From large retailers to individual entrepreneurs operating from home, businesses of all sizes around the world have been aided by online marketplaces in finding customers like never before. These online marketplaces have enabled customers to buy products, sitting in one corner of the world, from the other corner of the world. But as with any channel there are benefits and drawbacks to online marketplaces and in this blog we will have a look at few of them.
Merits of online marketplaces
Easy to Get Started
Online marketplaces almost charge nothing to enroll you and to showcase your products. They usually charge a small percentage of each sale, which varies from site to site and from category to category. This makes it convenient for small and medium size sellers to get listed and start doing business online.
Customers visit online marketplaces mostly focusing on products rather than on brands. And if your product matches their requirements, they will definitely find you. Once acquired, splendid user experience and outstanding customer service will help you build customer loyalty which will help you bring more sales.
Small retailers have limited marketing budget and cannot afford to spend a lot on brand awareness. With chances of listing in online marketplaces, these retailers get the privilege of displaying their products on the same page along with big brands which in turn helps them to build brand awareness and gather mind share of the customers.
Renowned online portals like eBay, Amazon, Best Buy, Staples have a huge online presence. These platforms along with their huge customer base can help you reach places and increase sales drastically.
Demerits of online marketplaces
It is definitely attractive to list products on third party marketplaces for a number of reasons, but it is important to note that third party marketplaces control your products; they have the authority to regulate the pricing and discounts of your products. Many a times, only control left over with you is the inventory and its description. While they might help you establish yourselves in the beginning you cannot be overly dependent on them. It is important to use them as an alternate channel and not as the only channel.
No place for Customization
Online marketplaces give you little flexibility in customizing/ personalizing your products for your customers. Most sellers end up selling generic products there which may or may not be what the end customer was looking for.
Online marketplaces take care of the end to end services and they carry all your product and customer data. While most online marketplaces use it for marketing and promotional activities they rarely share this gold mine with brands/ businesses. This can cripple businesses from understanding what is working and not working for them and them making changes to leverage on that insight.
Brands are always are risk if the marketplace company were to launch their own private label of the product which you are selling. With all the information they have and control over what they show to customers they can very easily take over brands and drive them out of business.