How online retailers can successfully use marketplaces

By: Lorna Beament

This article summarises some findings from GS1’s ‘Harnessing the power of online marketplaces’ whitepaper, examines the different kinds of online retailers that sell through marketplaces, and discusses how each can best use marketplaces.

Proliferation of online marketplaces

You’re looking for a gift but don’t have the time to leave the office at lunchtime or maybe you just don’t want to slog around the shops in the cold. So what do you do? Well, you’ll probably look at a range of websites, including online marketplaces. Maybe you’re scanning Amazon for the latest deals or watching an auction on eBay.

15 years ago you might have been wary of online marketplace or perhaps you didn’t know they existed. But today we have witnessed a boom of these online platforms, suggesting the UK market is reaching online retail maturity, fuelled by a new breed of business with increased digital skills and a desire to access new markets.

The reality, however, of being successful on online marketplaces is not so simple. We’ve all heard the urban myths of ‘sofa CEOs’ making a fortune by selling goods online or reselling cheaper products bought in China but it’s not that easy.

There’s also many different types of online sellers, from those who dabble into online sales simply as a hobby, all the way up to larger omni-channel businesses who use online marketplaces to reduce the risk and investment needed to access international markets.

But why does GS1 UK necessarily care about online marketplaces you might say. We’re just the barcode guys, right?

Well when we looked at the make-up of our membership, 10,000 of our members told us they use online marketplaces to trade. We have also witnessed a spike of new members joining to secure GS1 product identifiers, especially smaller businesses, so they can use online marketplaces as part of their sales strategy.

We conducted market research with White Space to better understand the types of businesses using online marketplaces, while answering why they are using these platforms and how they use them.

What drives a business to use online marketplaces?

We captured the results from the market research in our whitepaper The rise of UK’s digital entrepreneurs:  harnessing the power of online marketplaces and the results painted a fascinating picture on how and why businesses use online marketplaces to trade goods.

Marketplace sellers have different motivations and reasons for using online marketplaces. For example, some use them as a testing bed for new products. These sellers have a more established online presence and sometimes sell a smaller selection of their full range on Amazon to test demand.

Then there are sellers who see marketplaces as their main sales channel as they provide an appealing platform to scale up businesses with an online channel focus.

The research went onto tell us that online marketplaces are used differently according to a business’ focus. A significant number of the business we spoke to have a pure online focus and marketplaces allow them to sell their goods while keeping physical costs down, like rental space. These online sellers are broadly positive about marketplaces and many have explored the different marketplaces, as well as understanding their strengths and weaknesses.

A smaller group of businesses have a mixed online and offline focus. They typically have a physical store or wholesale network, which are supported through online marketplaces, and while they are not against selling on these external platforms, they are using them in reaction to the growth in consumer use of marketplaces.

And those businesses with a pure offline focus were smaller in number and obviously make little use of marketplaces. These businesses prefer to mainly sell through their stores, their own website and a network of partners and/or affiliates.

Online marketplaces also represent an opportunity for businesses to access international markets. These are typically businesses with larger revenues and tend to have their own websites. However, their needs are complex and they require integration with existing software, will have to be compliant wherever they are selling in the world and will be sensitive to challenges around the international supply chain.

The different faces of marketplace sellers

While establishing the different motivations and drivers for businesses to use online marketplaces, the market research was also able to segment these online sellers into six categories or ‘profiles’ based largely upon their scale and complexity.

The vast majority of online marketplace sellers tend to be smaller businesses with smaller turnovers called Traders and Creatives. Traders have an eye for the latest product trends and crazes, which they buy in bulk and sell fast using multiple online marketplaces. Creatives tend to operate from home, have turned their hobby into a business and focus on a single marketplace.

Innovators focus on a niche idea or a smaller range, often invented by them, started out online and look to increase awareness. Growers typically start offline, like a family business, but recognised marketplaces could help them reach new customers and reinvigorate their business.

Pioneers have lots of experience using marketplaces but use them selectively based upon product type. The smallest group were Leaders and these might be large omnichannel businesses but despite their size, marketplaces still represent an important channel, especially as they represent opportunities to sell internationally.

The research also demonstrated that while online marketplaces provide lots of opportunities for businesses to sell, grow and expand, there are challenges and these will be different dependent on what profile you fall into.

For example, Creatives need to seek out advice on how to best use marketplaces, such as listing items, and require guidance on marketplace regulations and barcoding. In comparison, Leaders require a bespoke product management system that sits across all sales channels to drive success and overcome challenges.

Now that you’ve heard about the different types of online retail businesses using marketplaces, why not take our online personality quiz and let us know what type of marketplace seller you are #whatsellerareyou.

 

By: Lorna Beament, Engagement Manager – Marketplaces, GS1

Download the whitepaper The rise of UK’s digital entrepreneurs: harnessing the power of online marketplaces

More content from GS1 in our Solution Provider Directory on their profile page

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