What is an Online Marketplace?
An online marketplace is a website or application which entertains the sellers and customers to sell and buy their desired products online respectively. The owner of the online marketplace does not hold any kind of inventory but assists other sellers or merchants to sell through the marketplace, making it easier for them to have a swiftier selling experience. Amazon and eBay are the best examples of an online marketplace.
Talking about the wide customer base these online marketplaces are facilitating the sellers with, there has been an immense competition amongst the sellers to get their product highlighted, achieve a buy box, and improve their sales. In general, just because the marketplaces aggregate products from a huge list of sellers or providers, the selection from the customer’s side becomes wider. This makes the product prices on an online marketplace much more competitive.
Types of Online Marketplaces
There are mainly three types of online marketplaces…
A vertical online marketplace sells products from different sources but they all belong to one specific product-type. For example, ShoeCarnival.com is an online marketplace which is totally dedicated to selling shoes, from different brands.
The horizontal online marketplace sells different product types but they all possess a similar characteristic. For example, Greenobazaar.com sells different products, but they are all organic. It has everything – organic jewelry, food products, cosmetics, etc.
The marketplace that sells everything is called a global marketplace. Best examples – eBay and Amazon.
Is the online marketplace a good choice for SMBs?
An online marketplace can always be a good platform for any seller, to begin with. Regardless of being a small or a medium sized retailer, you can always list the products from your inventory on an online marketplace – let that be eBay, Amazon, etc.
There are plenty of reasons why a seller should opt for an online marketplace and not an online storefront…
- There is no need to make any unnecessary investment in getting your storefront developed. If you are selling products from various brands, there are chances that you as a seller get highlighted on the marketplace. For your own storefront to gain publicity, there would be other marketing expenses involved.
- An online marketplace is a platform that will help you gain revenue. Customer loyalty is certainly something that you need to take care of being a merchant, with the services that you are providing.
- Considering eBay and Amazon to be the two largest online marketplaces, along with facilitating the sellers, these online marketplaces also offer seller fulfillment services – inventory storage, shipping, return management, etc.
- Being a seller, if you are planning to list your products on more than one such online marketplace, you definitely need to have an inventory management software that can automatically update your stock count as per your selling.
Pros of selling on an online marketplace
If you are planning to sell on Amazon, you certainly have to act as per their rules and regulations. But this is nowhere harming your sales. Amazon’s wide database of customers will always assist you with better positioning when it comes to sales, visualize huge benefits with immense exposure. Your customers will never doubt you as a seller if you are selling on Amazon!
Amazon is a global, trusted brand. There are chances that your customer might belong to a different geography, and with the services that Amazon provides, it is very much easy to reach out to them. This will give you a chance to move your business from a local-scale to a global scale.
Cons of selling on an online marketplace
It’s obvious that being such a huge marketplace, Amazon is giving opportunities to all the sellers across the globe. So as your customer reach is widening, so is your competition.
Lack of control
As said, Amazon and even other such huge online marketplaces have their own guidelines for the sellers to list their products and sell. You can never, as per your own wish, sell or advertise on such marketplaces.
As long as you are normally selling on Amazon, you only are facilitated by having your products listed on the marketplace. All the other things – order fulfillment, shipping, return management, etc. are to be done by the seller all by himself. For Amazon to take care of everything, you need to become an FBA (Fulfillment by Amazon) seller. This service comes with a fee, depending upon what sort of facilities you are expecting from Amazon.