Why read this? : We look at the role marketplaces play in e-Commerce channel planning. Learn the pros and cons of key players like Gumtree, eBay and Etsy. Read this to work out if marketplaces are a good e-Commerce option for your business.
Marketplaces are where many businesses start with e-Commerce. They’re a quick way to find and start selling to online shoppers. They’re built to make online selling easy. All without the hassle of setting up your own store, or dealing with an online retailer.
They’re quick and easy because they “rent” you the space to sell on their site. You access their back-end systems and list your products or services.
Customers either contact you to buy, or the transaction takes place on the marketplace’s site. Delivery is usually (but not always) down to you.
Marketplaces act like a middleman
Technically, they’re not a retailer. They don’t buy the products from you, and then sell them on. They’re more like a middleman between you and the customer. It keeps the selling model simple. That can be (but isn’t always) a good thing.
However, it’s harder to do many of the more advanced e-Commerce techniques with marketplaces. You have less control over the selling experience versus using other channels.
They also don’t all work in the same way. Some only provide a website to showcase your products. You handle everything else. Others are more sophisticated and manage payments and deliveries. Some, as we’ll show, even make the product for you.
How marketplaces work
The customer-facing part of marketplaces works like a digital classified advert. It tells shoppers what you have for sale.
But it’s also interactive. There’s a clear call to action where the shopper can “Buy Now” via the site.
You control the product page content. Which products to sell. Which product information to include. And the price you’ll charge. (Usually handled via the marketplace’s product information management system).
Most, though not all, will give you some control over the product page design. For example, adding your logo. Adjusting the colours and typography.
But everything else is usually automated. You can’t affect much of the customer experience. It’s a transaction between you and the customer, but it runs on the marketplace’s terms. In many cases, you don’t even have direct contact with them, unless there’s a specific issue.
Let’s move on to look at how some of the most popular marketplaces work.
Gumtree
Gumtree is the most visited marketplace site in Australia. It’s been part of ebay since 2005. The ownership structure changed in 2020, but it’s mostly still ebay.
They have over 7 million users and 3 million listings, with 80,000 new listings daily.
It’s a very simple selling model. They connect buyers and sellers to enable transactions. You post adverts for what you want to sell. Buyers contact you via the site, and you manage the sale.
Gumtree doesn’t handle transactions. Payments are usually via PayPal.
You also manage the delivery (including delivery costs). Or you arrange for the buyer to collect the product from you. It’s also up to you to fix any customer service issues.
It’s more like a digital media channel than an e-Commerce platform, albeit one where buyers and sellers connect. In fact, Gumtree tries to avoid having anything to do with the actual transaction. It makes most of its money from advertising fees.
Gumtree works best when selling one-off high-ticket price items. For example, it’s good for selling second-hand cars, electronics and furniture.
It’s a great way for online shoppers to find bargains in those sorts of categories. But for online sellers, selling on Gumtree can be more of a challenge.
The Gumtree online seller experience
The easiness of selling on Gumtree has an unfortunate knock-on effect on the overall experience. Anyone and everyone can sell anything and everything on the site. This means the quality of advertising, products and services is highly variable.
Sellers post their own product images. Write their own sales copy. There’s little quality control. The site only intervenes if sellers break the rules.
It feels like a crowded shopping place. The site structure can feel random. As if you’re visiting an online car boot sale. Maybe fine for selling a one-off item. But not what you want for regular online selling.
Regular online sellers find it hard to build their brand on Gumtree. There’s so much noise. So many competing offers. It’s not a great experience if you sell premium products. It’s a hard place to make your brand stand out and build your competitive advantage.
ebay
Gumtree’s owner, ebay has more quality control over what’s sold, and how it’s sold. There’s more structure in the selling process.
They offer better options and services for regular online sellers. For example, regular online sellers can set up and design their own storefront through the ebay Seller Hub.
This gives you more flexibility in how your product pages appear. You still have to work with their templates, but it’s more flexible than Gumtree.
However, it’s less flexible than if you manage your own online store.
Still, within reason, you can build a distinct brand feel for your store on ebay. That helps towards finding a competitive advantage. You also have access to more digital data and insights than with Gumtree.
Ebay also lets you set the price. Their original business model was as an auction-price site. Now, you have the option to set auction and fixed prices with them.
They can also help manage payments. For every transaction, ebay takes a 10.9% fee from the final payment amount. Depending on the category, they may also take other listing and transaction fees.
For new or small sellers selling up to 40 items a month though, there’s no listing fee. If you’re just starting with them, that helps your initial profit and loss.
Delivery is on you though
However, ebay doesn’t manage the delivery for you.
You have to work out how you’ll deliver ebay orders to the customer. That includes covering the delivery costs and dealing with any customer service issues.
Ebay does have more controls in place than Gumtree to protect buyers and sellers though.
“Bad” accounts can be reported and removed. That means transactions feel safer on ebay.
The ebay selling experience
Selling on ebay is the digital equivalent of renting a small store in a large shopping mall. In fact, many major shopping mall retailers like Coles, Chemist Warehouse and Myer also sell through ebay.
The main benefit to online sellers is the quality and quantity of online shoppers who visit ebay. It’s perceived as a higher-quality shopping experience. The quality of content / products you find and the transaction experience is usually better than Gumtree.
Shoppers visiting ebay are usually in product search and “buy” mode. As a seller, that means you have access to lots of customers with high potential. They’re looking for products like yours. And they’re looking to buy now.
However, there are also challenges to selling on ebay. You have to follow their selling rules and processes. The only changes you can make to your store are those pre-defined by ebay.
Say you want to change the branding of your storefront. You’re limited to the options they give you. Or you want to dig into the digital data to understand why your conversion rate is so low. Again, you’re limited to what ebay give you.
You can’t add extra customer experience features and services as you could with a Shopify or WooCommerce store. Different payment or delivery options, for example. Extra brand content. Special offers and promotions. Not really possible with ebay.
With ebay, you “rent” space on their platform, rather than “own” it. You don’t get any of the advantages of owning your own space online. Search traffic you generate boosts their site, not yours. Customer data goes into their CRM system, not yours.
Ebay is interesting because of the quantity and quality of the shoppers. But, the limits on managing the customer experience make it more of a challenge long-term.
Etsy
Etsy is another popular option. It’s more like a marketplace for artists. It tries to create more of a community feel for buyers and sellers.
It focuses on 3 categories :-
- handmade items.
- vintage items (over 20 years old).
- craft supplies.
If you make jewellery or handbags, or you make or sell fashion items, Etsy is a good option for you.
While it’s free to join the site, the financial model on Etsy can be challenging.
They take a variety of different fees for “hosting” the transaction. For example, Etsy can charge listing fees, shipping transaction fees, transaction fees, payment processing fees and currency conversion fees for each transaction. They manage the payment for you but don’t cover deliveries or customer service.
Added up, these fees can take 15-20% off what you get from the sale. That can make a big dent in your profit and loss. You need to pay for production, advertising and delivery costs out of 80-85% of the selling price.
On the plus side, you’ve got lots of shoppers looking for more uniquely crafted products. If that sounds like the products you want to sell online, Etsy can be a good fit. You also have some flexibility to adjust the design to “brand” your storefront, though it’s at a similar level to ebay.
Facebook Marketplace
Facebook also has an e-Commerce presence with Facebook Marketplace.
It runs as an online classified ads site, similar to how Gumtree works.
The platform connects buyers and sellers, without handling actual transactions. It’s more of a digital media channel to tell people what you have for sale.
Its main benefit is the high number of people who regularly use Facebook.
As per our digital business model guide, around 60% of Australians use Facebook. Despite its bad press, it’s still the number 1 social media channel in Australia.
So, it has the potential to reach lots of customers. As per our digital media guide, there are a lot of options to help you find the right target audience when you advertise on the site.
However, it has similar challenges to Gumtree in terms of the overall experience. Because anyone and everyone can get on there and sell, the quality of the experience varies greatly.
For example, you might be trying to sell your ultra-premium brand but find yourself listed next to Daryll from Woop-Woop selling his battered old Ford Falcon. That probably won’t sit well with the brand identity or e-Commerce positioning you want online.
For one-off sales of second-hand items, it’s a direct competitor for Gumtree. But, it’s mainly targeted more at personal rather than business selling. So, you’re usually better off looking at some of the other marketplaces first before you try selling on Facebook.
Hybrid marketplaces
When looking at marketplaces as an e-Commerce channel option, there are 2 other options to consider.
First, Amazon which offers a couple of different ways for you to sell online.
Though they’re best known as a retailer, they also run Amazon marketplace.
In this model, they manage payments. You can handle delivery yourself or use their delivery systems.
Prices and fees vary depending on what type of product you’re selling.
They can be anywhere from 6% to 25% for handling the payment, and similar when they handle the delivery. Plus, though they’re a huge site with many shoppers, there can be a lot of challenges to working with them.
Check our online retailer guide for more on working with Amazon.
Print on Demand (POD) is a variation on marketplaces. POD sites like Redbubble and Spreadshirt set up a range of “blank” standard printable merchandise items.
T-shirts for example, which we sell in our own shop. But also other clothing items (e.g. baseball caps and hoodies) and common household items (e.g. cushions and art prints)
You create artwork designs to appear in the “blank” areas of the items.
Customers choose your design and the POD supplier prints it on the item and sends it to them.
You have a storefront on their site, similar to how other marketplaces work. But you can also connect this to your own site, so it looks and feels more branded.
When a customer orders your design, the POD company handle the payment and delivery for you. They print it and send it to the customer. You never see or touch the product itself. This makes it simple to manage.
However, it has limits similar to other marketplaces. You have limited control over the product pages, for example. And no control over the order to delivery system. If there’s an issue with the print quality, you have to ask the customer to contact the POD supplier. That’s not great if you’re trying to build your own brand.
POD works best for people interested in the design aspects of creating products. It’s less good for those who want to get into the nitty-gritty of managing the whole e-Commerce customer journey.
International marketplaces
So far, we’ve covered the main marketplaces popular in Australia. But there are many international marketplaces which should also be on your e-Commerce radar.
For example, T-mall which is part of the Alibaba e-Commerce empire. It gets a huge amount of traffic in China and other Asian markets.
The Lazada group of stores and marketplaces (and again part of Alibaba) is another popular platform in Southeast Asia.
The benefit of these sorts of marketplaces is the huge customer reach. Australia is a relatively small country in population terms (and potential online shoppers) compared to most other markets.
The challenge though is to understand and meet the needs of customers in these markets. You won’t know them as well as you know your local customers.
There’s also the challenge of overseas shipping. Some products are easier to ship than others. For example, books or fashion items are usually simple to export. But for say, food and drink items, there can be many customs and import regulation challenges.
Advantages of marketplaces
Marketplaces are popular because of their easy set-up options. You can be selling online in a matter of minutes just by setting up an account with them. No complicated online store set-up, or difficult online retailer negotiations to worry about.
You can also flex your product range and pricing, without much technical know-how.
These sites get lots of visitors. Those visitors are looking to shop. They’re a source of high-potential customers. It’s easier to sell to customers already looking to buy.
When they can also handle payments or deliveries, that means you don’t have to work out how to handle those areas. That reduces complexity for new online sellers.
They work best when you want to sell specific items at a specific point in time. They’re good for selling one-off high-value items like cars and electronics.
Disadvantage of marketplaces
But if you want to sell online regularly, or have more control over the selling experience, you’ll soon find the disadvantages of marketplaces.
It can be frustrating not being able to run the e-Commerce customer experience the way you want.
You don’t own the space when you sell through marketplaces. You can’t change the functionality of the site. Or do anything special or different.
It means if your products aren’t selling, you may not have access to the tools you need to fix it.
Also, these platforms take a relatively high percentage of the selling price in fees and commission. You pay for them making it easier for you to sell. But if you can manage your own payments, shipping and deliveries, the profit margins are usually better in other e-Commerce channels. Other channels usually have a better-looking profit and loss.
Conclusion - marketplaces
Marketplaces are a great way to start in e-Commerce.
Their main benefits are speed and easiness of use.
You can start selling online quickly. If other channels seem too complex, and you want to keep things simple, they’re a good option.
They’re also good for selling high-ticket items and one-offs. They also work well for some creative items like the stuff that sells on Etsy or selling T-shirts via Print on Demand.
However, as your e-Commerce knowledge grows, you soon hit the limits of marketplaces. They limit what you can do to control the customer experience. Most online businesses that want to scale up usually move on from marketplaces and start selling direct.
There’s a lot to be said for the simplicity and speed of marketplaces. You should include them in your e-Commerce planning process. But make sure you go in with your eyes open. They make their money because they take a percentage of everything sold on their sites. You need to make sure you’re still making a profit after they take their cut.
Check out our online retailers guide for more on other e-Commerce channels. Or get in touch if you’re stuck on where marketplaces fit in your e-Commerce planning.
Photo credits
Woman holding credit card near Macbook : Photo by Pickawood on Unsplash
Delivery – driver handing over package : Photo by RoseBox رز باکس on Unsplash
Amazon on phone : Photo by Christian Wiediger on Unsplash
Thumbs up / down (adapted) : Photo by Markus Spiske on Unsplash
Credit Card / Laptop : Photo by rupixen.com on Unsplash
