Creating an E-Commerce Marketplace: a Good or a Bad Idea?
First of all: Amazon does it. Yes, this alone is enough to start a trend. How many times have you heard people say that “if Amazon does it, there must be a good reason?” Indeed, many e-traders, small and large, copy that giant with some success.
Secondly, there is the simple race for scale – the principle that the more products your site contains, the more chance it has to make a profit for all who trade there. Amazon and Cdiscount have shown the principle to be good – other sites are still seeing if they too can replicate it.
Certainly, the possibility of expanding your product range without having to make huge investments in stock makes the idea of a marketplace seem attractive.
But before we get too carried away, let’s rewind a little!
What is a marketplace?
An e-commerce marketplace is simply an e-commerce site that lets several different sellers offer their products to online customers.
On Amazon, for example, not all the products on offer are sold by Amazon itself: some are sold by specialist clothing, DIY, entertainment and other retailers, who use the Amazon site but send items that they sell directly to the customer themselves. Amazon gets a commission for each thing these traders sell.
(In fact, Amazon now also offers traders the option that it takes care of delivery for them – but that’s another story.)
In a ‘classic’ e-commerce site, it is just you, the site’s owner, who sells products to your clients. But in a marketplace, many other sellers will conduct trade with the help of your platform.
The great advantage for them is the visibility you offer them – you put them in touch with their customers. Think of it as a kind of ‘shopping mall 2.0’.
And marketplaces don’t just let businesses sell to consumers. They can also let consumers sell to each other (‘C2C’, or ‘consumer to consumer’), and businesses sell to other businesses (‘B2B’).
So, are they a good idea?
Marketplaces can certainly be a great way to quickly expand your product range without the need to invest in more stock. This alone has sent many e-traders down the marketplace route – after all, stock is expensive and increases your working capital requirement (WCR).
A marketplace means other people pay for the stock, so you don’t have to dip into your cash reserves.
More products on offer from more sellers also means more content on your site, in terms of pictures and product descriptions, and this of course brings more traffic. More traffic in turn brings more buyers and sellers, creating a virtuous circle.
(Naturally, you must ensure that you trust your sellers to create accurate content.)
Of course, the tastiest part of the marketplace equation for e-traders is commission. Instead of going to all the work of sending out products, they can sit back and watch a percentage of the sale price roll in for each transaction made by the sellers they host.
On top of all this, the barriers to entry into the marketplace business have lately fallen dramatically. Off-the-shelf plugins like Magento, Prestashop, and Woocomerce make developing your e-commerce site into a marketplace much less costly than before, while complete solutions like Izberg Marketplace, CloudCommerce Factory (formerly Marketplace Factory), and Wizaplace have made starting from scratch more accessible.
OK – but what are the downsides?
In spite of all the attractions, opening a marketplace does naturally present some challenges.
The first is the learning curve that e-traders must face in understanding the change of business model. The job of a traditional online seller is to source the best goods at the lowest price and then to send them out to customers as and cheaply quickly as possible.
Becoming a marketplace manager certainly takes away some of that legwork, but it brings in new challenges: you must find reliable sellers, and then you must evaluate, manage, and motivate them.
Then there is the challenge of finding a cost-efficient way to keep traffic flowing into your site – and if this is already important in regular e-commerce, it becomes crucial for marketplaces. Why? Let’s look at a little simple math.
First, the ‘classical’ e-commerce site. It costs you €1 to bring each visitor to your site. For every 100 visitors, one become a customer, and of those the average spend is €200 – of which half is profit. To make this €100 you have spent the same amount on customer acquisition – in other words, you have broken even.
(Of course, these numbers are just examples)
If we run the same numbers for a marketplace, something discouraging happens: from your €200 sale, which cost you €100 to acquire, you make a commission of 15% – €30. Hey presto, you are €70 out of pocket.
This demonstration is, of course, simplistic – but the problem is real. To make a profit, a marketplace needs much higher volumes of traffic than does a ‘classical’ e-commerce site. Accordingly, your traffic acquisition strategy needs to be extremely solid – putting all your bets on SEO is probably not a smart move.
The final important problem is the technical one. Though the minimum technical requirements for setting up a marketplace have fallen dramatically, we’re still at an early point of the journey of developing platforms for marketplaces.
A such, any new marketplace will require a healthy technical budget if it is to keep up with its competitors in the years to come – indeed, for most, remaining competitive will mean continual innovation in the services and features they offer.
What’s the verdict? Should we create a marketplace?
Setting up a marketplace represents a very interesting opportunity for e-traders – but it’s not a silver bullet. Anyone who thinks that marketplaces are a magic way to grow their profits while cutting their workload definitely needs to take a reality check.
Building a profitable marketplace requires an investment of time and money, and will fundamentally change your business model. But if you’re prepared to put in the effort, then its a project that can, indeed, reap dividends.
(And, if this sounds like you, we suggest you take a look at this article, which asks Why Most Online Marketplaces Fail to Build a User Base and Never Turn Profitable, as well as this list of special KPIs for marketplaces.
And what about you, are you planning to create a marketplace?
Find out more interesting news on https://roobykon.com/
Roobykon Software team consists of the professionals who can take the project from the very beginning and successfully lead the project to the successful release within timeframe and budget. Our developers, system analysts, QAs, SEO engineers, technical writers and content managers are here to implement the projects of any complexity.
- Roobykon Software (roobykon.com/)
- 1/101-103 Queen St, Woollahra NSW 2025, Australia
- contact info:
company phone: +02 8007 3424
This release was published on openPR.
Permanent link to this press release:
Please set a link in the press area of your homepage to this press release on openPR. openPR disclaims liability for any content contained in this release.
You can edit or delete your press release Creating an E-Commerce Marketplace: a Good or a Bad Idea? here
News-ID: 647158 • Views: 1448
More Releases from Roobykon Software
SEO For Marketplace Business in 2018
The main goal of each marketplace owner is placing their business offspring in the top SERP positions. Because people tend to only trust the first few links in the search results, it is clear that positive website search ratings can significantly increase its conversion rates. So, we’ve got an ultimate aim now. But what about the methods for achieving it? Some people believe in the holy power of keywords and tr
Say ‘Goodbye’ to PayPal: Adyen Replaces The Giant as an eBay Payment Partner
The payment services diversity has reached a new horizon. The more new players arrive at the scene, the more becomes the competition between them and existing services. This, in turn, forces giants to expand their offerings to keep up with times. However, there are also those of them who failed to hold their position and soon would be replaced with other younger platforms. Don’t you guess what platform are we
Short Introduction to Online Marketplaces
Online marketplaces are extremely useful modern web tools for retailers and customers. These eCommerce solutions make it possible to choose and buy different goods from different sellers in just a few clicks without the necessity to leave one’s home or workplace. The most prominent online marketplaces out there right now are Amazon, eBay, AliExpress, etc. Besides these, there are lots of online platforms dedicated not only to sales purposes. Airbnb
How to successfully start an online marketplace in 2018
2018 is undoubtedly a year of e-commerce! There are lots of marketplaces which provide people the opportunity to easily solve everyday, domestic, transport, and many other issues. And in turn for entrepreneurs, marketplaces allow combining their work. But even with all advantages given from online marketplaces, not every e-commerce business owner can be unsuccessful. What could be causing this? The most common problem for aspiring businessmen is the uncertainty in choosing a niche
More Releases for Amazon
United Kingdom (UK) Amazon 2021 Prime Day Market: Amazon, eBay, John Lewis
HTF Market Intelligence released a new research report of 53 pages on title 'United Kingdom (UK) Amazon 2021 Prime Day’ with detailed analysis, forecast and strategies. The study covers key regions that includes North America, Europe or Asia and important players such as Amazon, AO.com, Currys PC World, eBay, John Lewis & Partners, etc. Get Free Sample Report + All Related Graphs & Charts @: https://www.htfmarketreport.com/sample-report/3015671-united-kingdom-5 Summary United Kingdom (UK) Amazon 2021 Prime
MIGRATION TO AMAZON RELATIONAL DATABASE SERVICE (AMAZON RDS)
More and more companies from small business to large corporations are already using cloud services. Businesses which plan to switch their current digital infrastructure to cloud, often focus on Amazon Web Services, one of the biggest cloud platforms. AWS cloud service is more popular than its nearest competitors. Migrate and make gains Notwithstanding the business area, companies of every size have already realized the advantages of cloud data management. Every company has
UK Economic & Retail Update-Q3 2018 | Amazon, Amazon Pantry, ASOS, boohoo, Prett …
UK Economic & Retail Update-Q3 2018 "UK Economic & Retail Update-Q3 2018", report offers comprehensive insight and analysis of the UK economy and retail environment (including forecasts up to 2023). It provides in-depth analysis of the following: the key issues regarding the UK economy (including CPI, unemployment rate and etc.), and the key issues regarding the UK retail market (including online, offline and non-food markets). Inflation levels have slowed since Q1 2018,
UK Economic and Retail Update by Amazon, Amazon Pantry, ASOS, boohoo, PrettyLitt …
The Exhaustive Study for UK Economic and Retail Update Market Research Report is added on Orbisresearch.com database. The report covers the market landscape and its growth prospects over the coming years. The report also includes a discussion of the key vendors operating in this market. "UK Economic & Retail Update - Q3 2018", report offers comprehensive insight and analysis of the UK economy and retail environment (including forecasts up to 2023).
UK Economic & Retail Update Market Is Thriving Worldwide | Amazon, Amazon Pantry …
A new independent 35 page research with title 'UK Economic & Retail Update - Q3 2018’ guarantees you will remain better informed than your competition. The study covers geographic analysis that includes regions like UK, North America, Europe or Asia and important players/vendors such as Amazon, Amazon Pantry, ASOS, boohoo, Pretty Little Thing, DFS With n-number of tables and figures examining the Economic & Retail Update Market, the research gives
Amazon Account Manager
Revanth Infotech is successfully delivery e-commerce solution to many marketplace vendors. They specializes in providing a complete ecosystem for achieving higher sales on Amazon & other E-commerce platforms. It is an one stop solution for setting up, running and growing your business on Amazon & other e-commerce marketplaces without compromising your existing business.By precise strategies, they tailor-out to suit any marketplace business, by analysing competitor data to beat them at