For ecommerce businesses venturing into new markets, knowing the best way to reach your target audience and maximise revenue can be difficult, especially within 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 favour different marketplaces, for example Allegro dominates in Poland. Research is key before deciding which one to use in each market.
Should you sell via a marketplace or direct through a website?
There are pros and cons to both options, and we guide our clients to make the right decision for their business based on elements such as the market they are entering, their product, business goals and available resources. 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 localised 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 in return, you sacrifice full control over the design and layout. However, you can create shops on some marketplaces and have some control over the imagery and design. A key thing to remember with marketplaces is translation is still needed when targeting international markets as marketplace customers still expect to see localised product listings. 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 nuances from around the world and doesn’t 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 that sellers can usually take advantage of. For example, Fulfilment by Amazon allows sellers to send their products to Amazon and they will store and ship your products. They can also handle the 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 maximise 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. Amazon in France reached approximately 24 million unique visitors per month in the third quarter of 2017. However, this doesn’t reflect the actual traffic numbers for your product keywords. To get any such insight requires premium software. Also, any purchasers of your products become customers of the marketplace rather than your business. It is also worth noting at this point that considering which marketplace to sell on is important in terms of traffic quality for your specific 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 into any website localisation at the start, incorporating localised keyword research. This enables your business to rank for relevant search terms and drive traffic that will convert.
PPC can also be used to drive short-term traffic while organic positions are stabilised. Each country requires a different strategy. For example, for Baidu 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 much more targeted to your business needs. Having analytics data from purchases also allows internal experts or a marketing agency to optimise 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 and Alibaba, will have all the relevant trust signals that customers look for when purchasing a new product. However, this does limit the trust you are building up for your own brand. Amazon also offers a service called Amazon Vine where you can pay for Amazon customers to review new products, which allows you to build positive reviews for your products and build trust in your listings.
If you decide to sell directly, incorporating the relevant trust signals is crucial to feeling local and trustworthy. Local language quality is also an important trust indicator, especially in markets such as France where accurate spelling and grammar carry more weight than in the UK.
4. Ongoing costs
For most marketplaces, businesses have to pay fees on the products they sell. This needs to be built into profit margins along with any additional fees for logistics etc. This can increase the selling price of your 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 also allow you to test your products in a new market before investing in a website development project.
For bigger businesses with a larger sales volume, the fees can reach a sizeable amount and if there is an opportunity to drive sales through direct selling, this may be preferable. When a customer repeat buys through visiting your website directly, you don’t pay a fee each time they purchase in the same way you do through a marketplace.
5. Encouraging repeat purchases
New customers are hard to acquire, and most businesses rely on an element of repeat business. When you sell via a marketplace, customers buy products from the marketplace rather than you directly and you do not hold any data on those who have purchased your products.
For some marketplaces, you can put ad spend behind your products, or for the likes of eBay you 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 is adding to each sale and therefore the cost per product will need to be set higher.
If you sell directly through your own site, by gathering data from your customers and using analytics and ad platforms, such as those included in the Google Marketing Platform, you can retarget previous customers through programmatic and social media advertising. As well as analytics data, gathering opt-ins from your customers to use their email addresses for marketing purposes allows you to engage them in email programmes to drive traffic to your site and encourage repeat purchases at a cheaper cost.
Could your international strategy include both?
The answer is YES! For some companies, marketplaces are used successfully to test the waters in new markets or to support a website launch as they begin to sell directly. For others, marketplaces form part of an ongoing international strategy to drive traffic and maximise sales. Depending on your product and objectives, you could miss out on traffic by not utilising both routes or by choosing the wrong one.
Whichever option you go for, ensure it forms part of a long-term strategy for successfully maximising revenues in a new global market. If you decide to sell directly through your own site it’s important not to underestimate the impact cultural differences, such as payment options or delivery and returns expectations, can have on local market conversion rates.
It is also important to remember the importance of investing in brand awareness, especially when competing against others on marketplaces. To outsell against your competitors relies on being able to compete on price, having a USP or having a differentiator through a well-known brand. If your brand or USPs aren’t well-known, it will be hard to compete. For example, a designer clothes company in the UK without brand awareness in Germany may find it difficult to sell their products at a high price bracket on a marketplace. A company selling plain notebooks at a cheap price is likely to have more success.
If you need help localising your website or localising and promoting your marketplace product listings, speak to one of our experts.