Navigate the Shifting Sands of Marketplaces

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Listen as Adam Joseph, Director of Client Services at ChannelAdvisor, runs through the challenges faced in marketplaces.

This clip is from our webinar, "Marketplace selling: Trends and Challenges for 2017" in association with ChannelAdvisor. To watch the full on-demand recording, click here.

There's a ton of opportunity out there within marketplaces but it's not without its challenges. A lot of the conversations I have with our customers here at ChannelAdvisor is about how to navigate through the shifting sands of marketplaces, and how you can help them stay one step ahead. One of the things we do here is that we analyse - We have a huge amount of data on marketplaces and we produce a lot of reports and info helping our customers and the general eCommerce community at large. We help make sense of the some of the data we see internally from all the sales data we have [and] the rate of change is huge. If any of you have alerts set up either on e-commerce or marketplaces, you will see how many news stories are coming through each day. We saw that huge story yesterday, not about marketplaces but Google Shopping and the huge fine laid down by the EU.

The challenges are immense, and what I wanted to do in this section of the webinar is to throw up key challenges that I’ve seen and that our customers have faced. It’ll be interesting to see in the Q&A section if the people on today’s webinar are experiencing the same challenges.

So the first one is all about knowing the marketplace you’re operating on - the requirements for each marketplace can be very different. The goalposts do continue to shift on a monthly, weekly or rather, daily basis. We are seeing shifts on what marketplaces are asking from their sellers.To continue that football analogy with the moving goalposts; if you’re seen not to comply with the rules, you’re either going to get a ticking off from the ref (yellow card) or at worst, a red card which would mean you are completely suspended from a marketplace. Once you are suspended, it can be very difficult to get listed again.

It’ll have a huge impact on your seller metrics as if you play by the rules, you’ll find your seller metrics are boosted. Get suspended and they’ll go the exact opposite. Receiving a policy violation from the marketplace can be anything from posting the same item multiple times, selling forbidden goods. We had a customer of ours who accidentally listed a knife, which they sell in store but somehow appeared in their feed. That is forbidden. Listing offensive material, having an image that was inappropriate or that was in the wrong format. There are many restrictions or best practice advice that marketplaces have. Really do take any advisory emails you receive on marketplaces seriously  Even if you’re seen to be in contravention from a marketplace, if they see that you’re attempting to listen and take their advice I think the likelihood is that you’ll have a better relationship and therefore, get over any bumps  than if they think you’re just ignoring the advice they’re providing.

The next challenge is one we have been having lots of discussions about with our customer base. It’s very specific to Amazon so please excuse me for those who are not trading on Amazon. Given how important this is, and many of our sellers are pondering this, I thought it would be worth including [it] in today’s webinar. Much of what we’ve talked about today, is sellers who have acted as a third party on a marketplace. In other words, you sell directly to the consumer via a marketplace. Some marketplaces, focusing on Amazon, in some cases you can become a 1st party and you become the wholesale supplier to Amazon. They then sell on your behalf. I should point out, that here with Amazon, you have to wait to be asked by their vendor management team to become a wholesaler to them. If you don’t get an invitation from their vendor management team, then your only choice is to sell 3rd party on Amazon.

Now what typically would trigger or peak the interest of that team? Items that are selling really well on Amazon that are driving sales - then over time, it is likely that Amazon would become the seller and have you act as their wholesaler. There are plenty of things to bear in mind, whether it be staying as a 3rd seller or become a 1st party. Do you want to have a hybrid combination? A combination of both 1st and 3rd party. There’s no right or wrong answer here but there’s definitely pros and cons to consider. One thing to point out is if you’re going to be a 1st party supplier to Amazon, you will need to provide great product details for your listing such as great titles, images, product attributes. In terms of three specific examples for consideration if you’re invited to become a wholesaler on Amazon - pricing, plus profitability, control plus inventory ownership & fulfilment, plus customer service. For prices plus profitability, if you’re a 1st party seller you will sell to Amazon at wholesale and Amazon will list/sell/fulfil each product. You may find that if that item was previously 3rd party although you may find a spike in sales, that may just purely be what you were selling as a 3rd party has been shifted to 1st party sales. I definitely think you’ll see some momentum in your sales by doing 1st party but you want to make sure you’re getting over and above what you would have done as the 3rd party anyway.

Although Amazon technically sets a price for the item if they’re the seller, both retailers and brands can control the price of products to a degree if you've got the proper pricing policy in place. I would say as a first party seller to Amazon, you have very little control over the brands and products Amazon actually sells. The other thing - particularly if you’re a smaller business selling 1st party to Amazon, is that the standard payment terms are net 90 so if you’re waiting to be paid around the holiday season, that could cause an issue.

Moving on to control, plus inventory ownership, here it is a relatively simple question. What works best financially for business? In a 1st party relationship, the inventory is on Amazon’s books and on a 3rd party relationship, the inventory is on your books. That’s true even if you use fulfilment by Amazon, which is a program whereby your stock and inventory is held at Amazon’s warehouses and they ship on your behalf and service issues. Even if you’re an FBA seller, that inventory is still on your books so again, that’s more of a financial decision. Lastly, if Amazon is a 1st party seller then you’re selling wholesale to them, they’ll take care of all customer service issues including competitor or customer fraud issues. If you’re a 3rd party seller even using FBA, you still have to deal with anyone making false claims about your products. There are different things to consider and this could be a whole webinar in its own right. As I mentioned earlier, there’s no right or wrong and whether to become a 1st or 3rd party seller is a challenge many of our customers are thinking about at the moment.

On to the next challenge, market conditions: I mentioned this briefly before, I definitely don’t think right now eCommerce, or marketplaces specifically are at saturation point. It’s definitely become a much more crowded market and ensuring that you stand out has become vital. Otherwise, particularly with the influx of new sellers from China, you will get swamped out. The great ways of doing it - great quality listings ensuring you have great visibility and there are some considerations to bear in mind. Both geographically and focused on the product you're selling, make sure you’ve got that right mix because if it’s a niche marketplace you’ll know the typical kind of sellers you’ll want to attract will be on the marketplace already.

Just like you would do for good business practice, work out what your unique selling point is. What is your commercial advantage? Is it price/quantity/size? Make sure you play to your USP.

Once you’ve determined what your USP is, make sure you check out the competition. How are they listing on marketplaces and what’s potentially working for your competitors out there and thinking about how you might change your approach. What;s worked well for our customers on marketplaces is not when you target the mass market, but you really target and work out what your best customer looks like targeting specifics rather than the masses.

I mentioned sellers coming in from China and this has seen an unfortunate side effect. Whereas there is a lot more choice and sellers, counterfeit and fake products are becoming a big issue on marketplaces. Although once reported Marketplaces will take action on counterfeit products, sometimes it’s not before real damage is done. That could lead to both your online sales and your reputation. You could also get lots of negative feedback which could be quite damning for customers who think they’ve bought a product from you, but actually buying it from a counterfeit provider. They’ll then give you damning feedback and that could also affect your seller metrics and dissuade potentially buyers to purchase from you.

Talking about having great product feedback, I think everyone understands the value and there’s no greater marketing technique then when you’ve got a customer willing to act on your behalf and say how great the product is. It’s great marketing and it really boosts your seller metrics helping  improves confidence and increases your chances of conversion. It is true to say that historically, feedback has always been blighted by fake feedback.  In other words, people that have been paid to leave positive feedback or you’ve been given free gifts in exchange for a great review. Now today, both of those feedback programmes are heavily frowned upon and in some cases, they’re prohibited completely. We’ve seen a definite shifting here so it’s interesting that Amazon for example have created a vine program where they not the seller, but Amazon directly identifies and invites trusted reviewers on Amazon to post trusted opinions about products. I’m sure many other marketplaces will follow soon and they really are going to crack down on just in terms of increasing seller confidence to make sure that the reviews you have on your product are fair, honest and transparent.