Excited about starting a business, but overwhelmed by all the decisions you need to make?
Don’t worry – you are not alone!
Starting a new business has become easier than ever. With the convenience of buying online, more people do a majority of their shopping on the interwebs. This has spawned a massive growth in online retail which in turn has led to numerous channels and options for selling online.
Figuring out what online channels to sell on can be confusing and even intimidating for someone who is looking to start an online business. Here’s our take on it to help you make an informed decision.
We segment online sales channels broadly into two categories:
- Marketplaces – that have several multiple sellers. For example Amazon, Etsy, ebay
- Branded web-stores – that have a single seller. For example bonobos.com, gap.com
Let’s take a look at some of the major factors to consider while deciding where to sell:
Audience
Marketplaces: The biggest advantage of selling on marketplaces, is that half the marketing job is already done for you. Millions of buyers visit Amazon, Ebay, Etsy and buy billions of dollars of merchandise every day. So getting an audience is not a problem at all when you start selling on one of these.
Web-stores: Having your own branded web-stores on the other hand puts the onus of doing the marketing and spreading the word on you – the entrepreneur. Which is not a problem, if you are Gap, Bonobos or Target, as you already have a brand presence. But for most fledging businesses this means spending a lot of time and money on raising awareness or generating traffic to your web-store.
Buying Experience
Marketplaces: Selling on a marketplace gives you very little, if any, control on your customer’s buying experience. Marketplaces like to keep the buying experience of their buyers consistent and this leaves very little room for businesses to tailor their buying experiences.
Web-stores: Selling on your own branded web-store, gives you complete control over the experience of your customers. All the way from choosing the color pallet of the web-site down to the shipping options you would provide to your customers.
Branding
Marketplaces: If you do decide to sell on a marketplace, you would be one of thousands if not millions of businesses selling there. This means you are competing with several other folks in differentiating your product and brand when you are getting started.
Web-stores: Since you are the only business selling on your own web-store, once people do find your website, you have a much bigger opportunity to build and establish your brand.
Margins
Marketplaces: Although marketplaces do get you access to millions of sellers, them come at a price. Marketplaces take a percentage of your sales which effectively reduces your margins on the products you sell and hence your overall profitability. To add to that, competition from other folks selling the same product does influence your margins
Web-stores: Selling on web-stores not only lets you take your entire order price to the bank but it also gives you the freedom to set the list prices for you products.
Customer ownership
Marketplaces: Marketplaces have very strict policies that prevent sellers from contacting the buyers. Marketplaces invest a lot of time and money to build their audiences and do all they can to protect that investment. This does not gives the entrepreneur much opportunity on building a customer base.
Web-stores: When someone buys merchandise from your branded web-store, or even visits you store, you have complete ownership of that customer – their contact information, buying patterns, etc. You are free to re-market, re-target and re-sell them.
Final thoughts
You could even start selling on multiple places at the same time. But of course, the more places you sell on, the more time and money you spend on managing those. As an online retail entrepreneur, you need to think through such trade-offs.
