Online marketplaces are business partners. Just like entering into a mutually-beneficial business partnership, brands should choose a marketplace according to suitability, viability and profitability. Does the marketplace sell similar products? Can you easily distribute your products in the marketplace’s primary region? Will you make any money from selling on this marketplace?
But, there are also some less obvious criteria to consider that will determine if the marketplace partnership is a success. Here’s what you should look for when selecting global marketplaces.
Suitability: aligning marketplaces with short-term objectives
Why are you looking to sell on marketplaces? The most common answer is ‘boost profits’, but profitability is a long-term objective that tends to arrive in years 2-3 onwards. In the short-term (years 1-2), it’s all about choosing marketplaces that align with your immediate goals.
For example:
- Build global brand awareness - Be it raising the profile of your brand among your core audience or increasing brand recognition in a new market, choosing specialised marketplaces can help you expand and diversify your international footprint.
- Acquire new (qualified) customers - If you’re looking to increase your customer base, it makes sense to sell where customers are already shopping. Given their online ubiquity - i.e. 92% of online shoppers in the US use marketplaces - general marketplaces help maximise customer acquisition, but specialist sites provide access to more qualified customers (and also give you insight into the spending behaviour and preferences of your ideal customers).
- Clear discounted stock - Whether you’re shifting last season’s fashion items or making space in the warehouse for new stock, certain marketplaces act as outlet stores for low-price stock.
- Gather market intelligence - Instead of commissioning a report or undertaking your own analysis, you can use marketplace analytics to better understand their market, influence their ecommerce strategy and establish competitive pricing based on what price points work best for your products.
- Free up commercial team time - If you have time-consuming physical sales operations or time-constrained commercial teams, outsourcing your online trade to marketplaces or marketplace experts can free up staff time. Not only can you piggyback on well-known marketplaces’ names and traffic, but also their back-office capacity (i.e. streamlined payments systems).
From spreading sales risk & reward across multiple marketplaces to improving reseller visibility, the list of short-term objectives is endless, but your shortlist should not be. Choose 3-5 short-term objectives and rank them by importance.
Viability: considering ability to sell on marketplaces
Global marketplaces offer global opportunities, but also global challenges. From logistics and compliance to tax regulations and support, selling you products globally via marketplaces is not possible for every brand.
You should consider:
- Consumer demand - Do you already have sales data that demonstrates where your products sell well? Not every market has as much growth potential for your products, so market research is crucial.
- Product compliance - Are there specific conditions for selling your products in the selected countries? From restrictions on 18+ products to bans on specific ingredients, regulations vary at regional, national and state level.
- Local tax set-up - Are you required to set up a local business entity or tax registry to sell in this market? The hoops and loops to jump through might make selling in certain countries more hassle than it’s worth.
- Distribution agreements - How easily can you store and ship your products? You need to think about possible distribution agreements and delivery & returns policies in each market?
- Customer support - Do you have the capacity to service customers in different time zones and languages? If you’re unable to provide great customer service, you run a higher risk of negative reviews.
Profitability: assessing the costs of selling on marketplaces
Although profitability isn’t vital for the first few years, you will eventually want to move from the red to the black. Outlining whether a marketplace has a potential path to profitability should be a key consideration at the outset.
You should look at the following costs:
- Operating models - On most marketplaces, brands can choose a range of operational options from outsourcing everything to the marketplace (i.e. fulfilment by Amazon) to manually directing their marketplace sales in-house. No matter your choice, you need to factor in the financial and time costs.
- Delivery and returns - Can you at least match the standard delivery and returns policies in the target market? Free delivery and returns is a costly endeavour and you should weigh up the costs of sending, receiving, handling and even relabeling before you get started.
- Warehousing - When you go global, manufacturing, storing and distributing products locally goes out the window. Keeping stock in international warehouses can vastly impact your bottom line, especially if they are bulky, heavy or need specific conditions (i.e. perishables needing refrigerated warehouses).
- Integrations - Does the marketplace require manually-updated listings or is it fully automatic? Do you need lots of CRM integrations to get started or just one? Integrations cost developer time and money for both implementation and management.
- Management - Will you use a reseller or take on a marketplace consultant? Depending on the expertise (and available time) of your commercial team, it often makes sense to hire a marketplace agency to help boost sales and free up your time to grow your business.
Suitability, viability, profitability
With two-thirds of ecommerce taking place on marketplaces, they are a powerful avenue for brands to hit their business objectives. If you’re considering setting up on marketplaces or expanding into new marketplaces, follow our 5 steps to choosing a global marketplace or reach out to hello@emanaged.co.uk for more advice.