It’s easy to get lost in the global terrain of e-commerce. The numerous opportunities for expansion and branding advancement make it an attractive arena for growth but the inherent complexities and risks can make those first steps feel daunting for all but the most fearless entrepreneur.
While many think of e-commerce as the simple act of ‘digital selling or buying’, there are distinct differences between the various types of arenas for e-commerce, the marketplaces and webstores, and the strategies you can utilise to your brands’ advantage.
Just to make sure we are on the same page: what are marketplaces
In general, an online marketplace is an e-commerce site where products and service information are provided by multiple third parties and where transactions are processed by the marketplace operator. For merchants, marketplaces eradicate the burden of time and customisation. The technical aspects of the website store management are transferred to the marketplace. This ultimately makes it easier for the merchant to focus on product development, manufacturing and distribution. While stock information and descriptions are provided by the merchant but maintained by the marketplace and adapted/designed for the mobile apps. There is regular site traffic, which can also drive people to your webstore and brick-and-mortar store. Marketplaces are especially attractive to small businesses as they have low to no start-up costs, with lower promotion expenses.
The marketplace usually charges a fixed fee or percentage per transaction, and there is typically active competition between the vendors on the marketplace. The multi-vendor competition drives prices lower, often making it harder for smaller companies to compete, but it is also the primary reason that consumers are drawn to market-places. Simply put, they often have the lowest prices and the largest selection of products from the widest range of brands. In fact, 31% of first-time shoppers prefer online market-places to webstores because of the lower prices and brand-diversity.
Why the USA and why marketplaces in the USA
The importance of marketplaces
E-retail spend on marketplaces as % of total e-retail spend (2018)
The different marketplaces in the USA
Full range marketplaces:
- Wallmart – by invitation only
- Etsy – crafts
- Reverb – music
- Wayfair – home
- Cratejoy – subscription boxes
- Bonanza – unique items
- Houzz – home innovation
What is bought online
As Frank Van Den Berg, Managing Director, Salesupply and Infinity Blue Marketplaces explains, ‘Today, “search” as a function is shifting; more US shoppers start their shopping searches on Amazon than on Google,’ which makes it an important space to be on if you want to compete in the US market.
While moving into US marketplaces comes with risk, they can be alleviated through careful consideration of the following:
- Research: Make sure to first research all you can about the US markets, including the sales tax per state and how that will influence distribution and sales on your selected marketplace/website. Put together a simple business case assessing top-line sales, cost and bottom-line profits. Speak to an expert to verify your assumptions, or to do this for you.
- Size of the marketplace really is not everything: Your products may belong in a niche market instead of the bigger marketplaces so look to the smaller niche marketplaces or to creating your own webstore.
- Product: Before you start consider whether your products are unique enough. If you are going to be one-of-many you might end up to competing on price right ‘to the bottom’. There’s no need to go with your whole product range; select products that your research indicates will do well in the US markets and start with a test range first.
- Packaging: Select products and packaging that will “fit through the letter-box” i.e products that will reduce packaging costs. E-commerce consumers are also aware of their environmental footprint so do not overpackage your products.
- Brand: How well is your brand protected in the US market, and how well are you able to create brand-identity through your chosen vendor?
- Listings: The quality of your listing is crucial. If you cannot afford the investment for your full range, reduce your product range so that you can for the remaining products.
- Reviews: Reviews are basically word of mouth advertising. Some companies spend a lot of money on getting customer experience right and this generates a lot of reviews. This is an effective strategy to grow brand loyalty and also long-term sales.
For Van Den Berg, ‘Marketplaces are fantastic, it’s a ready-made ecosystem and they continue to develop which makes it really interesting; at the same time if your branded customer experience is that you really drive your sales with one-to-one interaction with customers where the integration of your social-media is important than I would certain consider webshops.’
As US e-commerce marketplaces present UK vendors with a gateway to high traffic arenas, new customer procurement, and vouched-for legitimacy, it is easy to see why it has become a sought-after destination for UK retailers. With careful consideration, preparation, and strategic partnerships with local-hero organisations such as InfinityBlue, who specialise in introducing retailers to international markets, the advantages outweigh the risks and challenges faced by UK retailers.