Why Marketplaces Are Bad for Online Businesses
A marketplace is a website or an app helps customers buy products from many different sources.
Most of the time the operators of the website does not own any products in the marketplace, but represent the products of different sellers and help the customers to do the transaction through their website or app. Daraz, RetailGenius are a few examples from Sri Lanka. In Sri Lanka, many people, especially in the Colombo, do their shopping from marketplace websites. Which easy for them because of the reliable home delivery service the seller provide for them, sometimes for free. Many customers tend to shop from an online marketplace because it is very convenient and they can access many products, compare the best and most profitable products.
There are several advantages for a seller by using marketplace as their online platform for their business. A marketplace already will have a customer base and decent website traffic to their website, using that marketplace will help you get more leads and sales. Since marketplaces are doing marketing and brand awareness a seller can cut down the cost of marketing as well. Many marketplaces take care of financial transaction which is very helpful for a seller and it is easier to join a marketplace rather than developing an own e-commerce website.
There are significant benefits to a seller can have by joining a marketplace. But there are many drawbacks. Many marketplaces are charging you a portion from the sale, which will affect the pricing of the product or service you are providing. As a user, the seller has to play by their rule and regulation, which can restrain sellers activities. In a marketplace, a seller has to face heavy competition from fellow sellers and customers able to control the prices of the products or the service since they have options to select. Marketplaces tend to give important features for their top-selling partners, which can leave you to force to share the selling with them. But the main drawback of joining marketplace is that the seller does not gain any access to customer data such as email or address. Which a marketplace use for their marketing campaigns. Due to the lack of transparency in the internal corporate activities a marketplace changes its mission anytime they like. This might be sound simple, but the entire Amazon.com built by this strategy. In the beginning, Amazon lets sellers, join and sell their products and “stole” those sales data and created their Amazon prime service which sells the same products with lower than their seller’s price and amazon manipulate search results to sell their own products which killed many businesses.
Clearly, the drawbacks of the marketplace outweigh the benefits of joining the marketplace (at least on a long run). Marketplaces are very beneficial for new sellers and for the people who start their business with a small budget. They can easily access a large customer base and get the benefits of marketing from the marketplace. It is best to use the marketplace and social media to build your brand and move to your own website where you can control the data of your customer base and target them with marketing campaigns. If you are a seller who is planning to develop your own modern looking e-commerce website you can contact us and create a modern looking responsive website. Making sales is a wonderful feeling, but you need to remain stable in generating passive income independent of marketplaces.
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