Why Selling On Only Marketplaces Is A Bad Idea?
Online marketplaces offhand appear to offer greater benefits for merchants regardless of their business size (small, medium, large). Rather it is a symbiotic relationship between eCommerce store and merchants as the vendor gains a better exposure for their products/service, while the web store receives an extended product range without increasing the inventory.
However, upon closer examination the reality is different. Should merchants be selling on only marketplaces? It is a million dollar questions and the answer is….it depends!
Expanding your business presence beyond your website is a two-edged sword. It is a bonus for some vendors while for others it can be a big mistake. Why? Numerous factors must be considered to make profits when you sell on only marketplaces. This article explores the pros and cons for you to make an educated decision.
When you deciding selling on only marketplaces, you must analyze if your product is sellable on the marketplace, the intensity of market competition in your niche, and the fee and restrictions of your choicest marketplaces.
As a merchant, you are aware of the benefits of selling on marketplaces that includes increased sales, improved product visibility, repeated customers, and ease of transactions via secured payment gateways installed on the marketplace.
But, like the two sides of the coin, selling on only marketplaces has its disadvantages too. Let us read what they are:
Burdensome Fees Structure
Establishing your products catalogue solely on the marketplace will significantly boost your sales revenue, but simultaneously it adds the burden of the high marketplace fee. The fee levied is a percentage of each sale you make, and varies across eCommerce platforms for same products categories. Thus, you should estimate your profit margins and the fee structure of your choicest marketplace, before placing a price tag on your products. For example, low-margin yet highly commoditized categories may simply not churn up expected profits.
Usually the eCommerce stores offer free Shipping to your customers for an enhanced user- experience, and that means an added dent to your profit margins, and not for the marketplace.
Lack of Brand Visibility and Lower Profit Margins
Although the marketplace infrastructure allows a smooth transaction and improved products visibility for your business, but it restricts the way you want to sell. Since, eCommerce stores focus on the products and not the sellers, you get a restricted opportunity to create your brand presence, a restricted opportunity on selling your products/services, as you have to abide by the T&C of the marketplace, and restricted communication with the customers. Additionally, you cannot control the marketplace sellers to stock your popular products themselves.
Lack of Inventory Synchronization
Since a marketplace is a second point of sale for your business, synchronizing the shopping carts on your web store and that of the eCommerce platform is not practically feasible. Thus, you cannot maintain a robust record of your total sales made in a month via different points of sales (POS) channels and your website. Furthermore, you cannot evaluate your stock levels without manual intervention.
So, does that mean you stop selling on secondary POS? Nopes! Try alternative methods like Social Media channels.
You should evaluate the benefits and disadvantages of selling on only marketplaces first and judge if you can support them, without incurring losses. Ideally, businesses dealing in commodity products and are well-established should sell via their own independent web store instead of seeking help from the sell on only marketplaces service, but since we all need to expand customer base and improve sales, we are compelled to ride the wave of selling via premium marketplace stores.
By the way, do you know that you can sell on your own store as well as on marketplace and ship via ShipRocket easily? Check this blog to know more.