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External Marketplaces; Offering eSellers Reach, Sales and Maybe Even China

Philip Rooke
February18/ 2015

Selling online is not just about attracting customers to your own site and making the payment process easy. External marketplaces offer eSellers another route-to-market where they can benefit from the marketing, SEO strategy and payment structure of another organisation, such as Amazon. In the case of the Chinese company Alibaba, retailers on their Tmall Global marketplace are also offered help with any potential cultural differences.

Recent research shows that 95% of UK retailers are already selling via this channel with almost half using them to trade overseas. As might be expected, Amazon is the most popular site amongst UK companies, with around 86% selling on the marketplace giant, followed by 68% on eBay. However, although external marketplaces offer exciting new opportunities for being found online, locally and internationally, they are not all the same and there are challenges that need to be considered, such as delivery expectations and a potentially higher rate of returns.

In the UK many online retailers will turn to Amazon as their first point of entry to external marketplaces. The online behemoth has more e-commerce sales than anyone else — an expected $91 billion in sales in 2014; more than the next dozen largest e-tailers combined. It seems that the global giant is now often the first port of call for shoppers and is even challenging the established search engine companies. The recent report by Forrester Research revealed that nearly one-third of online shoppers now begin to search for a product on Amazon, rather than using a search engine.

We use Amazon as an external marketplace for our sellers at Spreadshirt. For ecommerce retailers like us, an advantage of marketplaces is the wider reach they can offer. Becoming an Amazon Marketplace merchant gives our sellers another important route–to-market. It has become a vital part of our company’s increasingly multichannel distribution model. Best-selling products on the Spreadshirt platform are now automatically transferred to Amazon in key markets. In our experience Spreadshirt sellers on Amazon, have reported a doubling, sometimes tripling, in revenue. Our internal surveys show that, due to Amazon’s online traction, average sales can increase by up to 140%, with some larger brands experiencing on average an increase of up to 200%.

So, Amazon is clearly influential; driving reach and sales, but it is not the only marketplace out there. eBay now offers B2C routes and other, previously industry-only players such as the portal of U.S. company, Sears, are also entering the consumer market. While Amazon and eBay are the better known marketplaces in Europe, the US and Australia, if you look east towards Russia, or Asia, you come across other large, and locally very active, online marketplaces such as Ozon (Russia), Tmall (China) and Rakuten (Japan). All in their own way and in their regions, leading representatives. Selling via one of these local market places could be a relatively risk-free way for UK companies to test the market without a huge investment.

Having said that, it is important to keep in mind that not all online marketplaces are the same. Amazon makes it easy for the customer to make a quick purchasing decision. Other marketplaces, like Rakuten, focus more on the story. Here, sellers can be more individual, sharing stories with buyers and information on special features. Both approaches are noteworthy and offer different ways to present your products.

So, these are some of the benefits of selling through external marketplaces, but there are also some challenges retailers need to take into account before going down this route. For example, shipping and delivery expectations always need to be high on the list when considering expansion and new regions.

eSellers looking at the vast and exciting market in China might take advantage of Alibaba’s Tmall Global marketplace. Through Tmall, brands can operate without investing in a local warehouse; however not being physically present may have an impact on delivery times, so expectations will need to be managed.

For us, one challenge on Amazon is that their customers expect very short delivery times. A particular problem for a print-on-demand platform competing with companies selling ready-made products. Despite having optimised production facilities in Europe, USA and South America, we still had to set up a separate business unit in order to meet new customer expectations on delivery times.

There is also the issue of higher returns rate on orders. On our site, where shoppers are more aware of the customisation and print-on-demand process, our returns are around just 3%. A downside of doing business on Amazon has been that our print-on-demand offering is not as well understood there.  In external marketplaces, shoppers tend to order, try on at home, and send back for a refund if they don’t like it. This means that our returns are up, albeit to only 6%, which is still reasonable compared to industry standards.

Other challenges of new regions are getting the cultural fit right. External marketplaces can sometimes help with this, reducing to cost of cultural misunderstanding. Tmall even helps with advice on local fashions and trends.

In our experience, an external marketplace presence can undoubtedly drive sales for eSellers. However, companies need to also be prepared to deal with the challenges that all expansion into new markets involves. They need to consider which marketplace offers the right fit; shopping as entertainment or for speed?  Competition will always be fierce online, whatever your size, so it’s important to provide a shopping experience that offers customers more than just the lowest price tag. These marketplaces are undeniably bringing innovation and vitality to the retail sector. They offer a flexible route to expansion, an opportunity to test new markets and are even changing the way we shop. Our response has been to embrace external marketplaces, as they are helping develop both the online and multichannel markets, as well as preparing us for an increasingly multichannel future.

Author: Philip Rooke, CEO of Spreadshirt. Follow him on Twitter @PhilipRooke

 

Philip Rooke

As CEO of Spreadshirt, Philip Rooke brings a laser focus to delivering a simple and easy customer experience and seasoned experience in scaling business processes to address and deliver precisely what a customer needs and demands. Philip Rooke launched his career in the internet business starting in media and eventually evolved into a leadership role with leading e-commerce retailer Tesco.com. He developed a finely-honed, customer-centric approach during his 16 years in the industry, where he was part of the team that transitioned Tesco.com into £1 billion in sales, making them one of the most successful retailers in the world across both the food and non-food industries. Philips’s specific expertise has been all about delivering the best customer experience in rapidly growing industry-leading businesses like Tesco.com, SkinStore, and Carlton Television.