Should You Consider Adding a Marketplace to Your Business Model?

There’s a new business model in the eCommerce agency marketing mix called marketplaces. While the idea is certainly not a new one – after all, in-person shopping in this manner has been around for centuries – it is starting to become more popular with online shopping.

As an eCommerce brand, you might wonder if this type of setup is a good idea for your online store or why anyone would consider doing it. That’s what we’ll address here! 

Ready to explore why adding a marketplace to your business model is something to consider? Let’s get started.

What is a Marketplace?

When it comes to an eCommerce marketing strategy, a marketplace is simply a third-party seller model where other retailers have the ability to post products on your online store.

One key example of this would be Walmart, which started as a brick-and-mortar retailer, expanded into eCommerce, and now has an enterprise marketplace model for wider product availability and better distribution.

The Benefits of Marketplace Selling

Today’s shoppers want convenience and selection. As a midsize eCommerce brand, it isn’t always easy to provide this type of service. And that’s where the power of marketplace selling comes in. Here are a few of the most common pros to this type of business model.

1. Increased Catalog Size

While you would certainly love to provide your customers with every type of product they’re looking to buy, this isn’t always practical or feasible. With a marketplace, you’re essentially opening up your sales channel to additional vendors. That means more items for purchase and a more robust catalog overall.

2. Lower Fulfillment and Inventory Cost

When you aren’t the one fulfilling the orders or keeping them in your warehouse, these costs go down dramatically. For some small eCommerce brands, adding a marketplace with a variety of vendors can be a great way to reduce overhead.

3. Better Customer Loyalty

Customers that find everything they’re looking for in one location are much more likely to come back regularly to purchase more. In addition, they aren’t going to be checking out your competition to try to find alternatives.

Reasons to Avoid Marketplace Selling

Of course, for every benefit, there are reasons why you might want to avoid marketplace selling, too. Not only does this complicate your sales channel a bit, but it can also be much harder to control certain elements of the customer experience.

1. Less Control on Fulfillment

When you have a marketplace business model, you’re essentially trusting other sellers to provide the same high level of satisfaction that your customers are already accustomed to receiving. If they don’t ship out on time or use quality packing methods during the fulfillment process, this could negatively affect your online store.

2. Vendor Reputation

While vendors have the same goal as you when it comes to increasing sales, they aren’t always on the same page regarding messaging or positioning. This can sometimes create a conflict if their products are especially controversial or create a major issue. Likewise, something a vendor does off your platform could end up hurting your sales in the end. That’s why it is crucial to make clear decisions on which ones you work with when deciding to add a marketplace to your business model.

3. Less Control on Product Sourcing

When working with a marketplace business model, you’re trusting your vendors to source their products based on quality and safety in the same manner your in-house team would. Sometimes, this can create a bit of a problem when it comes to other organizations not having the same high standards that you do. To keep this from being a problem, it is important to thoroughly review each listing before adding it to your platform and even reviewing products before they go live for purchase.

Should You Add a Marketplace to Your Business Model?

While there are certainly some amazing benefits to adding a marketplace to your eCommerce marketing strategy, there are also plenty of risks. By taking both the pros and the cons into consideration, your brand can build innovation in your ecommerce marketing strategies and make a solid decision about whether it is worth doing so.

Need a little more help understanding this process? Our CAKE team of experts is here to help you sort it all out. Please contact us today to learn more or to discuss adding a marketplace to your online store.