Marketplaces: A Great Entry Point

If a merchant is wanting to begin selling online or take a small step toward diversifying into new sales channels, one of the public marketplaces, namely eBay and Amazon, is typically a safe environment for rookies.

Scot Wingo, CEO of ChannelAdvisor, says that, as a general rule, his firm sees eBay as a great place to start selling online.

eBay a good place to start

“I think about eBay as ecommerce training wheels,” he said. “It’s like when you ride a bicycle, you have a lot going on, you are steering, you are pedaling and you are trying to balance. Training wheels take the balance out of the equation, and you can focus on pedaling and steering. Then, when you are really good on those things, you take the training wheels off and you work on balance. The same is true for ecommerce.”

Wingo notes that in ecommerce, a merchant must first find out what he wants to sell and where to locate sources for those products. Then he must focus on merchandising and logistics.

“What eBay lets you do is really focus on the product sourcing and logistics and not really worry about demand and merchandising that much,” Wingo said. “eBay brings the demand, you bring the products, then you have to do the logistics piece. Eventually, as you kind of outgrow eBay, and we generally see somewhere around $50,000 a month is a good point for companies to start really doing this, you can really expand beyond that and open your own website.”

Ralf VonSosen, vice president of Infopia, agrees that the marketplaces make a great starting point for a multichannel rookie, but he adds that a merchant should look closely at each option and consider where customers for their products are most likely to be.

Find your audience

“You’ve got to find that right buyer,” VonSosen said. “I think that is where (the marketplaces) differentiate quite a bit—in the unique types of things that you would find on eBay versus on Amazon. Amazon and Overstock, and those types of environments, tend to be a much more productive type of environment, so it is much more like a traditional store.”

VonSosen noted that each of the “big three” marketplaces can help a merchant develop brand recognition and build a customer base.

“In terms of risks that you are taking, I think any of these major marketplaces are a great place to start,” he said. “It’s a great place to gain some experience and start building your brands and get exposure to new customers because it just gives you an opportunity to make your products available to more buyers, buyers that potentially will then become loyal customers to you as a store brand if they have a good experience in doing business with you. The cost of going on these marketplaces usually tend to be very minimal.”

Typically, there is going to be parity between prices on products at a merchant’s brick-and-mortar store, website and any kind of shopping-comparison engine. However,Wingo says that merchants often have a different pricing strategy with the marketplaces based on the different types of shoppers that are attracted to eBay, Amazon and Overstock.

Amazon audience is different

“A lot of people will actually increase their prices for Amazon because the average Amazon consumer is an early adapter,” Wingo said. “They are not very price sensitive. They are willing to pay near full price, or even sometimes above full price, if it is something that is a relatively hot product.”

Wingo said the average eBay user is at the opposite end of the spectrum.

“The eBay buyer is your cheapest kind and the most deal-oriented buyer out there,” he said. “So, consequently, once people have many online channels, they typically look at eBay as one of the last channels they will run a product through. Or they may source end-of-life, severely-discounted products on eBay. The eBay consumer is really looking for 30-50 percent off retail. So, you definitely are looking at a different model there than your own ecommerce site, and it’s definitely different versus something like at Amazon.”

PEC Staff
PEC Staff
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