E-marketplaces account for a massive amount of ecommerce, so it is impossible to ignore them if you want to be online. However, they take a considerable cut, so how can you maximise your ecommerce strategy for profit maximisation?
You must realise that it is possible to have products that cater to different sections of your market (or micro-niches), segment your market and create (or sell) products for them! Create an ecosystem and a pipeline. Send people from a low cost, low margin first purchase; to a high cost, high margin and fully differentiated product. Think of it like a sales funnel. If you can entice customers with a low-cost product, then they are more likely to purchase a higher value product in the future.
Marketplaces provide a ready market for products that people are searching for. So, use this to create your low cost, low margin option. This way, you can access a market relatively easily. Keep in mind, that you are always trying to lead them to a higher priced, higher margin product on your own ecommerce site.
Use e-marketplaces as a pipeline, feeding customers into the funnel. Products that are being searched for can be sold on marketplaces, those that are highly differentiated and unique to you cannot. Customers need an introduction to the brand, through a lower price product, here you can use a marketplace to begin the customer journey.
An example of an industry that does this very successfully is the fashion industry. You can, for example, buy Burberry perfume on Amazon. This product is not terribly unique. There are plenty of designers and perfume manufacturers available online. Burberry is feeding customers into the funnel.
Not everyone is going to purchase a Burberry handbag because of buying perfume online. However, those who do, will be looking for a “Burberry” handbag. Not just a handbag. Purposefully, Burberry handbags are not available through Amazon. This provides the opportunity to sell through other channels (such as Burberry.com) at a higher margin.
Marketplaces, especially ones aimed at the fashion industry (such as Net-A-Porter), have proved such an important strategy for the fashion industry, that LVMH has announced their own high end fashion marketplace. This will not only feature LVMH products, but also products from other fashion brands.
An example from the toy industry is how the Rubik’s Cube operates online. The regular Rubik’s Cube is available through all major e-marketplaces. However, there are several products unique to Rubiks.com.
Rubik’s understands that competing with retailers online for the regular Rubik’s Cube is not an effective strategy. If someone wants a Rubik’s Cube, chances are they will type it into Amazon (or another marketplace). However, one someone has a Rubik’s Cube they want to solve it. They go onto Rubiks.com and they look for a solution. Once there, Rubik’s sells them other related products.
Use a marketplace as part of your strategy, but think about how you can lead those customers to other channels. Whether that is including vouchers for money off direct purchase in Amazon vouchers, or identifying what a customer does after they have purchased the “lead in” product.