Creating an e-commerce marketplace has become a real trend in recent months. Many e-commerce sites no longer hesitate to change their business approach to offer, in addition to their products, products from other sellers on their site. This trend can be explained quite easily for several reasons.
Firstly, Amazon does it. Yes, it’s enough to launch a fashion. How many times have you heard “If Amazon does it, there must be a reason!”. Many e-retailers, large and small, copy this strategy with varying success.
Secondly, it is the race for gigantism that is driven by a simple principle: the more products the site contains, the more likely it is to be able to “gain” its customers. This principle is again valid for Amazon or Cdiscount but remains to be proven for other sites. To have lots of products without making out too much money in order to buy the stock, the marketplace seems a good idea!
What is a Marketplace?
An e-commerce marketplace is simply an e-commerce site on which several sellers will be able to offer their products to internet users. On Amazon, for example, not all products are sold by Amazon, some are sold from professionals of clothing, DIY, DVD, etc.
In a “classic e-commerce site” you sell products directly to customers. If you have a marketplace, it is other sellers who will make the sale “thanks to you”. It is a work of visibility and connection. You have to look at it as a kind of shopping mall 2.0.
Note that a marketplace can allow the connection between individuals (C2C, Consumer To Consumer), professionals to individuals (B2C Business To Consumer), or between professionals (B2B Business To Business).
E-commerce Marketplace: Is It the Right Idea?
A marketplace is a good idea to quickly increase its products catalog without investing in the stock, it is also one of the main reasons that push e-trades to open a marketplace. Yes, the stock, it’s expensive and it digs the BFR (need working capital). You might as well offer other people to sell their products without having to take out the money and impact their cash flow.
A lot of products also means “content” provided by sellers: photos, descriptions, etc., and therefore more pages and more opportunities to drive traffic to your site. A beautiful virtuous circle.
The “commission” side is also often an interesting element for e-retailers. Instead of having to ship products, we “content” ourselves to take commissions on each sale. Seen from afar, it still looks a lot simpler than managing parcels all day long.
Barriers to entry have also fallen sharply. The development price of a marketplace keeps falling and many plugins are available, for Magento, Prestashop, Woocomerce…and solely marketplace solutions like Uppler or Mirakl.
The Defects of an E-commerce Marketplace
Opening a marketplace still has a few flaws, the first being the change of business model that is not always understood by merchants. The job of an e-trader is to know how to efficiently source (buy the right products at the right price) and to know how to ship them quickly for the lowest cost.
The work on a marketplace is quite different, you have to know how to bring in reliable sellers, qualify them, manage them, motivate them etc…and on the other hand, you have to be able to generate traffic at the lowest possible cost. This skill, certainly useful in the case of classic e-commerce, becomes indispensable in marketplace.
The demonstration is certainly a bit simplistic but the problem is there. To be profitable a marketplace requires a much larger amount of traffic than a conventional site. The traffic acquisition strategy must therefore be extremely well-established! Betting only on SEO is obviously a bad idea.
Finally, another major problem is the technical part. Creating an in-house platform can be complicated and time-consuming to develop all the necessary features. A Saas solution is mostly quite complete but, you have to make your choice based on the cost and native features.
Should I Create a Marketplace?
Clearly, creating a marketplace is an interesting opportunity for e-dealers. It is above all a project that must be well framed in order to function and much of the work will be based on the ability to attract buyers and sellers.
Building a marketplace will take time, money, and will fundamentally change your business model. If these steps don’t scare you then yes, creating a marketplace may be for you!
Featured image credit: Unsplash.com
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