There has never been a better time to sell online. Ecommerce marketplaces are reaping the rewards of SMB owners looking to sell their wares in a world shifted online by Coronavirus. But selling via a marketplace builds the marketplace’s brand and business – not the brand or business of the SMB owner.
An ecommerce site gives small businesses greater control over their brand, allows them to build direct relationships with customers and – ultimately – helps them build stronger businesses. Here’s how a website builder helps your SMB customers succeed.
Should small businesses sell their goods via online marketplaces?
SMBs can make money from selling via online marketplaces, though they could keep a higher proportion of the revenue from selling via their own website. Creating a website from scratch doesn’t have to be expensive or take a long time. BaseKit’s website builder makes it easy to set up a beautiful online store and start selling immediately. Having a website, domain, or ecommerce store, gives SMB owners the freedom that marketplaces don’t, and website customers are their own. These factors alone make a compelling case for businesses to sell via a website, rather than a marketplace. It’s beneficial for you too: relevant value-added services like a website builder will help your small business customers to succeed and show you to be an integral part of their business.
Let’s take a look at nine reasons small businesses should avoid selling via online marketplaces and sell via their own sites.
1. Loss of brand identity and growth with marketplaces
In choosing to sell via a marketplace, small business owners often forfeit their right to be identified. For instance, Amazon prohibits sellers from referring to their own company, brand or websites, as this is viewed as an attempt to lure customers away from Amazon. Other marketplaces have similar policies. When selling via an online marketplace, customers aren’t buying from the small business, they’re buying from the marketplace. That means selling via a marketplace inhibits the brand and the potential business growth.
And while retailers have the benefit of selling via an established platform, it makes it difficult to break away from that platform in future. Depending on the SMB’s goals, that might be OK. But if it comes to a time when they want to establish and grow their own brand identity and business, it means starting from the bottom and working up – again.
2. Products live and die by reviews and a large volume is needed to make a difference
In ecommerce, reviews are everything. For selling via a marketplace to be worthwhile to a small business, they need to spend the time and effort encouraging customers to leave a review. While this does build the seller’s reputation, it also builds the reputation of the platform. For the same level of effort, the small business owner could put the energy into building their own brand. In the end, the return will be better and the brand, revenues and customers their own.
3. It’s hard to differentiate against similar products
Marketplaces are full of competition. This is especially true on Amazon and eBay, where hundreds of thousands of products are sold within the same category. Established sellers have the upper hand in the form of the number of reviews, reputation, and volume of transactions. SMBs have no real way to distinguish themselves. This isn’t helped by the platforms sending out emails to their customers with an invitation to ‘buy similar’. The emails don’t necessarily link back to the original seller, simply a similar product in that category. The aim isn’t to benefit the SMB, but to grow the marketplace. The SMB becomes a commodity with very little opportunity to differentiate themselves. Which leads to…
4. A race to the bottom
When small business owners are unable to differentiate on branding, customer experience, service levels, or anything else, the only thing they can compete on is price. This drives down the revenues and margins of the business owners. Sometimes it’s the only way to differentiate!
Pricing can be increased, once the seller gets a foothold in the market and generates a substantial number of reviews. At that point, price may play less of a prominent role in differentiation, because the trust factor is persuasive to buyers – people might prefer to pay a little more from someone that offers reliability. Marketplace pricing is driven by what else is available on the platform itself, rather than the skill, knowledge, labour and passion of the business owner. Marketplaces devalue the product, service and hard work of the business owner.
5. There is little to no overall business growth when using marketplaces
Marketplaces can provide a good opportunity for business owners to make fast sales. They provide a tried and trusted way for new retailers to get online. However, the drawbacks outweigh the benefits. There will always be new entrants to the marketplace, perhaps who undercut on price, which the established retailers will have to compete with.
Not only that, the small business owners who sell via marketplaces are bound by the platform’s terms. They are not free to run their business as they wish, which inhibits the potential for growth and development. Moreover, if the marketplace changes their policy, algorithms, the rules, or anything, the retailers have to comply. If they don’t want to? They’ll have to find somewhere else to sell their goods and their revenue stream is cut off.
6. No control over the customer experience
Usually, businesses – whether large or small – are able to differentiate by the customer experience they deliver and their service. Following the rules of the platform means that the SMB isn’t able to deliver their service, only the service of the marketplace. It also means that the customer has to play by the rules of the platform too – they have no say in how they do business with the sellers.
The customer relationship is hampered also when selling via marketplaces, which is a major blow to small businesses. Many small enterprises rely on word of mouth to grow, whether in-person or on social media. The retailer-customer relationship is critical as it encourages the customer to want to buy from that particular SMB, rather than a marketplace. Once this relationship is established it can be nurtured, and the retailers will naturally find opportunities to cross-sell and upsell. These opportunities are unlikely to occur without the direct relationship.
When selling via marketplaces, the customer ultimately belongs to the platform, so the SMB can’t market to them or leverage retention strategies in the same way that they could if the customer had purchased from their website directly.
7. Platform fees are better off in the SMB’s pockets
When using marketplaces to sell their goods, SMBs have to pay fees. They may be responsible for a listing fee, a seller’s fee, they may pay a percentage of the sale to the platform, admin fees and more.
The small retailers that sell via a marketplace are likely to be the party that suffers most when legal or tax-based regulations are enforced. Not wanting to harm their own bottom line, platforms push the cost down the pipe, raising fees or increasing percentages taken for each sale. Not wanting to alienate customers, the small business owner is reluctant to raise prices, and so they are caught in the middle, as they watch their own profits shrink. There was a prime example of this in the summer when Amazon passed the so-called ‘digital sales tax’ onto small businesses. In the midst of a crisis, SMB owners were faced with an increase of 2% on the fees payable to Amazon. Rather than support the small businesses who make the Amazon marketplace what it is, Amazon chose to squeeze them.
Investing in their own ecommerce site reduces those costs over the long term. When selling through their own website, a greater proportion of the revenues stay with the small business owner. Organisations which support, rather than squeeze, the wallets of small business owners are likely to retain loyalty and be appreciated in the long run. A website builder is not only a value-added service in the here and now, but something which grows in value as the small retailer builds their business over time.
8. Not only is competition fierce, the playing field is uneven
Online marketplaces can offer a quick way to start selling online. However, small businesses, particularly solopreneurs and independent retailers, may have a hard time establishing themselves organically. ‘Sponsored ads’, ‘sponsored products’ and ‘sponsored listings’ on marketplaces are designed to push those who pay to the front of the queue. The investment in getting products seen builds the marketplace’s business at the expense of the SMB.
With a website builder, an independent retailer can start selling online – of course, they may still need to pay for advertising. However, the investment is in their own brand and SMBs are not hit with heavy fees when selling via their own ecommerce store. The net result of their expenditure is that their business benefits.
9. SMBs are building someone else’s business rather than their own
Jeff Bezos is the richest person on earth. When selling via a marketplace, SMBs are not the hero. In making their money through marketplaces, they are keeping someone else’s business in profit and growth while doing themselves out of the opportunity to scale. Having their own website or ecommerce site means that, rather than pay platform fees to Amazon, SMB owners could use the money to build their own businesses.
A website helps small businesses to thrive online
Platforms, such as store builders, which allow SMBs to grow their own brands, are the most beneficial to small business owners. They put the SMB owner in the driving seat and allow them to succeed. By equipping small businesses with the tools to get online, and to thrive, your service plays a key role in the business’ continued success. And happy customers are loyal customers.
Do you want to help your SMB customers succeed and build loyalty too? We can help. Contact our partnership team and we’ll show you how.