Marketplaces can be pricey, overwhelming, and oversaturated places to sell your products. At least that’s how it may seem at first glance. As an online retailer, you have a lot of options on where to sell, and if you don’t do your research - you could be missing incredibly profitable opportunities. Marketplaces require a different approach than selling on your own website, complete with a new set of rules to follow and things to consider for your business. But with this guide, you’ll learn why selling on marketplaces could just take your business to the next level.
Building a loyal customer base can be a time-consuming, lengthy process. With marketplaces, there’s already an existing network of shoppers ready to purchase. We’ll discuss the big three in this guide: Amazon, eBay, and Etsy.
Amazon is the largest US-based online retailer, with over 100 million active users, and not going anywhere soon. If you are looking to grow your small business and leverage a powerful existing network of shoppers, Amazon’s marketplace is a great starting point.
Customers selling on Amazon have more average orders than any other channel – shopping cart or marketplace. The level of exposure your business receives through the Amazon network leads to a greater volume of orders, providing you with increased profits that help offset any costs associated with being a marketplace seller.
As the world’s premier online auction marketplace and 157 million active buyers spending over $8.8 billion annually, eBay is another monster market that retailers should consider. eBay is a great starting point for those with one-of-a-kind items or those with remaining last season inventory. If you’re also looking to experiment with auctioning some of your inventory, such as collectables, eBay not only has an auction option, but a ‘Buy It Now’ option for those listings.
Last but not least is Etsy, which has over 30 million active users. Etsy is focused on those retailers who create their own handmade products. They also offer an existing base of customers and a variety of promotional tools for retailers.
You don’t always have to hold you inventory on-hand, especially if you’re selling on Amazon. With Amazon, there’s the option to have your inventory ‘Fulfilled By Amazon’. This means you don’t have to incur the fees of holding and shipping inventory to customers.
You do, however, have to supply your inventory to Amazon. Amazon noted on their fulfillment page that 71% of FBA respondents in a 2014 survey reported that their unit sales increased on Amazon.com more that 20% since joining FBA. This aligns with our recent report that our customers selling on Amazon have more average orders than any other channel - shopping cart or marketplace.
With FBA, you also have the option of multi-channel fulfillment. So not only will Amazon fulfill your Amazon marketplace orders, it will also do so on shopping carts you sell on. This is helpful for those that are already selling on either other marketplaces or through a shopping cart. You don’t have to be concerned with allocating certain inventory counts to solely Amazon or your other retail site.
On average, shopping cart customers who also have a single marketplace make 38% more revenue than shopping cart customers with no marketplace. Those who have two marketplaces make 120% more revenue. This means more room for retailers to expand and grow their business.
Overall, as the number of marketplaces increases for retailers who have shopping carts, the average revenue and order volumes increases, but average order value decreases. This means that while you will process more orders, the order value will decrease, but that’s not a cause for concern, because your revenue will increase. Retailers who sell on two marketplaces see 190% more in revenue than those who sell solely on a single marketplace.
This data-packed section isn’t meant to overwhelm you. It’s driving the point home that selling on marketplaces is likely a very beneficial business decision for most retailers.
Marketplaces don’t just offer an existing network of customers to tap into, they also offer an existing framework for selling. Retailers can leverage the existing marketplace infrastructure to quickly get setup and start selling immediately, as opposed to spending extra dollars and time in setting up their own shopping cart solution. marketplace. To use this framework, however, there are fees associated with each marketplace. Before diving in, be sure to understand what fees are associated with different products you sell.
Breakdown of marketplace fees:
All Amazon transactions are subject to a Variable Closing Fee, which ranges from 6% to 45% depending on the product category. There’s a full table of fees on Amazon’s site here.
Does eBay have seller fees, too? Yes, for eBay basic fees, check out their most recent fee table. However, if you have less than twenty listings a month, you are only responsible for the Final value fee, which 10% of the sale amount.
Alternatively, Etsy boasts zero membership fees, however, they do charge $0.20 per listing for four months, or until it sells. When it does sell, they collect 3.5% in service fees.
The Bottom Line:
When done correctly, selling on a marketplace can be a very successful retail endeavor. There are several benefits, and although seller fees are inevitable, when done correctly, you can bring in more revenue across the board. The best thing you can do when exploring the option of marketplace selling is to test, review, and make adjustments. Each business is unique and you need to make sure you look at the big picture and do what’s right for you.
A quick note on our data:
The data quoted in this guide was sourced from over seven million orders from January 2015 - May 2015. The order history of over four thousand small and medium sized businesses using Stitch Labs were sampled. Shopping carts considered include Magento, WooCommerce, Shopify, and BigCommerce. Marketplaces considered include Amazon, eBay and Etsy. For the purpose of this analysis, only orders in USD and CAD were included.
Curious in testing new marketplace channels? Stitch helps you connect your multiple channels easily and gives you insight into which products, variants and channels are making you the most money.