Online marketplaces have been growing in popularity for more than a decade, with consumers preferring the convenience that these digital platforms can provide. Then the coronavirus pandemic hit and forced us all to change the way we shop, with more consumers shifting to online shopping than ever before.
This has seen online sales soar in 2020 and Amazon – the UK’s largest online marketplace – is expected to see the most significant rise, with latest figures showing a 37 per cent increase in the retail giant’s Q3 earnings.
However, online marketplaces don’t just offer a convenient way for consumers to shop, they also open up a huge opportunity for SME retailers to expand their digital footprint and increase sales. Online marketplaces are one of the best marketing tools retailers can access and are a fantastic way to reach new customers.
If you’re an e-commerce business owner not using marketplaces right now, then you need to make sure you understand their potential for helping you boost revenue and staying ahead of your competitors.
Why do consumers turn to online marketplaces?
The key to understanding the importance of online marketplaces is recognising how consumers shop. However, everything we knew about consumer behaviour at the beginning of this year has completely shifted due to the impacts of the coronavirus pandemic.
The Smart Shopper study, which was commissioned by Google in August this year, highlighted some of the key changes to shopping behaviours as a result of COVID-19, and found that a staggering 86 per cent of consumers said convenience was the biggest motivation behind purchase channel selection. This was closely followed by home delivery, availability and price.
On top of this, they found that one of the biggest pain points for online shoppers was the need to register or login to a website before purchasing, with slow customer service response times coming next.
It’s factors like this that have seen more and more consumers turning to online marketplaces, and the likes of Amazon and eBay have built their platforms around these key elements.
Amazon for example, has more than 150 million people signed up to their Prime membership, which allows members to shop a huge range of items – from books to clothes, electronics and even groceries all with free next day delivery. On top of this, Amazon is famous for its one click, or now slide to pay method, which allows customers to easily and quickly purchase their products with just one simple action.
In today’s competitive digital landscape, many e-commerce retailers struggle to compete with the convenience and ease of shopping that the online marketplaces are offering.
What do SMEs need to know about marketplaces?
In 2018, marketplaces accounted for a staggering 52 per cent of all global online retail sales and now there are hundreds of online marketplaces, with new ones emerging all the time. Amazon, eBay, Etsy and Not On The Highstreet are amongst the largest in the UK and although each operates slightly differently, they all provide a platform through which smaller retailers can market and sell their products. Usually for a fee, or commissions on sales, SMEs can access new markets and established audiences through these channels.
Online marketplaces are, without doubt, a huge growth opportunity for retailers but it’s also important to consider the potential drawbacks of listing your products on these sites.
Adding a new sales channel to your business means managing products, customer service enquiries and sales through an additional platform that you have little control over. If it’s not managed properly, this could cause issues that could impact your brand’s reputation.
Importantly, you’ll need to consider if you have the stock levels and staff available to manage this additional channel. This may mean investing in more stock or hiring new staff which you’ll need to factor into the costs.
You should also take the time to find the marketplaces that are right for your business. Whilst these platforms can open your company up to new customers, if they aren’t the right audience for your business then it’s unlikely that these will convert to sales.
Opening up a new sales channel is a big decision for any business to make, and therefore you must consider all of the pros and cons it could present. However, with marketplaces dominating the online landscape, the benefits of utilising these platforms can be huge.
What could my business gain through an online marketplace?
There are so many benefits of expanding to online marketplaces, but the main benefit is the opportunity to increase sales and grow your brand. Amazon alone has more than 400 million visits per month, so the opportunity for retailers to reach untapped markets is huge.
Another benefit is the ability to take advantage of these brands’ already established platforms. You don’t need to worry about all the usual considerations of selling online, such as website and mobile optimisation, design and marketing, payment gateways or website security, as the platforms provide all of this for you.
It costs almost nothing to set up an online marketplace store and, whilst online marketplaces do charge for their services, it’s often for a much lower cost than you would expect.
It also reduces the risk for your business, if you put all your eggs in your own website, and something goes wrong then you have nothing to fall back on. As long as you understand the risks associated with each of your sales channels, and make sure they differ between each, then you are much more protected if issues do occur.
If you’re looking to diversify your e-commerce business through online marketplaces, but need funding to purchase stock, invest in new technology or even to manage cash flow, then a Capify e-commerce business loan could be perfect for you. Get in touch today to check if you’re eligible.