By Philip Rooke, CEO, Spreadshirt
Online marketplaces are likely to be a key area of focus for e-commerce in 2015. 95% of UK retailers are already selling via this channel with almost half using them to trade overseas. Amazon is the most popular site amongst UK companies with around 86% selling on the marketplace giant, followed by 68% on eBay. But not all marketplaces are the same. Most offer exciting new opportunities for being found online, both in your local market and internationally, leading to potentially higher sales. There are also challenges that need to be considered, such as delivery expectations and higher returns.
Let’s start with the leader of the pack. Amazon 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. One of the reasons behind Amazon’s success is the changing usage patterns of online shoppers. According to a study conducted by Forrester Research, nearly one-third of them now begin to search for a product on Amazon rather than using a search engine. Eric Schmidt, CEO at Google, has also recently cited the marketplace as the company’s biggest competitor in search.
Amazon is changing the way online shoppers are finding things. And selling online is about being found. It is true that good marketing and an SEO strategy can help any retailer be found online, but you may be missing a trick if you’re not getting your products onto these external marketplaces, since these are increasingly now people’s entry point to the web.
For retailers, an advantage of marketplaces is the wider reach they can offer. For us, the decision to become an Amazon Marketplace merchant was because we believe this channel can give our sellers another important route to market. And it is a significant 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, thus further extending the reach of our platform’s partners to customers and helping them interact on a wider scale with their target audience. In our experience Spreadshirt sellers, whose products are offered on Amazon, have reported a doubling, sometimes tripling, in revenue. Internal surveys show that, due to the traction of the industry leader, average sales can increase by up to 140%, with some larger brands experiencing on average an increase of up to 200%.
However, Amazon 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. This diversification of sales channels can only benefit the market. While Amazon and eBay are the better known marketplaces in Europe, the US and Australia, if you look towards Russia, or even further to Asia, you come across other large, and locally very active, online marketplaces such as Ozon, Tmall and Rakuten. All in their own way and in their regions, leading representatives. If you’re looking to expand into these regions, they might be worth considering.
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 might appeal to the same or very different companies.
There are benefits of selling on these 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 may well be different.
A challenge in our experience is that Amazon customers expect very short delivery times, a particularly problem for a print-on-demand platform competing with companies selling ready-made products. Even with our optimised production facilities in Europe, USA and South America, a separate business unit has had to be established in order to meet new customer expectations.
There is also the issue of higher returns rate on orders. For us, the only downside of doing business on Amazon has been that our print-on-demand offering is not as well understood as on our own platform. 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 6%, which is still reasonable compared to industry standards. But it’s around 3% on our site, where shoppers understand the customisation and print-on-demand process.
A marketplace presence can undoubtedly drives sales. However, companies need to also be prepared to deal with the challenges. With competition online fierce whatever your size, it’s important to provide a shopping experience that offers customers more than just the lowest price tag. Rather than competing with these marketplaces, they should be viewed as new routes to potential customers and as an opportunity to improve your practices. These marketplaces are bringing innovation and vitality to the retail sector – they are changing the way we shop too. 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.