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Blog // 11/02/2019

Pro’s and cons of selling through online marketplaces

Retail commerce

“The sooner we drop the ‘e’ out of ‘e-commerce’ and just call it commerce, the better.” – Bob Willett, former President of Best Buy International and CIO of Best Buy.

Having the ability to sell online is a must in today’s society and many retail businesses have their own website to sell through. However, finding ways to steer people towards your website can be an extremely costly and time consuming task for business owners. From the consumer’s point of view, they don’t want to have to stroll through various websites to find the right product at the right price. Online market places have found a way to resolve this problem, by setting up a platform for various businesses and individuals to sell in one place.

Whilst this sounds like the perfect solution for the consumer, there are a few points that need to be considered by the seller in order to determine if this is the best decision for them.


Positive aspects of selling through an online marketplace

Online shopping banner

Increased traffic and potential new customers

Online market places take away the hard work and often costly task of trying to direct people to your website, as thousands of loyal market place customers are ready to browse through your products which can reach a global market instantly.

If the consumers like your products, they are also more likely to purchase from you again, promote your website to others, or find your website to visit directly in the future.

Readymade website

Whilst a lot of business would also have their own website as well, if you are starting out and want to see what kind of feedback and response you get from your products, there is a readymade online store for you to sell through, without having to design and maintain your own.


Downsides to online marketplaces

Woman on phone

Competition

Whilst you are guaranteed increased traffic of consumers viewing your products online, along with this comes increased competition. Sometimes all it takes is someone dropping their price by £1, and it could be the difference between a customer buying from you or your competitors.

Copycat selling

There is a risk that if your product is very popular, the owners of the marketplace themselves could purchase the products directly from a wholesaler and start selling them on the market place at a lower price.

Inventory

More often than not, the people who sell through online market places, also sell through their stores and website. The trickiest area here is keeping control of your stock levels and ensuring you have enough to fulfil all orders and delivery dates, as well as the cash available upfront to purchase the stock to start with.

Marketplace fees

Whilst sales can increase significantly by selling through online market places, the fees can be quite substantial.

If your products already return small gross profit margins, selling through an online market place may run the risk of eroding this margin completely, as their fees tend to be based on a percentage of the sale price rather than the margin.

In addition to this, there will also be a charge to list your products on a platform, before a sale is even made.
When considering whether or not it is the best decision for you to sell via an online marketplace place, it is extremely important not only to consider the pro’s and con’s noted in this article, but also to be wary of the advice given out on internet blog’s.

Sadie Channing - Menzies Accountancy FirmFor further insight on this, please see Menzies LLP article on “Poor advice from online marketplace trading blogs – as it’s not what is being said that’s the problem!” Menzies LLP are specialists in the retail and wholesale sector. We have the expertise to assist businesses, and individuals, who are considering branching out onto online market places.

For more information or to discuss your online retail strategy contact Sadie Channing via email at schanning@menzies.co.uk or telephone +44 (0)1252 894921.

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