Marketplaces versus direct selling




For ecommerce businesses venturing into new markets, knowing the best way to reach your target audience and maximize revenue can be difficult, especially in the context of different cultures where different factors affect the propensity to buy in different ways. A key part of that is deciding whether you should sell direct online through your own website or via a marketplace.

What is a marketplace?


Forbes defines a marketplace as ‘a website or app that facilitates shopping from many different sources. The operator of the marketplace does not own any inventory, their business is to present other people’s inventory to a user and facilitate a transaction.’

Examples of marketplaces include eBay, Amazon and Alibaba. Different countries will favor different marketplaces and research is key before deciding which one to use.


Should you sell via a marketplace or direct through a website?


There are pros and cons to each option, but we guide our clients to make the right decision for their business based on elements such as the market they are entering, their products and business goals.

We have outlined five key areas to consider when planning your international strategy and deciding on the right sales channels for your business.

1. Time to market


Targeting a new market requires a fully localized website, which can take time to develop depending on your internal resource, development capacity and budget. Marketplace listings may be simpler to set up than a new website, but you do have to sacrifice full control over the design and layout.

But you can create shops on certain marketplaces and have an element of control over the imagery and design. A key thing to remember about marketplaces is translation is still needed when targeting international markets. Marketplace customers still expect localized product listings, so this needs to be built into planning and time frames.

Amazon offers its own translation through Amazon Translate, however, this is a machine translation. It doesn’t take into account different worldwide nuances or integrate relevant keywords to drive traffic to your products. A huge benefit of marketplaces over websites is the existing set up of logistics and payment options in different markets.

Fulfillment by Amazon allows sellers to send their products to Amazon and then Amazon will store and ship sellers products. Amazon can also handle local language customer service and returns for an extra fee. However, there is a potential for issues with chargebacks if businesses don’t follow strict vendor compliance requirements. 

Whilst selling via a marketplace may result in a quicker time to market in the short-term, a long-term strategy needs to be put in place to maximize growth and revenue.



2. Driving traffic and new customer acquisition


Marketplaces tend to drive high levels of traffic and for many, they have become search engines in their own right. However, this doesn’t reflect the actual traffic numbers for your product keywords. Any purchasers of your products become customers of the marketplace rather than your business. It is worth noting that considering which marketplace to sell on is important in terms of traffic quality for your products. 

Having your own website won’t drive huge volumes of traffic on its own, but by integrating SEO into your localisation you can drive relevant quality traffic. SEO should always be built with website localisation at the start, as this incorporates localized keyword research. It also enables your business to rank for relevant search terms and drive traffic that will convert. 

PPC can be used to drive short-term traffic while organic positions are stabilized. Each country requires a different strategy. For example, in China, it is often better to invest more in PPC over SEO due to the limited space for organic listings. The traffic you drive through your own investment in SEO and PPC is more targeted to your business needs.

Having analytics data from purchases also allows internal experts or a marketing agency to optimize that spend. New customers through your website become your customers rather than those of the marketplace.




3. Establishing trust in new markets


Marketplaces are well-trusted websites for customers. Although the customer is buying the product from you, their perception is they are purchasing from a well-known, trusted website. Marketplaces such as Amazon, will have all the relevant trust signals that customers look for when purchasing a new product. However, this does limit the trust you can build up for your own brand.

Amazon also offers a service calledAmazon Vinewhere you can pay Amazon customers to review new products. This allows you to build positive product reviews and trust in your listings. 

Incorporating the relevant trust signals is crucial to feeling local and trustworthy if you decide to sell directly. Local language quality is an important trust indicator, especially in markets such as France, where accurate spelling and grammar carry more weight. 


4. Ongoing costs


For most marketplaces, businesses have to pay fees on the products they sell and these need to be built into profit margins along with any additional fees. Fees can increase the selling price of products and reduce profit margins, however, for many small businesses, absorbing a cost per product sold is easier and less risky than a bigger investment cost at the outset. Marketplaces allow you to test products in a new market before investing in a website development project. 

For bigger businesses with larger sales volumes, fees can reach a sizeable amount, so it may be preferable to drive sales through direct selling. When a customer repeat purchases directly through your website, you don’t pay a fee each time like you do through a marketplace. 

5. Encouraging repeat purchases


New customers are hard to acquire, and most companies rely on an element of repeat business. When you sell via a marketplace, customers buy products from the marketplace rather than directly from the company, so you do not hold any data on those who have purchased your products. 

For certain marketplaces, you can put ad spend behind your products, or for the likes of eBay you can set a percentage of revenue you are willing to pay up to per purchase. This type of marketplace marketing is a good way to encourage first-time purchases, but it falls short when it comes to encouraging repeat business at a lower cost. Again, you need to be wary of the fees this adds to each sale meaning the cost per product needs to be set higher. 

If you sell directly on your own site, you can use analytics and ad platforms to gather customer data, which can then allow you to retarget previous customers through programmatic and social media advertising. Along with analytics data, gathering opt-ins from customers to use their email addresses for marketing purposes allows you to engage them in email programs that drive traffic to your site and encourages repeat purchases at cheaper costs.




Can your international digital marketing strategy include both?


Yes! For certain companies, marketplaces are used successfully to test the waters in new markets or support the launch of a new website as they start to sell directly. For others, marketplaces form part of an ongoing international strategy to drive traffic and maximize sales. Depending on your product and objectives, your business may miss out on traffic by not utilizing either route or selecting the wrong one. 

If you sell directly through your own website it’s important not to underestimate the impact cultural differences, such as local payment options or delivery and returns expectations. 

It’s also important to remember the importance of investing in brand awareness, especially when competing against others on marketplaces. Outselling your competitors relies on competing on price, having a USP or a differentiator through a well-known brand. If your brand isn’t well-known, it will be hard to compete. Whichever option you choose, ensure it forms part of a long-term strategy for maximizing revenue in a new global market.

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