaces, including those in the Czech Republic, the most frequently mentioned ones in Slovakia are Glami, Biano, Mall, Favi, Heureka, or the European Zalando (Germany) and AboutYou (Germany).
What are specialized marketplaces and what are their advantages?
Specialized types of online marketplaces focus on a specific segment. Examples include the aforementioned Favi and Biano (marketplace for furniture and decorations), AboutYou and Zalando (clothing), and so on. Even Autobazar.eu, which exhibits marketplace features for the auto-moto segment, can be considered such a marketplace.
Why do they even exist?
Compared to classic marketplaces like Amazon or Aliexpress, they have a much narrower focus. This logically comes with a clearer filter for product selection (and listing) and the implementation of various additional services. Examples include assembly, delivery through external carriers, and the like.
ui42 TIP: Because focusing on a specific product segment brings more options for choosing the most suitable couch or running clothes, customers appreciate the clear and user-friendly environment of the marketplace and prefer to shop there.
Why is the popularity of marketplaces on the rise?
The answer is simple. There's demand for them from buyers who find this type of shopping very advantageous. On the other hand, marketplaces offer sellers the possibility to get a taste of the online business world even without an e-shop, or as an alternative to what Facebook Marketplace or a similar bazaar-type marketplace previously offered. However, there are many more reasons. Let's break it down.
Advantages and disadvantages of the marketplace platform for buyers
We've already mentioned some in the article above. However, there are many more advantages that have made customers love shopping on online marketplaces.
All you need is... a marketplace
First of all, imagine the variety. A new iron, a webcam, and a book by your favorite author in one basket. If a specific product is sold by multiple vendors, customers can even compare prices, condition, or reviews from customers who have already purchased. By the way, it still holds true that the more competition, the more benefits for the customer (lower price, promotions, extended warranty, etc.). Additionally, we're still in e-commerce, which means convenient shopping even at 2 AM on a Sunday morning when you don't feel like counting sheep.
Safe and secure shopping
Clear categories or filters help you find the right product, and a major benefit is the trustworthiness that comes with shopping under the umbrella of a marketplace. Add to that the options for secure and modern payment methods, sophisticated logistics, and the ability to track your shipment, and it's clear why the trend called "marketplace" won't simply gather dust.
One account, one purchase history, one basket. Plus, innovations powered by artificial intelligence, which can handle personalized offers even without knowing who's logged in.
ui42 TIP: You don't have to be a big player like a marketplace to have artificial intelligence in your e-shop. You can automate things like recommended products as additional sales in the cart, product details, pop-up windows, or anywhere on your website. This can easily increase the addition of products to the basket by 35%, as in the case of our client PackPack.
The disadvantage is the loss of benefits when buying from an e-shop
A disadvantage of shopping on an online marketplace for buyers might be the lack of a well-developed product filter. Classic e-shops also have the advantage that within an online marketplace, it's sometimes not possible to get various benefits, related services, or professional advice.
What are the principles of safe shopping on a marketplace?
If you've already shopped on Amazon or Ebay, you probably know that the whole process is simple and very clear. It also includes data protection, as customers register their account directly with the online marketplace and don't need to deal with GDPR or consent for cookie usage with each individual seller. However, it's recommended to read the terms and conditions you agree to before making a purchase. It also wouldn't hurt to study the complaints procedure or the system for handling returns.
What you should pay special attention to is the payment method. You should handle this through verified payment gateways and systems with additional protection, such as PayPal.
Additionally, especially when buying from Asian marketplaces, it's a big plus to verify real product photos, ideally in customer reviews. Product photos themselves are often misleading, and customers are then surprised by what they unpack at home. Besides photos, reviews (especially verified ones) are a way to check the seller's credibility beforehand. While the marketplace itself has tools to protect buyers, why complicate your life unnecessarily?
Advantages and disadvantages of selling through a marketplace
So now we know why marketplaces are a popular spot for customers. But what about sellers or e-shops considering entering the online marketplace arena? This is a dilemma many face today.
Listing products or entering one of the marketplaces isn't a problem itself. There are even specialized SaaS (software as a service) solutions that can get sales up and running within a few days, even with thousands of products.
The marketplace is a new sales channel
The biggest advantage that every e-shop owner or marketer sees is a new sales channel. With a vast amount of customers. A huge amount, actually! According to the latest figures, Amazon alone has over 200 million Amazon Prime members, each of whom spends more than $1,000 on Amazon annually. Every minute, this gigantic marketplace records sales of $283,000. And somewhere out there, among all that, is your slice of the pie.
Sell even without an e-shop
For some, it's a new sales channel, and for others, it may even be their first and only one. Marketplaces are a great way to try out online sales without having your own e-shop. You don't need any tools, to look for new customers, customer support... You get everything on a silver platter. Thanks to the reputation of the marketplace, even the costs of your own marketing and brand building are eliminated. If you still want to work hard in the competitive battle between sellers who offer the same products, you can simply use the extended options that the marketplace offers (upgrade membership, premium account, etc.).
Online marketplaces are an opportunity to expand abroad
Marketplaces usually know no borders. What does that mean? That if you are thinking about expanding, it is one of the options to sell on other markets as well. Even from tomorrow.
A huge advantage is that many marketplaces also offer the option to start with really minimal costs and benefits that will even put you ahead of the competition (budget for PPC, free premium account, etc.). And you can take care of everything, including logistics, comfortably from your own living room.
The pitfalls of selling through a marketplace
And now, the other side of the coin. Selling through a marketplace also has its dark side. Yes, exactly the reason why you may not be there yet either.
The first sobering up from the euphoria called an online marketplace comes when you realize the amount of competition there is. This is especially true for sellers who do not have their own products. The highly competitive environment naturally pushes prices down or forces you to think about what bonus service to offer. In addition to the constant competition for a lower price for the product, the fees also take their share from your margin. Even the tempting offers for first-time sellers are only temporary, until the marketplace sucks you into its network.
You may be wondering what happened to brand building? Well, you have to leave that to your own solution. In addition to positive references from customers, you can only scratch the surface in the online interface of marketplaces and not stick out too much. In other words, you're all in the same boat. This also means reduced communication with the customer through the marketplace channels and great pressure to adapt to the set rules. Consider whether, for example, Sunday order processing and similar fast logistics challenges that you will face in some marketplaces are worth it for you.
How to successfully sell through a marketplace?
Before you decide to sell through a marketplace, do your research and find out which one is the most suitable for you. It depends on the segment and your sales portfolio. If you know that there is a specialized marketplace (e.g. Etsy, etc.), try its potential, it will be a more relevant form of sales for you than a general marketplace.
Find out your options. What all can you sell and especially under what conditions. The marketplace may offer different types of memberships or profiles at different levels. Choose one that suits your ideas and requirements. For example, with Amazon, you can even choose whether you want to handle the logistics of your order yourself or simply send the products to the warehouse, where they will take care of everything for you.
If you are deciding between several marketplaces and don't know which one to go to, no one said you can't try several. See them as sales channels that create an omnichannel with your e-shop or even store and make the most of it.
Don't live up to expectations. Your current bestseller may not necessarily be a hit on the marketplace either. However, be careful, on the other hand, this channel can sell out your long-term shelf warmers.
After all, a marketplace is a great way to try out online sales if you don't have your own solution or don't want to invest a big budget upfront. And it's ideal if you want to try selling your products on the foreign market. A bull's eye? If you are thinking about expanding, you can find tips on how to do it without major failures in an article on our blog. Or contact us directly and rely on 27 years of experience with projects that were not afraid to cross the borders of Slovakia.
