On forums across the internet, small business owners ask: Can selling on online marketplaces help or hurt a small business?
Online marketplaces are e-commerce websites, such as Amazon, Etsy, and eBay, that offer a broad selection of products from different suppliers. As the majority of online shoppers turn to online marketplaces, small business owners might question the value of maintaining their own websites to sell products.
For small business owners already selling on independent retail website and online marketplaces, managing the flow of information can quickly become a pain point.
To help small business owners navigate these challenges and opportunities, Clutch recently surveyed 1,000 online shoppers about their habits to determine how online shoppers navigate the e-commerce landscape.
Using these findings, along with interviews with small business owners, we offer advice for managing multi-channel sales, plus tips on how to achieve a strong brand presence online, reduce shipping costs, and decrease your workload through website features.
- 69% of online shoppers prefer to shop on an online marketplace such as Amazon.
- 57% of shoppers who prefer an online marketplace are seeking lower prices found by comparing items from multiple brands.
- 37% of shoppers say discounts or coupons can attract them back to retailers’ websites.
- When thinking about their most recent purchase, nearly one third (30%) of shoppers found the item while browsing online, after already deciding whether to shop on an online marketplace or a specific retailer’s website.
- One third of shoppers (33%) cite convenience as the key motivator to shop online rather than in a physical store.
Shoppers Overwhelmingly Prefer Online Marketplaces
We typically envision competition among retailers who sell similar products, but in reality, online shoppers’ first decision is whether to shop on a retailer’s website at all. Our survey found that most shoppers prefer online marketplaces.
Nearly 70% (69%) of online shoppers prefer to shop on an online marketplace, such as Amazon, when looking for a product. Nearly one third (30%) of online shoppers first decide whether to check a marketplace or a specific retailer’s website, then determine the specific item they will purchase while browsing.
This finding underscores the importance of maintaining a presence where your customers are most likely to be looking. It also means that online retailers who sell exclusively on their own websites, without selling through an additional online marketplace, are at a significant disadvantage from the start.
However, navigating an additional e-commerce platform can intimidate many retailers. Daniel Mullaly is Chief Technology Officer of Lewis Bamboo, one of North America’s largest bamboo nurseries that supplies natural sound and privacy barriers nationwide. For Mullaly, the decision to sell products on Amazon came after several months of internal debate.
“At the beginning, we were skeptical of Amazon,” said Mullaly, citing Amazon’s 15% referral fee and strict guidelines. However, Mullaly soon realized that the cost of acquiring new customers to Lewis Bamboo’s website nearly equaled the cost of Amazon’s referral fee.
“After we realized that, it was a clear choice that we needed to sell on Amazon,” said Mullaly. “Since then, it’s doubled our business.”
Amazon’s growth of the entire e-commerce space creates new opportunities for Lewis Bamboo. Mullaly says that sales are now split almost equally between Amazon and his own website.
The type of product an online retailer sells also matters. Alicia Sanchez runs an apothecary business with her wife. Together, they sell spices and teas that are organic and MSG-free. In 2016, she published Dear God, Are We There Yet?, a book about spirituality and self-discovery.
Amazon greatly helps her book sales, thanks to its recommended reading feature, which drives roughly 80% of her book sales compared to sales from her e-commerce website.
“In a world full of e-commerce where people feel that Amazon is a threat, use it as your advantage and be yourself,” said Sanchez. “That’s how you’re going to shine out.”
Leo Castro is Vice President of Marketing at BigCommerce, a leading website builder platform for e-commerce.
He points out that e-commerce companies of any size can learn from online marketplaces’ successes. For example, he encourages e-commerce business owners to emulate online marketplaces’ level of testing and attention to customer experience.
“It’s amazing how many small business owners don’t actually go through the checkout flow themselves. When they do that, they can see friction points,” said Castro. “Once you find something that works, double down on that. That’s key. Those are the kinds of things that marketplaces like Amazon and eBay do all the time.”
By embracing and learning from the marketplaces that increasingly dominate online shopping, small business owners can transform a threatening force into one that ultimately strengthens their approach to e-commerce.
Online Shoppers Want Savings and Convenience
For shoppers, cost and convenience drive the decision to search online rather than in a store.
There’s one aspect of online shopping that significantly impacts both cost and convenience: Shipping.
The largest percentage of online shoppers (33%) listed online stores’ convenience as the primary reason they did not shop in a physical store.
Of shoppers who prefer online marketplaces, over half (57%) cited lower prices from the ability to compare products as the leading reason for their preference.
Part of Amazon’s popularity lies in its ability to satisfy impulse purchases, especially for Prime members. Not only can shoppers complete purchases with a single click, but guaranteed 2-day delivery and a flexible return policy means that Amazon can provide instant gratification.
Many online shoppers don’t realize that many of these orders are fulfilled by small business owners.
For Mullaly, this means that slightly over half of his orders are shipped in bulk to Amazon’s distribution centers. Amazon’s rates on freight shipping are steeply discounted, and those savings are passed on to retailers who ship to and ultimately from Amazon’s distribution centers.
“We can ship pallets for between $75 and $350 to anywhere in the US,” said Mullaly, estimating that Amazon’s discount saves as much as 60% of freight shipping costs. “That helps. If we had to pay full price for freight, it wouldn’t be that plausible.”
With reduced shipping expenses and the ability to fulfill orders faster through Amazon, Mullaly is now able to distribute bamboo more widely and for greater profit. He also fulfills some Amazon orders directly from his business, and as long as no more than 4% of orders arrive past the 2-day deadline, he will remain eligible to fulfill Prime orders.
Sanchez points out that Amazon’s shipping policies have changed buying behavior, leaving small business owners to play catch up.
“We live in a world now where everybody wants everything yesterday,” said Sanchez.
By selling her book through Amazon, Sanchez says she has learned new techniques from Amazon’s highly organized back end, which includes a series of emails that alert customers when their order ships and a post-purchase reminder to leave a review.
Regardless of whether or not a multi-channel e-commerce strategy is right for your business, you can learn from the strategies that allow online marketplaces to thrive.
Small Business Websites Can Build a Core Group of Customers
With online marketplaces expanding to encompass an ever-greater share of e-commerce, it may be tempting to forego your own website entirely. Small business websites still play an important role in building a loyal customer base, though.
For the 37% of shoppers who prefer shopping directly from a retailer’s website, the promise of a discount or coupon most strongly influenced the decision. To implement discounts, you should use a website builder that specializes in e-commerce.
For example, BigCommerce is equipped with back-end features that allow merchants to set and track promotions and discounts such as buy-one-get-one offers, free shipping, and more.
“These seem like fairly mundane features, but that’s very hard to find e-commerce platforms that have robust promos and discount features,” said Castro.
Beyond attracting customers back to your website with discounts and coupons, there are other benefits to maintaining your own e-commerce website. Most importantly, your website can solidify your branding and build deeper relationships with customers.
1. Building a strong brand presence
Maintaining an e-commerce website grants online retailers greater control over how shoppers perceive their brand.
Castro found that retailers succeeding in multi-channel e-commerce tend to use their own website to build a strong, branded presence online. They then expand their presence through social media engagement with customers and a presence on marketplaces such as Amazon, eBay, and others.
Since online marketplaces are streamlined to provide a consistent experience for customers, sellers are often limited how much they can personalize their presence. For example, Amazon sets character limits on product descriptions, and email communication after a purchase is branded with Amazon’s tone and style.
By contrast, a dedicated website gives you space to fully develop your brand through website features such as social media integration, answers to frequently asked questions, a blog, and more.
2. Winning customer loyalty
By putting your brand’s style and values on display, you can create opportunities for deeper relationships with customers.
“It’s easier to make a sale than to keep a customer,” said Sanchez. Her website keeps customers coming back for additional content that can enrich their experience.
“Instead of having a transaction, you’re creating a relationship,” said Sanchez.
Similarly, Mullaly offers better prices to longtime customers who use his website. Online marketplaces such as Amazon typically deduct a referral fee from sales, so offering discounts or coupons to loyal customers can ensure a direct connection with your brand without sacrificing profit.
A website allows online retailers to enhance their brand’s presence–--and potentially create lifelong customers in the process.
How to Manage Sales Across Multiple Platforms
Managing inventory, pricing, shipping, and more can become challenging when retailers sell across multiple platforms, but for many, the promise of greater sales through online marketplaces will be worth potential inconvenience.
With a few adjustments to your process, you’ll be able to stay organized while managing new sales flowing in from online marketplaces. Use the following tips to develop a sustainable strategy for multi-channel e-commerce:
1. Develop a robust quality control process
No matter where customers are ordering your products, the orders you fulfill are still a reflection of your business. As you diversify your retail platforms, it’s important to ensure that your quality doesn’t slip in the face of the added workload.
“If you’re doing fulfillment, everything needs to speak the same language. It needs to come like it came from your company,” said Sanchez.
She points out that although Amazon’s stringent requirements might seem burdensome, they actually serve as a helpful template for how to maintain quality across a complex system of orders.
In her own business, Sanchez uses unique codes for each order to track shipping rates, discounts, and more. No matter where orders come from, the system allows her to pay close attention to the details that add up to a consistent experience with her brand.
By identifying and tracking key details in the fulfillment process, and ensuring that your branding remains consistent, you can provide a seamless experience for customers, no matter where they shop.
2. Invest in tools that help you stay organized
As online retailers expand their presence across multiple channels, it can quickly become difficult to manage the orders flowing in. Luckily, there are plenty of online tools designed to help you stay on top of even the most complex e-commerce systems.
For BigCommerce, this means designing website features that answer small business owners’ need to manage both a website and a presence one or more marketplaces.
“We’ve recognized that as a pretty big pain point,” said Castro. “We’ve tried to solve that by having an integrated channel manager that allows merchants to be able to manage all those different online presences in one place.”
Beyond the increase in volume, selling through online marketplaces means that you will also need to abide by their rules and standards, which might differ from your company’s specific policies.
“The biggest challenge of selling on both is probably separating the different policies,” said Mulally. For example, Amazon’s lenient return policies have raised the question of whether he should change the return policies for products sold through his own website.
Mulally also uses a tool that pulls all of his orders into one streamlined system--an important step for a small business that may not have the manpower to dedicate staff members to different platforms.
3. Prioritize cross listing products that are continuously stocked in high quantities
Listing a unique item on Amazon and your own website runs the risk of promising an impossible sale to two customers. Cross listing works best for items that are stocked in high quantities, which is part of why it works so well for Mullaly’s bamboo and Sanchez’s book.
One solution is to maintain different inventories for different platforms. For example, online marketplace Etsy is ideal for retailers who sell handmade, one-of-a-kind items. To avoid overselling, a jewelry maker could simply list different products on his website compared to Etsy.
Online Marketplaces Can Help Small Businesses Grow
Depending on the product you’re selling, the size of your inventory, and more, it may take time to discover the best possible mix of online retail platforms.
For Mullaly, Sanchez, and Castro, only one thing is certain: Amazon, and other online marketplaces, are not going away.
To succeed in multichannel selling, focus on building a strong brand, investing in tools that can help you stay organized, and being strategic in where you choose to list your products. You may find that Amazon and other online marketplaces can be an asset to your existing e-commerce website rather than a threat.