Growing internationally through online marketplaces
September 11, 2015 11:59 AM
Online marketplaces have enjoyed explosive growth since the debut of eBay two decades ago. In addition to convenience, these marketplaces offer retailers another route to market where they can benefit from the marketing, SEO strategy and payment structure of an often more established business.
Selling on a pre-existing external marketplace is often the most successful and cost-effective option for businesses wanting to take the leap into the digital world or for online business to grow internationally.
In the US, Amazon is the starting point for nearly 39% of shoppers to begin their online search in 2014, as compared to 18% in 2009. Search engines are seeing the opposite trend; 11% of shoppers started their research on Google in 2014 versus 24% in 2009.
Becoming an Amazon Marketplace merchant gives Spreadshirt sellers another important route to market with immediate wide reach as best-selling products are automatically transferred. Our sellers have reported a doubling, sometimes tripling, in revenue. Internal surveys show that, due to Amazon’s online traction, average sales can increase by up to 140%, with some larger brands experiencing on average an increase of up to 200%.
However, there are unique challenges that need to be considered before diving in:
For us, one challenge with Amazon is that their customers expect very short delivery times. This is a particular problem for our print-on-demand platform competing with companies selling ready-made products. Despite having optimized production facilities in Europe, USA and South America, we still had to set up a separate business unit in order to meet new customer expectations for delivery times.
Higher Return Rates
There is also the issue of higher return rates on orders. On our site, where shoppers are more aware of the customization and print-on-demand process, our returns are around 3%. A downside of doing business on Amazon has been that our print-on-demand offering is not as well understood. In external marketplaces, shoppers tend to order, try on at home, and send back for a refund if they don’t like it. This means that our returns are up, albeit to only 6%, which is still reasonable compared to industry standards.
Best Cultural Fit for Marketplace
While Amazon and eBay are the best known marketplaces in the US, Europe, Australia, if you look east towards Russia, or Asia, you come across other large, and locally active, online marketplaces such as Ozon (Russia), Tmall (China) and Rakuten (Japan). Selling via one of these local market places could be a relatively risk-free way for small international companies to test the market without a huge investment.
While Amazon makes it easy for the customer to make a quick purchasing decision; other marketplaces like Rakuten, focus more on the story. Here, sellers can be more individual, sharing stories with buyers and information on special features. Both approaches are noteworthy and offer different ways to present products.
Online retailers looking at the vast and exciting market in China might take advantage of Alibaba’s Tmall Global marketplace. Through Tmall, brands can operate without investing in a local warehouse. However not being physically present may have an impact on delivery times, so expectations will need to be managed.
A challenge when entering a new region is getting the cultural fit right. External marketplaces can sometimes help and reduce costs associated with cultural misunderstanding. Tmall even helps with advice on local fashions and trends.
Competition will always be fierce online, whatever your size, so it’s important to provide the best shopping experience for your customers. These marketplaces are undeniably bringing innovation and vitality to the retail sector. They offer a flexible route to expansion and an opportunity to test new markets in this age of instant commerce.
If you do your research properly, tapping into the power of international marketplaces may just be the best way to expand your business both locally and internationally. When ready; dive in the water is fine!
Follow Phil on Twitter @PhilipRooke
Spreadshirt Inc., a web-only retailer of customized apparel and other items, is No. 431 in the 2015 Internet Retailer Top 500.