Does the revenue potential of selling on marketplaces outweigh the challenges faced by brands?
According to Packhelp’s Sellers Expectations for Marketplaces 2024 report, brands choose to sell on marketplaces to reach new customers (40%), generate new revenue streams (37.6%) and reach new markets (35.5%). But almost two in five brands (38.4%) sell on just one marketplace due to the costs, logistics and resources of managing sales on multiple platforms.
Thankfully, there are solutions for all three of these challenges. Let’s unpick them.
Packhelp’s report found that high commissions (43.8%) and late payments (42.6%) were the two biggest cost concerns for brands considering selling on marketplaces or expanding their presence on more marketplaces. Almost a third (31%) thought that intense competition on marketplace platforms made the high costs minimise potential revenue gains.
It’s true: some marketplace costs are unavoidable. For example, if you sell through Amazon Seller Central, you’ll need to pay a product referral fee of 10-20% of the sale price depending on the category. Or if you sell sportswear through Decathlon, you’ll need to spend £40 per month to sell on the platform and an average 16% commission fee.
Paying for Amazon PPC is practically a mandatory charge to get your product’s in front of the right audience these days.
However a lot of costs we encounter with clients are related to manual procedures and poor use of team time. Listing software can manage your stock inventory for specific marketplace rules, so you avoid late payment fees or penalties, but it also can and should replace a lot of manual procedures many Brand become trapped in performing.
Costs are inevitable to 3rd party channel sales growth, however using the right technologies and set up, this should be low proportionate to the sales and opportunities the channels will offer.
While 31.6% of brands told the Packhelp survey they valued marketplaces’ fulfilment services, almost an identical figure (31.2%) were concerned about shipping and logistics challenges when selling on marketplaces. In particular, brands feared overpaying for packaging (29.2%), the cost of logistics (24.8%) and damaged parcels (23.6%).
Marketplace fulfilment options range from the ‘hands on’ to the ‘hands off’. On Amazon you can offload a portion of the fulfilment process by selling directly to Amazon with Vendor Central or use fulfilment by Amazon (FBA) through Seller Central. Whereas sellers looking to sell on the recently relaunched Tesco UK marketplace will have to fulfil orders themselves.
Many sellers find it hard to manage multiple stock pools or justify separating stock locations for marketplace needs, especially when the channel has not yet proved itself to be a good source of revenue and growth. This creates situations where a seller may say "the channel didn't work for us" because they failed to give the channel the right fulfilment set up and model.
Marketplaces means adaptation. Sellers must embrace the channel fully, giving it the fullest chances of success. Far too often sellers will try a channel half-heartedly, then claim it was not viable or successful. If you want the best result, invest in what the channel needs from day one.
Some sellers are hesitant about selling on marketplaces as they don’t know how to manage marketplace sales and processes. In particular, a quarter (23%) of brands claimed that they don’t have the time or resources to manage selling on a new platform, 18% were concerned about the tax complications of selling on marketplaces and 11% were confused about marketplace rules and policies.
This justifies our existence! We know full well the challenges and requirements to make marketplace channels a success - it takes skills and knowledge, along with the right tools and methodologies, to scale them to a profitable position.
For example, White Stuff didn’t have the marketplace knowledge or resources to rectify their Ebay account. But with eManaged taking over their eBay stock management and advising on eBay sales strategies, White Stuff was able to increase its YoY eBay sales by 400%. Check out the case study to find out more.
Amazon is the hardest to get right - it has the most complexities, the most moving parts you need to work well, and takes a lot of effort and planning to get running. We were able to get Le Mieux from 0 to 1 million in year one, and have had many other successes. But none of this came magically or instantly - hard work, knowing where to focus energy and adapting to the needs of the channel all need to fit together.