The Opportunities & Challenges of Online Retail Marketplaces

The ecommerce sector has more than doubled in size in recent years, with worldwide online retail sales soaring from $1.5 billion (£1.2 billion) in 2015 to an anticipated $3.5 billion this year. By 2021, that figure could increase to almost $4.9 billion.

It’s an industry that offers vast global potential for growing businesses, and one of the most attractive routes into this space for many firms is to trade on well-established marketplaces such as Amazon, eBay and Alibaba.

These platforms offer some clear advantages, but could also raise challenges that you will need to be ready for.

Marketplace opportunities

One of the clearest benefits of trading on major marketplaces is the access they provide to a huge customer base. Amazon, for example, has more than 100 million loyal, paying members of its Prime programme – and many more customers who aren’t signed up to Prime – while China’s Alibaba has some 552 million active users on its Tmall and Taobao marketplaces.

Trading on an online marketplace provides quick and easy access to an additional, well-established sales channel that can expand your customer base and help you build your brand. Even though you are selling via a third-party platform, users will come to know your name if they buy from you regularly and feel satisfied with the service.

Sites like Amazon, Taobao, FNAC in France and Flipkart in India can also help you achieve a level of trust with customers and develop new relationships with other merchants and suppliers.

The benefits of ecommerce marketplaces are particularly compelling if you want to break into new global markets. Expanding into China, for example, is a daunting prospect for a small, independent business, but dedicated platforms like Tmall Global can help you get a foothold in the market without worrying about obstacles like having to acquire a Chinese business licence.

Anticipating challenges

There is clearly a lot of potential in online retail marketplaces, but it’s important to be aware of the challenges that can result from trading in this way.

Firstly, there are basic financial considerations such as the sales commission that must be paid to the marketplace. Some sites also charge monthly fees for sellers.

Secondly, the profile and reach provided by the biggest marketplaces means competition between merchants is often high. You may have potential access to an enormous customer base, but you will still need to find ways to stand out from the crowd and deliver a top-notch buyer experience to turn a profit and show return on investment (ROI).

Furthermore, trading via a marketplace can make it much harder to acquire customer-specific information and communicate freely with your buyers, which makes personalisation and relationship-building more difficult.

In today’s fast-moving, increasingly competitive ecommerce landscape, it has never been more important to have maximum control over the user experience and to truly understand your customers. These goals aren’t easy to achieve if you’re trading via a third-party platform.

Considering these and other challenges, it’s vital to do your research and preparation to make the most of online marketplaces, particularly if you’re expanding overseas.

Preparing for global success

One of the keys to success for any brand expanding into foreign markets is ensuring your marketing content is effectively translated and localised to connect with your target audience.

This is particularly important when you are selling via marketplaces, since all of your product names, descriptions and related copy need to be properly presented to support SEO and customer understanding.

Investing in services such as global market scoping can also increase your chances of a successful overseas expansion via online marketplaces. The results you get from targeted market research and analysis of test campaigns can inform your overall strategy and provide a guide to potential ROI.

With the global ecommerce industry showing robust growth year after year, and no signs of slowing down anytime soon, there are clear opportunities for revenue generation and business growth on ecommerce marketplaces.

By doing your research, planning carefully and anticipating challenges, you can position your business to derive the greatest benefit from these platforms.

To find out how Locaria can help you in this mission, take a look at our range of services or browse through our case studies.