Retail

Major Marketplaces: Friend Or Foe To The SMB?

Are major online marketplaces a friend or foe to the SMB (small- to medium-sized business)? Although many smaller merchants see behemoths such as Amazon, eBay and Alibaba as threats, with the right strategy, an SMB can turn those threats into opportunities.

Even in the relatively short lifespan of eCommerce, the way people shop online has changed, and drastically so. Recognizing and leveraging that could help fledgling companies reach consumers with the products they didn’t know they wanted.

Why Every SMB Needs A Major Marketplace Presence

According to Clutch research via FierceRetail, shoppers love marketplaces because they can compare products and prices all in one place. A marketplace also enables shoppers to buy multiple products from different brands. Finally, strong search capabilities and a solid loyalty program can be key factors in a consumer’s decision to use and stick with a certain marketplace.

The FierceRetail news report noted that 30 percent of online shoppers search a marketplace first before heading to a specific retailer’s website—so by not listing on a marketplace, retailers miss out on almost one-third of potential shoppers. Like they say, you miss 100 percent of the shots you don’t throw.

Consumers want to make sure they’re getting the product they want at the price they want, RetailDIVE noted with respect to recent Forrester Research findings. It’s very common for shoppers to do their research at a marketplace, where comparison shopping is easy, before heading to a retailer’s dedicated site – if they head there at all.

Furthermore, as FierceRetail noted, many SMB owners have never gone through their own checkout process, and therefore are blissfully unaware of the friction points within it. Customers who find that an individual brand’s website has a cumbersome checkout process or does not seem secure often take their business back to the major marketplaces, whose checkout flows are streamlined and optimized based on many years and billions of transactions worth of trial and error.

Forrester Research ran the numbers and found that half of last year’s online spending was done in marketplaces. According to the firm’s projections, that fraction could grow to two-thirds in the next five years. Together, Amazon, eBay and Alibaba’s Tmall accounted for $365 billion in sales in 2016. Half of Amazon’s wares are now being supplied and sold by third-party merchants.

It’s safe to say that marketplace online shopping is on the definitive rise. And if that’s where consumers are, then of course it makes sense for merchants to make those platforms a primary destination, as well. Having a presence on the big four – Amazon, eBay, Alibaba and JD.com – will get their products in front of three-quarters of marketplace shoppers.

Why A Marketplace Presence Alone Is Not Enough

However, there’s another side to this coin. Forrester found that those same big four marketplaces comprised 31 percent of total global online sales – which is a big chunk, but it means that more than two-thirds of eCommerce is taking place in smaller marketplaces or on individual retailers’ websites.

Upon arriving at a retailer’s website, many shoppers look for discounts and deals or a price match to sweeten the pot – because otherwise, why wouldn’t they just buy the product from their marketplace of choice and enjoy the loyalty benefits that go with it?

But when they do that, the merchant’s brand does not score any loyalty points. The loyalty is to the trusted marketplace platform, not to the brand. If merchants want shoppers to notice who they are buying from and return to buy again, a dedicated website is where that will happen.

Another downside to the marketplace, RetailDIVE noted, is that sharing profits with the marketplace and leveraging their free or discounted shipping – a perk that marketplace shoppers love – often cuts deep into third-party merchants’ profits. For those reasons, if a retailer can manage to move transactions to its own dedicated site, it is definitely advantageous to do so.

Whichever data you look at, the point is clear: A retailer should have a comprehensive online strategy that includes a dedicated website as well as a major marketplace presence.

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