Why Online Marketplaces Aren’t For Everyone

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Online marketplaces have become a growing e-commerce trend over the last decade. And, with many now operating worldwide, they offer a brilliant way of making products accessible to a wider audience. With key players like Amazon (who receives almost 6 billion visits a month), Etsy and Alibaba sending products across the world, the online marketplace channel continues to soar. In fact, in 2019, 50% of e-commerce sales were made through online marketplaces.

As the e-commerce landscape develops, the importance of marketplaces becomes greater. However, many brands believe selling their products through online marketplaces can have a detrimental effect on their existing sales channels.

So, how important are online marketplaces in the omni-channel retail landscape? We’re going to explore the pros and cons of online marketplaces and take a look at how brands can make them work to their advantage.

Online Marketplaces are Not For Everyone

According to data from Juniper Research, online marketplace revenue is set to double from $18.6 billion in 2017 to $40.2 billion in 2022. However, while marketplaces continue to grow, they are not a key channel for all industries – and this mainly comes down to customer shopping behaviour. For example, customers shopping for DIY or home and garden products usually prefer to buy from specific retailers – often pure players, or brick and mortar stores, like IKEA or B&Q. It would be counterproductive for brands who sell products via these pure players to list products on Amazon because it would damage their conversion.

We are also witnessing big-name brands, like Nike and Birkenstock, move away from online marketplaces like Amazon, because of the number of counterfeit goods and unauthorised third-party sellers on the site. When it comes to preventing these issues, online marketplaces still have a long way to go.

A Love-Hate Relationship

The relationship between brands and online marketplaces is often a love-hate one. Many brands want to work with marketplaces, but are afraid it might harm their business.

Here are some of the pros and cons of online marketplaces:

marketplace pros and cons

The Rise of In-House Marketplaces

In-house marketplaces have become popular with many global ‘ingredient brands’ like Intel, Microsoft and Nvidia. With in-house marketplaces, brands use their website to display the products of partner brands.

While it may seem counterproductive, some brands are now using this kind of online marketplace to their advantage.

Here are some of the benefits:

  • They provide added value for website visitors and help to create a seamless shopping experience

  • By displaying all product information and prices, visitors stay focused on buying the brand’s product, rather than looking for more information elsewhere
  • Brands have full control over the channel and information that’s displayed

Brands can implement Reviews as well as Where to Buy Online and Local solutions to provide a better customer experience.

Omni-Channel and Online Marketplaces

In an ideal world, all businesses will provide consumers with a seamless omni-channel buying journey, and online marketplaces are one of the channels that can help achieve this goal. For many brands, listing products through online marketplaces is a no brainer – especially those who are looking to extend their reach. For more established brands, a move towards in-house marketplaces can improve conversion and help enhance the buyer experience, among other benefits.

While the world of online marketplaces still has a lot of developing to do, there are many benefits for businesses and consumers alike. As always, when it comes to sales channels, brands need to go through a process of trial and error to determine what works best for their business – whether that be listing products via online marketplaces, or creating their own. Ultimately, brands need to work towards providing multiple purchase options to allow consumers to buy from their preferred channel, and marketplaces offer a brilliant way to do so.

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