As digital commerce continues to accelerate globally, selling on Marketplaces is rapidly becoming an essential sales channel for many B2C and B2B organisations. Entire industries are diversifying their channels to respond to the seismic shifts caused by the global COVID-19 pandemic. 

The pandemic brought changes to the e-commerce industry on a never before seen scale. According to Australia Post, in 2020 there were more people shopping online than ever before – up 31 percent to 5.2 million when compared to the average in 2019. Consequently, online goods spend grew by 95 percent YOY, with online purchases still continuing to grow at a rapid rate.

These figures, which include sales made through marketplaces, indicate that the dramatic shift will continue to affect online shopping behaviour for years to come. So whether you’re just getting started in e-commerce, or you’re well established, there’s simply no doubt that Marketplaces should be a part of your channel strategy. 

Differences between B2C and B2B marketplaces

A B2C marketplace is a business model in which the seller sells products and services directly to the consumer. The consumer is the end-user in this scenario. A B2B marketplace is a business model in which the seller sells products and services to another business. B2B marketplaces are largely inspired by their B2C marketplace counterparts, however, they do require very specific B2B multi-vendor functionalities to resolve scenarios including but not limited to:

• Bulk orders and Minimum Order Quantity (MOQ) capabilities
• Purchase orders, reordering and invoicing
• B2B payment types and terms, payment integration and ordering options
• Custom or unique pricing structures per customer or group
• Quote, Request For Proposal (RFP) and order negotiation workflows
• Functionality for restricting access for unregistered users and others
• Functionality for vendor product and order management, etc.
  

Three approaches to participation

We’ve identified the three most common approaches we continue to come across for organisations to diversify their sales channels with marketplace participation. These are:

#1 Selling on marketplaces

A business sells a selection of their full product range on an established marketplace eg. Amazon. Participation in several marketplaces is common, particularly where niche product categories are known to perform better on one marketplace vs another. For this approach, it’s not essential to have an e-commerce platform, this particularly applies to B2B organisations.

#2 Building a marketplace

A business builds its own multi-vendor marketplace. They thus have the opportunity to sell various product ranges from within their own organisational departments which may be distinctly unique, or curate a range of products from multiple external third-party vendors. 

#3 The hybrid approach

A business builds its own e-commerce solution or maintains an existing solution which is already live. By selling through the e-commerce solution they become an online ‘merchant’. The merchant directly integrates its e-commerce platform with established marketplaces, creating multiple sales channels.

Selling on marketplaces

Selling on established marketplaces follows many of the same principles as selling on an owned e-commerce solution.

For starters, most obviously, the products need to be in-demand and serve a valuable purpose to customers. Next, they need to be supported by good quality product data—for example, high-res images, videos, product manuals, reviews. And finally, the product must have market-competitive pricing. The pricing strategy must also not cause any channel conflict for an organisation, which can be extremely challenging when trying to remain competitive.

By selling on established marketplaces, organisations can benefit from the often multi-million-dollar marketing strategies of the marketplace owners. In many cases, organisations could never match these budgets themselves, so it’s a clever way to expand customer acquisition through selling on marketplaces. 

Many B2C and B2B organisations that use a platform which cannot integrate directly with a marketplace can still sell on marketplaces and diversify their sales channels in 2021 and beyond.

Benefits of selling on marketplaces

1. Add an additional sales channel to your existing business model
2. Access to a greater volume of traffic (including international traffic)
3. Reach completely new customers and audiences
4. Take advantage of the global trend in a new way of shopping
5. Increase credibility selling through an established marketplace
6. Internationalisation from the onset, if you want it
7. Benefit from multi-million dollar acquisition campaigns and strategies
8. Utilise powerful marketing strategies for your products and services

Challenges of selling on marketplaces

1. Marketplaces are extremely competitive
2. Commissions are charged for each sale, reducing your bottom line
3. You are potentially side by side with direct competitors
4. Potential restricted communications with customers
5. Limitations to how you brand your storefront in most cases
6. Cannibalisation can reduce sales on your e-commerce platform
7. You may be forced to outprice yourself, upsetting loyal e-commerce customers
8. There’s no guarantee for success

Building a marketplace

Again, building a marketplace follows many of the same principles of building an e-commerce website. It needs to be a viable, scalable business model with a clear value proposition. 

One of the most important reasons to build a marketplace for an organisation is to attract vendors and customers without the need to invest in physical stores and supply chain infrastructure.

Building with open-source technology can allow the flexibility required to meet the marketplace owner, vendors and buyers needs. These key stakeholder groups have individual needs specific to their customer experience that must be considered to build a robust and feature-rich platform fit for market success.

In addition to building a platform capable of creating tailored customer experiences for each stakeholder group, it must also support key integrations into other business platforms, for example, PIM, CRM, OMS, whilst leveraging the efficiencies of doing so. 

Indeed, this approach is much more involved than other options. However, for many organisations, there’s enormous potential to diversify their sales channels in this way, and take advantage of niche or industry-specific relationships with vendors and customers.

Benefits of building a marketplace

1. Owners can choose a revenue stream that best fits their market
2. The platform does the heavy lifting of business processes required for commissions, fees etc
3. Reduce financial risk as no need to invest in inventory upfront
4. Total control of customer experience at every step of the journey 
5. Flexibility to meet and change owner, vendor and customer needs
6. Provide customers with curated industry-specific products and services, thus creating a strong value proposition
7. Direct access to customers for marketing and communications
8. Total control of customer service and support structure

Challenges of building a marketplace

1. Establishing a customer base for a marketplace is no small task
2. Marketing budgets pre-launch are very high, to target suitable traffic
3. Vendor loyalty is difficult to achieve, particularly relating to the chosen business model and fee structure for participation
4. Customer loyalty is extremely difficult to achieve with so many active marketplaces in existence already
5. You cannot directly influence the product or service a vendor supplies
6. Scalability rarely achieved without a large number of customers joining to make it beneficial for others to join
7. There’s always a risk of too many sellers and not enough buyers
8. Ongoing costs of innovation continue for the life of the platform

The hybrid approach to marketplaces

For the majority of leading organisations that we work with, the hybrid approach has been the best way to diversify sales channels over the past 12 months.

For the hybrid approach to work successfully, the organisation’s e-commerce solution must tightly integrate with critical business systems whilst also integrating with marketplace platforms. This is to utilise the rich product data stored with the e-commerce platform giving all product listings the best chance of success. Whilst also, maintaining inventory accuracy across the board, aiding effective order management, and satisfactory fulfilment processes.

With stores closed in several states for much of the past 12-months, choosing to integrate with marketplaces was a ‘must’ for many organisations seeking new ways to acquire new customers. It was the lifeline many retailers needed when faced with massive disruptions.

Benefits of a hybrid approach

1. Add an additional sales channel to your existing business model
2. Access a greater volume of traffic (including international traffic)
3. Reach completely new customers and audiences
4. Take advantage of a direct integration capabilities
5. Manage products and product data in one central location
6. Flexibility with products, pricing and content by channel
7. Internationalisation from the onset, if you want it
8. Benefit from full order life cycle management

Challenges of a hybrid approach

1. It may become necessary to partner with a third party logistics partner, an additional cost
2. Merchandise planning and channel management requires additional people power
3. Marketplaces are extremely competitive
4. Commissions are charged for each sale, reducing your bottom line, particularly when compared with e-commerce sales
5. Potential restricted communications with customers versus e-commerce
6. Cannibalisation can reduce sales on your e-commerce platform
7. You may be forced to outprice yourself, upsetting loyal e-commerce customers
8. There’s no guarantee for success

In Summary

Whether you’re just getting started in e-commerce or well established, there’s no doubt that Marketplaces should be a part of your business strategy. It’s a sure-fire way to diversify your sales channels in 2021 and beyond.

Through our position as an award-winning e-commerce agency, we benefit from working with leading Australian brands and retailers. We’ve had a front-row seat to the individual and varied experiences our clients have had with Marketplaces and are excited about their APAC evolution.

There are new sales channel opportunities for retailers across B2C and B2B who are up for the challenge.

If you’d like to talk about diversifying your sales channels in 2021 and beyond but aren’t sure where to begin, get in touch and let’s chat! 

FREE Marketplaces Whitepaper

At Balance Internet, we have seen how marketplaces today are radically changing the way that businesses of all sizes sell products and services online. Businesses and online merchants are looking at gaining niche market advantages through marketplaces, reaching new customers and opportunities.

Download the free Whitepaper to learn more about:

→ What exactly are marketplaces, and why do they matter?

→ Key differences between B2C and B2B marketplaces

→ Three distinct approaches to participation you should know about

→ Benefits and challenges of marketplaces

→ Choosing the right selling model for your business

→ What to consider before building your very own marketplace

→ Key insights from leading industry experts from Adobe, MSTS, & Balance Internet

Download the Whitepaper!