Arguably the number one dilemma faced by online retailers is that nearly all of their time and effort is spent on marketplace channels. The allure of a massive customer base, keeping up with the often times "firehose" of demand, and vigilantly up-keeping extremely high levels of seller performance to ensure goodstanding makes it almost impossible to focus on the thing that matters most; your own retail site.
Marketplace sales are an extremely important component of your sales mix and should not be ignored. Increased order volumes can jumpstart a positive feedback loop enabling you to negotiate discounted rates with suppliers which allows you to compete and generate more sales at lower prices or sell at the same price more profitably. For more on this, read about Jeff Bezos' Virtuous Cycle. Marketplace sales, however, are sales to someone else's customers.
How the channel benefits:
- Increased product assortment leads to increased consumer traffic and loyalty.
- Powerful data sets to drive merchandising strategy.
How the consumer benefits:
- Downward pressure on prices as sellers compete for the buy box.
- More options emerge as existing and new private label brands begin to participate on the channel.
How the seller fares:
- Price war - increasingly competitive environment erodes gross margins.
- Introduction of 1st party inventory (i.e. sold direct by the platform) eliminates previously successful and profitable SKUs.
- Strong risk of developing reliance on channel with limited control over ability to participate, in whole or in part, moving forward.
- Powerful consumer audience to iteratively test and release new brands and innovative products.
How much time are you spending on marketplaces?
Be aware of how much time your overall operations are spending on Amazon, eBay, Walmart and other 3rd party selling channels. Survey all employees, track it in a spreadsheet.
Set a goal to gradually transition your team's time over to your own webstore. Set achievable targets and hold yourself accountable.
What actions will help you grow your webstore?
- If you don't already have a webstore, your first step should be to sign up with a leading shopping cart such as Shopify or BigCommerce.
- Put together and take action on a plan to build a remarkable shopping site. What will the brand be? How will the brand be remarkable? What will the shopping experience be? How will it be categorized and curated?
- Get your products categorized and listed to the site.
- Implement a system to acquire customers. Will you use Google Shopping? Will you use social channels like Facebook and Instagram?
- Implement a system to generate repeat purchases. Measure and optimize your customer lifetime vale so you know how much you can afford to pay to acquire each new customer and the incremental profit each will contribute.
This post is food for thought. Please let us know if you have any questions, we're here to help.
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The Zentail multichannel software platform is the #1 way to manage and optimize your selling on Amazon, eBay, Walmart Marketplace, Jet.com, Google Shopping, Shopify, Bigcommerce and a growing selection of channels. Centrally manage product information, pricing, listings, inventory, orders, business analytics and reordering from one beautiful interface.
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