What are marketplaces? And why is it important to consider them in one's online sales strategy?
Marketplaces are virtual spaces that connect multiple retailers and brands to millions of potential buyers. Amazon, eBay, Zalando are just a few famous examples.
If e-commerce is the digital storefront owned exclusively by a brand, marketplaces represent a kind of digital shopping mall, where users browse through millions of products from different brands and categories.
According to Statista reports, marketplaces dominate the e-commerce sector in Germany and Italy. Estimates of online sales in January 2024 show that 44% of transactions in these countries take place through marketplaces. In France, on the other hand, the share of marketplaces accounts for 29 percent of the market.
Marketplaces can be of two types:
- Vertical: specializing in only one type of product or product category (e.g., clothing and accessories).
- Horizontal: offer products from multiple categories
Why sell on Marketplaces
To increase online sales, presiding over marketplaces can prove to be an effective choice. Indeed, numerous researches testify that more and more users are regularly buying on these platforms, for at least 4 reasons:
- wide variety of products
- frequent promotions and affordable prices
- expedited shipments
- shipping time exactly indicated
- security of purchasing through a known “brand”
In fact, from the research we conducted in collaboration with Confcommercio Roma and Format Research, 91 percent of consumers who shop online routinely use marketplace platforms as a purchasing channel.
53.6 percent of businesses use their proprietary site to sell online, while 46.4 percent use marketplaces.
9.1 percent of businesses that do not currently use marketplace platforms for online sales plan to do so in the future.
For companies, selling on marketplaces means gaining 5 benefits:
Reaching a significantly larger pool of potential customers
Marketplaces are popular and are optimally positioned on search engines. They therefore turn out to be easily accessible to millions of visitors, who are increasingly accustomed to starting a search on such platforms.
Acquire traffic at a lower cost and sell more easily abroad
Compared to the resources needed to make your e-commerce stand out (SEO activities, Pay per Click Campaigns, social media, etc…), reaching a large audience with marketplaces is less expensive on average. For this very reason, many brands start selling abroad precisely through marketplaces.
Intercepting latent demand
On marketplaces, users do (mostly) unbranded searches, i.e., unrelated to a brand (example “work pants” vs. “Diadora Utility work pants”). This allows (even) little-known brands to be found online.
Emptying the warehouse
Good prices are one of the reasons why users frequently visit marketplaces. Reaching millions of customers through marketplaces is an effective tactic for disposing of in-stock products. Marketplaces that operate in Flash Sales mode are particularly useful in this regard.
Study the needs of your audience
Selling on marketplaces can be a great way to quickly assess which products are most sought after and purchased by the public, observe competitors’ prices and strategies, and adjust the offer based on the data collected.
How to sell on marketplaces
There are 3 strategies through which to sell on marketplaces:
- Selling as a Vendor. In this case, the brand sells a portion of its products to the marketplace, as if the marketplace were in effect an additional (online) retailer. Generally the brand sells these products at the wholesale price, so it gets tighter margins and loses all control over pricing and content
- Selling as a Seller. Brands sell directly on marketplaces. They then have to deal with digital content, shipping, billing, customer service, returns. Selling directly on marketplaces requires specific resources and skills.
- Rely on a specialized Seller in Direct-to-Consumer (D2C) mode. With this model, brands sell on marketplaces through a specialized partner that holds the technology, expertise, tax requirements, and experience necessary to maximize penetration across platforms.
The most common errors
Including marketplaces in your sales strategy requires expertise and experience. Without knowing their mechanisms, languages and rules, you run the risk of making mistakes and wasting resources. Here are the 4 most common missteps of novice brands and retailers:
1. Post incomplete or unoptimized product sheets
The product page must provide the user with clear and complete information. Therefore, it must have a title that states the brand, the type of product, the main function, and possibly some keywords that will help users find you.
The product sheet should also include anadequate description and pictures that are of good quality and match the product being sold.
2. Managing inventory loosely
It is essential that one’s inventory be continuously updated: if a product is not available, it should not be posted. The risk is to provide a poor user experience, with obvious consequences for the seller’s reputation.
3. Underestimating the importance of customer service.
Responding to a customer within 24 hours, communicating in the language of the country where the transaction takes place, meeting deadlines, and providing transparent information are just some of the customer service best practices that brands and retailers need to adopt. In most marketplaces (such as Amazon) these are activities that have a direct impact on each seller’s ranking.
4. Selling at too low a price
It can happen that the total cost of selling on a marketplace is somewhat underestimated. A common mistake is to disregard commissions payable to the marketplace, shipping costs, or logistics costs (in the case of joining specific programs such as Amazon’s FBA, eBay’s Guaranteed Delivery, and Zalando’s ZFS).
5. Do not operate with a multichannel approach
Multichanneling in e-commerce is essential for success, providing visibility and flexibility. Dependence on a single channel is limiting, while using multiple modes of distribution allows you to reach a wider audience.
Adopting a multichannel strategy maximizes online presence and addresses market challenges successfully.
According to a Harvard Business Review study, 73 percent of consumers use multiple channels during their purchase journey, underscoring the importance of reaching customers through different channels, such as marketplaces, e-commerce and social media.
6. Reusing B2B logistics for B2C channels.
A logistics structure that satisfies the traditional sales network is not always ready to process even individual customer orders.
This underscores the need to adapt and enhance logistics capabilities in order to meet the specific needs of individual consumers, highlighting the importance of increased flexibility and versatility in the logistics process.
.
Major marketplaces
Depending on their business goals and target product category, brands today have the opportunity to choose from numerous marketplaces. Here is a selection of the main ones:
- Amazon is the ultimate site for selling online and the most valuable brand in the world. It has more than 350 million products and over 300 million active users in more than 180 countries.
- Zalando is a vertical platform specializing exclusively in the sale of clothing, shoes and accessories. It operates in 25 countries.
- Ebay offers more than 1 billion products in different categories. It connects millions of sellers and buyers in more than 190 marketplaces around the world.
- Veepee is an online fashion and lifestyle outlet present in 10 countries that offers forward promotions and in France hosts an average of 13 million visits per month.
- Spartoo is a French marketplace named after the footwear used by gladiators. It focuses mainly on shoes and clothing.
- Otto is a German generalist marketplace with a presence in more than 30 countries.
- Cdiscount is one of the leading French e-commerce companies. It is a horizontal platform, so it spans different product categories.
- Allegro is the first Polish marketplace and the fifth in Europe. By 2023, it has reached nearly 20 million active shoppers. Customers can choose from more than 250 million product offerings at bargain prices,
- La Redoute, a French company based in Roubaix and Paris specializing in clothing, has more than 10 million customers in 26 countries.
- Farfetch, the world’s largest global marketplace for luxury fashion.
- Jd.com is the Chinese equivalent of Amazon. Together with Tmall, it controls more than 80 percent of Chinese online sales.
- Tmall is a Chinese marketplace focused on high-quality products of clothing, personal care, furniture, and food.
Some Success Stories
There are many stories of businesses large and small that have grown exponentially through the showcases of various marketplaces. With the right strategy, marketplaces offer multiple opportunities for established brands and even small businesses.
