The pros and cons of online marketplaces

Have you turned a hobby into a business? Maybe, you are running a business from home and want to speed up growth. Do you need to reach more customers, but don’t feel a stall at your local farmers market will produce the desired results? You are not alone.

If you are already selling online with limited results, you could be among the thousands of small businesses considering selling your products via online marketplaces.

There are great benefits to selling on Amazon, eBay and Etsy for example, but there are also drawbacks.

See also: Online selling options

The pros

Do you want to instantly market your goods to billions of customers around the world? If you sell your products on Amazon, eBay and Etsy, you really can reach a global market - quickly. But these big players don’t just offer a ready stream of loyal customers, they offer a lot more.

Other benefits of selling via online marketplaces include:

• No need to design and maintain your own online store
• Easy to upload product information and start selling quickly
• Simple and effective cross-border marketing
• Trust of customers
• No need to worry about payment gateways and security
• Mobile friendly checkout apps

Sounds great, doesn’t it? You could turn a business you started at your kitchen table into a global enterprise at the click of a few buttons. Think of all the new customers you could reach and hundreds, if not thousands, of orders rolling in.

However, it’s not always as easy as that. There are drawbacks to selling on major online marketplaces, and some of them can leave you considerably worse off, not better off.

See also: Online selling - Be legal

The cons

• Fees - There is a charge to list your products on platforms such as Amazon, eBay and Etsy, so you will be paying out before you have made a single sale. The costs vary depending on which platform you choose. However, the fees don’t end there, the marketplace will also take a percentage of commission for every sale. eBay even charges a fee if you want to de-list a product

• Competition - You will be up against stiff competition from every corner of the globe, including sellers from China and other mass producing countries. The competition you face will dictate how you price your products. Can you really afford to compete?

• Copycat selling - If your product proves popular, Amazon, for example, may decide to start selling a similar product itself - and undercut you. Your goods could almost disappear from search results as the marketplace pushes its own products

• Stock - Ask yourself the question, can you source enough stock to meet potential demand? What if your product trends and then the marketplace starts selling it? In this situation, you may well be left with stock you can’t shift

• Storage - You may need to invest in additional storage space in order to fulfil orders

• Fulfilment - Have you got the capacity to fulfil a large number of orders?

• Branding - It may be difficult to establish your own brand on these sites because customers tend to associate purchases with the platform and not the seller

See also: Marketing and advertising - ensuring legal compliance

What now?

If you’ve got a unique product, lots of stock and the capacity to fulfil a large number of orders, go for it. You really could be sitting on a gold mine. If you lack stock, storage and the capability to fulfil a large number of orders, don’t risk it.

It’s very important to weigh up the pros and cons to decide if an online marketplace is right for your business.

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