Are you thinking of starting an eCommerce business but wondering whether to sell on your website or a marketplace like Takealot or Amazon? Or have you started selling products online but are struggling to make substantial sales? You are not alone… Generally, most eCommerce businesses take a significant amount of time to gain considerable traction and start generating consistent sales. When starting, it is not easy to establish a recognizable brand and gain customer trust immediately.
Depending on the niche and the products you sell, it can take some time for your eCommerce business to “take off”. That is why you must develop sales strategies to help boost your first sales. While engaging potential customers through content marketing and social media can help you make sales over the first few months, selling on an online marketplace can be a great strategy to accelerate your sales in the first weeks and make money quickly.
In this article, we provide insights into what it costs to sell products on an online marketplace vs selling solely on your website. We get into details of branding, control, fees, exposure, traffic, competition, customer data, marketing, trust, credibility, and logistics to help you assess and decide if selling your products on a marketplace could effectively accelerate your sales and expand your e-commerce business.
What is an Online Marketplace?
A marketplace is an online e-commerce platform where sellers showcase their products. It offers numerous product categories for consumers to choose from. In recent years, the e-commerce boom has spawned a plethora of digital marketplaces. There are over 150 worthwhile marketplaces, with Amazon being the most popular, with an average of 4.8 billion visits per month.
With consumers increasingly opting for the convenience and variety offered by online marketplaces, This market is expected to reach $1064.90 billion by 2030. Now let’s dive into the key factors you need to consider before deciding whether to take advantage of these market platforms or not.
1. Branding and Control
– Selling on Your Ecommerce Website
You have full control over your branding and product posts when you sell your product on your e-commerce website. You can customize everything. From your logo, product categories, and product pages to your product images. You can also customize the way customers interact with your online store. This freedom allows you to build a strong, memorable brand that fosters customer loyalty.
On your website, you also have control over how you communicate and personalize the customer experience. For example, you can suggest alternatives to customers when you don’t have a specific product in stock or send personalized thank-you messages. You can also design and launch your sales or promotions. You can also personalize messages asking for customers’ reviews on a product.
Your website is yours and you do whatever you want with it, as long as it is aligned to your branding and business strategies.
– Selling on an Online Marketplace
Marketplaces or e-commerce platforms have too many rules that you need to comply with if you want to sell products with them. First, you need to apply. You will be required to provide some information and go through verification before you can be accepted. The application process can be frustrating if you don’t have all your business information in place.
Once you have been approved, there are product listing rules that can limit your ability to showcase your brand because they have instructions on how products must be added, and some products may require additional documentation before you can be able to list them. Usually, before you add any product to a marketplace, you must make sure the images meet the specified background color, sizes, and/or formats. You may be limited in the number of images you can add, and you may not be able to add videos.
Additionally, you cannot communicate with customers who buy your products, so you must ensure you include as much information as possible when listing your products on the platform. Customers who trust e-commerce platforms associate their experience with the marketplace, and not with your business. When they like your product, they will people to the marketplace and not to your website because they do not know you. If you selling a competitive product, you may not get the sale because your product is just one among thousands.
2. Fees and Profit Margins
– Selling on Your Ecommerce Website
When you sell products on your website, you have full control over your pricing and your operating costs. You need to pay for web hosting, domain registration, themes and plugins (if you are using pro versions), customer acquisition (if you do marketing), and payment processing fees. These fees can be very small amounts and predictable and so are your profits.
– Selling on an Online Marketplace
Marketplaces charge several fees to sellers who use their platform to sell their products. Marketplace fees vary according to the product you sell and the amount of sales you make. These fees include subscription, success, fulfillment, storage, removal, and Advertising (optional) fees.
- The subscription or membership fee is a fee that you pay to use the platform to sell your products. For instance, Amazon provides two types of subscription fees. The individual selling plan fee which costs $0.99 per item sold, and the professional selling plan fee which is $39.99 per month, regardless of how many items are sold. Takealot charges a monthly subscription fee of R400 per month.
- The success fee or referral fee is a fee that is charged on every product you sell on the platform. See it as a commission fee because the success fee is calculated as a percentage of the total sale you make on a product. The success fee depends on the product category. For example, the success fee for electronic products can be 8%, while the success fee for clothing and accessories can be 18%. Every e-commerce platform has a detailed description of success fees per category.
- Fulfillment fees are the fees charged for each item shipped from the marketplace warehouse. These fees are calculated by the size and weight of your product. Weight is measured as light, heavy, heavy plus, and very heavy. So if your product is large and heavy, your fulfillment cost would be high.
- Storage fees are fees that are only applicable if you store your products at the marketplace warehouse. If you opt to store your products, sell on lead time, and only deliver the number of products ordered, you will not be charged these fees. Storage fees vary according to the number of days your products are stored at the marketplace warehouse. When you are still starting, it is better to store your products yourself until you can predict your sales.
- Removal fees are like fulfillment fees. These are the fees charged when you choose to remove your excess inventory from the marketplace warehouse or when a customer returns your product to the marketplace warehouses, known as a return order. Removal order fees cover the cost of handling, processing, and disposal of returned or unsold products.
- Advertising fees are the fees you pay if you want to drive traffic to your product detail page through ads. These fees are optional, you only pay it if you create ads on the marketplace to promote your page. Advertising fees depend on a few different factors including the ad types you choose, your daily budget, your ad targeting type, and your bids per keyword. You get to decide how much you want to spend on a daily basisAdvertising fees are different for every product, every niche, and every seller.
Marketplace fees can vary a lot depending on the marketplace and the product you sell. It can become a significant expense for running your e-commerce business. Therefore, It’s important to understand the marketplace fees involved, so that you can make an informed decision.
3. Customer Data and Marketing
– Selling on Your Ecommerce Website
Owning your website means owning your customer data. This means you have information on your customers’ personal information, behaviors, and preferences. You can use this data to create targeted email campaigns, upsell products, or retarget visitors who visited your website but didn’t complete their purchases. This level of insight is invaluable for building long-lasting relationships with your customers and growing your e-commerce business.
– Selling on an Online Marketplace
Online marketplaces have control over all customer interactions, you cannot access them as you cannot directly communicate with your customers or build long-term relationships.
4. Traffic and Exposure
– Selling on Your Ecommerce Website
When starting an e-commerce business, driving traffic to your website and getting your products in front of potential customers can take a very long time. It will require consistent efforts and investment in search engine optimization (SEO), social media, and paid advertising to make your first sales.
Building exposure on your site is a gradual process but leads to long-term rewards as your online presence grows. I started four years ago, it is only last year that I have started seeing consistent sales.
– Selling on an Online Marketplace
Leading marketplaces such as Amazon or Takealot in South Africa have millions of active users, thus providing instant access to millions of potential buyers. They have established traffic and high visibility which allow you to get your products in front of your potential customers very fast, and make your first sales.
However, depending on the product category you sell, competition can be fierce. But you can differentiate yourself through product quality, excellent product presentation, competitive pricing, 4-5 star reviews, or unique features.
5. Trust and Credibility
– Selling on Your Ecommerce Website
Just like traffic and exposure, building trust and credibility, when you are selling products on your website can take time. With the increasing number of online scams, customers are becoming more vigilant when interacting online. They want to make sure that their orders will be delivered before they take a chance with you.
Additionally, customers need to feel secure about your payment gateways, delivery process, and return policies before purchasing products on your website. It can be difficult to gain trust or credibility when you are still starting. Displaying your first customer reviews can help boost credibility.
– Selling on an Online Marketplace
Established marketplaces come with built-in trust. Customers feel confident purchasing from these platforms because they know their payments are secure, their orders will be delivered and there’s a clear return policy. This trust can help new sellers gain credibility faster than they would on their website.
6. Logistics and Fulfillment
– Selling on Your Ecommerce Website
On your website, you control the shipping process and shipping time whenever you have an order. You can create personalized packaging or offer flexible delivery options. You are also responsible for managing returns and handling delays.
– Selling on an Online Marketplace
When selling on a marketplace, the seller support team handles all fulfillment services for you. All you need to do is send your product to the warehouse if you do not store your inventory in their warehouse. While this can be convenient for you, these services come at a cost as mentioned above and these costs reduce your profit margins.
Final Thoughts: What is the best strategy for your e-commerce business?
Ultimately, the choice of selling your products on your e-commerce website or an online marketplace will depend on your specific business needs and goals. By considering the key factors mentioned above, you can make an informed decision about where to sell your products.
When you sell your products on your website, you have control over every aspect of your e-commerce business, you make higher profit margins as there are fewer costs involved, and can build a loyal customer base in the long run. However, a marketplace gives you instant access to a large audience, which offers the possibility of making your first sales quickly.
Successful e-commerce business owners are not limited to one online channel. They sell products on their website and in a marketplace. So while they make money and gain revenue from the marketplace, they invest in their website to gain visibility and build credibility and customer relationships over time.
I believe this is the best way, to make money while building your brand. But the decision is still yours! You must align your e-commerce business decisions with your goals and resources. Whether you decide to sell on your website, a marketplace, or both, the most important thing is to take action NOW and start your eCommerce journey today.
Do you have experience selling products online? Share your thoughts and tips in the comments below!