10 Reasons Why You Shouldn’t Sell on a Marketplace (Unless it is Decentralized)
In my last article, I focused on the benefits of selling on Amazon & Co. But as always in life, there are two sides to every coin. Selling on (the wrong) marketplaces also carries a lot of risk to online entrepreneurs, as they will become a customer (of the marketplace) themselves.
Why you shouldn’t sell on a marketplace
- You will have to pay fees for selling on their platform
When you are selling your products on someone else’s website, they will charge you for it. Basic monthly fees and fees for every transaction (up to 20% on Amazon) will significantly reduce your profit margin. - You have no freedom to highlight your brand
Marketplaces predetermine the design of your page, so everything pretty much looks the same. You only have very limited freedom to show your customers who you are beyond your products.
- You will probably have to lower your prices
As every page within the marketplace almost looks the same and you will have steep competition for virtually every product, you will likely have to distinguish yourself by the price you ask. This means less money in your pocket. - You have to observe their terms of service
When you sell on a marketplace, you become their customer. They will set the terms of service and you have no say in any changes. And usually, any changes will benefit their bottom-line, not yours. - You have to play by their rules
Marketplaces will have high standards for customer service and shipping. So you will have to be able to live up to those standards or risk being marginalized. - The marketplace can become a competitor
When products gain traction on a platform, the marketplace may choose to produce and sell them themselves. And you won’t be able to compete with their prices.
- You have no access to customer data
Knowing where your customers come from, what they look at and maybe even why they buy is huge. But you only get to know that when you have access to the data. And on a marketplace the platform owns the data and will use it to their benefit. - People may buy from you, but they are the marketplace’s customer
Even though you may be the one selling and shipping the product, people will still consider the marketplace as the seller. So they are not really your customers, even though they bought something from you. - Your partnership can be terminated
The marketplace holds all the cards. They provide you with the access to the customer. So when they arbitrarily decide — for whatever reasons — to terminate your partnership, you will be left in the rain. - They give preferential treatment to top-sellers
Once a certain seller has established himself as a force within the marketplace, they will give him special treatment (until they decide to sell similar products through one of their own brands). So for smaller merchants just starting it will be next to impossible to compete with the rankings and conditions a top-seller may get.
There are various reasons why it can be beneficial for a merchant to start selling on an online marketplace. There are, however, also a lot of risks involved. Ultimately marketplaces will always strive to achieve the goals they set for themselves, giving little thought about how it might affect their merchants.
But where does it say that there has to be that one big entity that reaps in all the rewards from the hard work of so many?
With GAMB we want to want to give the power back to the merchants, by giving them full control over all decisions concerning their marketplace. So they themselves can decide what course of action will benefit both the marketplace overall and the individual merchant.
Who we are
GAMB — The Global Alliance for Merchants on the Blockchain has made it its goal to deliver a sustainable alternative to the powers currently dominating global e-commerce. We are building the leading decentralized marketplace. By enabling merchants to actively participate in every important decision, we empower them to be more than just customers of a platform.
Author
Daniel Schnadt is Managing Director of the Gambio GmbH and has been working in e-commerce from the age of 16. As a leading e-commerce solution in germany with more than 25.000 stores currently live Gambio is supporting the GAMB Project.
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