An excellent incremental revenue opportunity with a strong potential to attract new buyers

An online marketplace is an established and popular e-commerce site hosted by a third-party on which you can list and sell your products for a fee. There are over 100 online marketplaces around the world. Some of the most well-known include Amazon, Ebay, Alibaba.com, Etsy and Google Express. These marketplaces are an excellent incremental revenue opportunity for most businesses because they allow you to put your products in front of millions, even tens of millions of potential new buyers who visit the marketplace on a regular basis.

Overview

  • 2

    billion people will make an online purchase in 2020

    Source: Oberlo.com
  • 58%

    of global web sales in 2019 came from sales on marketplaces

    Source: Digitalcommerce360.com 
  • 2

    billion people will make an online purchase in 2020

    Source: Oberlo.com
  • 58%

    of global web sales in 2019 came from sales on marketplaces

    Source: Digitalcommerce360.com 
  • Roughly 167 million active users and 25 million sellers on eBay
  • 300 million customer accounts and around 2 million sellers on Amazon.
    Source: eDesk
  • Alibaba.com has more than 10 million sellers.
    Source: Fortune.com

The large marketplaces will offer you the opportunity to list in many different categories. There are also category-specific marketplaces. Webretailer.com does a good job of listing the many marketplaces per region, the product categories covered and how many monthly visitors each receives.

Most marketplaces will request a monthly account fee for you to list and then a fixed commission or percentage of each sale which varies depending on the category you are selling in. In many categories, 15% is standard but this can rise up to 25% for categories such as jewellery.

Many companies list on several different marketplaces plus their own website and even combine with in-store sales, so this is where multichannel integration software comes into its own, connecting the marketplace(s) to your own ERP system so that sales data, inventory management, product catalogue, invoicing etc. can be consolidated with your other business channels and your listings can be managed from one source.

Pricing software is also available which will automatically adjust your prices to match the best offer (based on criteria you set) increasing your chances of winning the buy box. If you are a small business, you can of course just use the seller reports and tools available from the marketplace itself at no additional cost.

As marketplace selling is such a popular activity with millions of active businesses, there are many videos and tutorials available online to guide and advise you on how to optimise this channel in general or more specifically, on a given marketplace.

Letzshop

In 2018 Letzshop was launched, a government initiative to provide a local marketplace where Luxembourg companies can sell online under the banner of ‘Shop local, Buy local’. According to their Facebook page in June 2020 Letzshop now has more than 440 local businesses online. This is certainly a channel you should take a look at.

Pros and cons

Pros:

  • Access to tens of millions of potential new buyers (increased sales)
  • Easy access to international customers
  • Relatively quick and easy to get started with low set up costs
  • Reduced marketing costs compared to other channels
  • Beneficial for SEO
  • As the business grows, you can benefit from better supplier pricing and improved margins
  • More time to focus on sourcing and selling rather than on platform and operational issues
  • Flexibility as your business can be operated from anywhere at anytime
  • Scaleability – possibility to grow and adjust stock levels accordingly
  • Instant trust and credibility from buyers who are accustomed to buying from the marketplace
  • Potential good testbed to see how well a new product will fare
  • Market Awareness – a clearer overview of the competitive landscape with visibility over competitors’ pricing, the marketing messages or product descriptions. By monitoring the number of reviews they have received, how successful their sales potentially are
  • Identify more easily new products to sell
  • Often the marketplace will take care of 24/7 customer support, even in local language
  • Some marketplaces offer inventory and fulfilment services at an additional cost, ideal for very small businesses and selling internationally

Cons:

  • Fierce competition from millions of other sellers. You will probably need to invest in marketplace sponsored ads to achieve visibility for your products at the beginning
  • Lower margins as prices are squeezed by the competition, with the lowest price often winning the buy box. This is especially true when you do not have a unique product with its own EAN number
  • Lower brand visibility as you are not allowed to customise the platform (e.g. links from your Amazon listings to your own website are not allowed)
  • Reduced customer loyalty as the buyers are not your direct customers
  • Generous refund and returns policy which you cannot influence, reducing overall margins (quite challenging for certain categories such as fashion and jewellery which have relatively high-return rates)
  • You are not in full control, which is fine when everything goes well. If your account is blocked for poor performance/bad reviews, it can be very difficult to appeal and get reinstated

Once you have decided to sell on a marketplace, selling online is a simple 4-step process:

Step 1 – Listing your offers for sale: Once you are registered to start selling, you can upload your inventory using listing tools provided by the marketplace. In some cases, you may have the option to outsource the listing creation to pay-per-use services which can help you create a high-quality product catalogue for your offers.

Step 2 – Customers can view your products online: Once you have successfully listed your products, they will be published in the Marketplace’s catalogue and thousands -if not millions- of potential customers will be able to view them online. Most marketplaces allow sellers to customise offers by adding promotions and special offers.

Step 3 – Delivery to customers: You will be notified when an order has been placed. You simply pick, pack and deliver your item to the customer or you have the option to outsource fulfilment to an external service provider. In some cases, marketplaces offer fulfilment services to their sellers as well.

Step 4 – You get paid: Payment for the products sold is deposited regularly into your bank account following deduction of the standard selling fees which the marketplace charges. Some marketplaces e.g. Amazon will take care of collecting the payment from the customer without you having to set up accounts with a third party payment provider. Ebay, on the other hand, will require you to have a Paypal account to be able to start selling.

5 tips for being successful

1 – Deciding what to sell:

  • The first step is to get an understanding of the demand for your product, your competition, and the ideal pricing point (You may already have this knowledge if you have been selling on other channels)
  • Look at what competitive offerings are already available and if your offers match or compliment what is already out there
  • Evaluate if you can offer a more comprehensive range of products, or colours and sizes not on sale from other sellers
  • Check with your suppliers what other popular items they can provide, which are not offered on the marketplace
  • If you are planning to fulfil the item yourself, take delivery costs, customer service and returns handling into account. Offering free shipping might increase your sales
  • Try to get as near to the manufacturing source as possible to have more flexibility on pricing
  • Check out which products are not offered yet on the marketplace and which designs and models are unique. Offering unique products you believe are sought after by customers or you know are already selling well offline puts you in a stronger position
  • Finally when making the decision which products to sell, ask yourself how successful they might also be in foreign countries allowing you to reach a much bigger potential customer base going forward

2 – Successfully listing and promoting your products:

You should invest the necessary time and effort  to optimise the quality of your listings

Good descriptions and photos increase the trust a potential buyer will place in your product.  Here are a few things that will help make your products attractive to customers:

  • Highlight the 5 key features you want customers to consider: Describing your product in well-crafted bullet points increases sales as they highlight important or distinguishing facts about your product
  • Reiterate important information from the title and description: Descriptions should be detailed, precise, fresh, original and useful. Imaginative and well-written product descriptions help the customer imagine the experience of owning or handling your product
  • Keep content up to date to attract repeat visitors: Examples of updates include e.g. latest specifications for consumer electronics, the most recent version of a product including an updated photo if the design has changed in any way, the latest publication date of media products etc
  • Provide good quality images: Ensure that the images you upload are high quality. Ensure the image shows the entire product. Ask the manufacturer or the supplier if they already have photos taken by a professional photographer which they can let you use. This will be much faster and cheaper than having to take the photos yourself and you are sure that they meet the required quality standards

3 – Ensuring you can provide excellent customer service:

Customer satisfaction and excellent customer service are key to being successful and a prerequisite for keeping your account in good standing.  Marketplaces are determined to keep their large and loyal customer base extremely satisfied and they expect their sellers to do what is necessary to ensure that poor customer experience is kept to a strict minimum

This also works to the advantage of the successful seller who is very customer-oriented and has put in place the support mechanism to ensure his/her products and orders are always well received by customers

Some specific things to bear in mind are:

  • Ensure that you pack your items really well. Nothing destroys confidence like broken items arriving at the customer
  • If you are handling fulfilment yourself, think about adding a personal note e.g. a postcard or stickers. People love free gifts, especially when they are unique
  • Respond to customer queries and orders as fast as you can and ensure all items you list for sale are in stock or can be procured within a very short timeframe
  • Be very realistic about the delivery timeframe you quote as you are setting an expectation which the customer will expect you to meet. Most customers will expect a very fast delivery and in many cases free shipping which have become the almost defacto standard for internet sales. Find a good and reliable carrier who can collect proof of delivery or leave a card when people are not at home
  • Find an easy way for the buyer to track his package without having to reach out to you

4 – Optimising your logistics and delivery:

Great service very much stems from how well you have set up your logistics and delivery mechanism. This means dispatching items quickly and making sure they arrive in good condition and within the advertised delivery timeframe.  This starts with keeping a close eye on stock levels across all channels

If you are taking care of delivery yourself, ensure you use an appropriate carrier balancing the criteria between cost, delivery time, delivery certainty and quality. This includes the appearance and condition of the parcels when they are delivered, the persistence of the driver in getting hold of the recipient and the follow up to reschedule the delivery at a convenient time when the person is at home

If you have concerns about your operational capacity or know-how to fulfil online orders, you should consider outsourcing the fulfilment of all or part of your products. This will also free up valuable time so you can focus on the strategic parts of your business. There are several companies and some marketplaces offering such services for large as well as small online retailers. Outsourcing fulfilment also reduces the initial investment needed in both staff and warehousing space and allows you to easily scale your business as sales grow or during peak periods like the festive season

5 – Scaling your business and growing further – at home and abroad:

As you grow and see which products sell best, and where there are unfilled niches for other products, it is quick, easy and relatively low risk to test and to continue to expand your product portfolio on the marketplace

You should also consider taking advantage of the continued strong growth in internet sales by expanding into additional international markets

Selling internationally

The prospect of selling internationally can be intimidating as it involves taking into account several important factors such as customs, taxation, localisation, brand building, multi-currency transactions, international logistics, intellectual property rights, parallel importation, export controls, markings and labels, product compliance and the not trivial challenge of driving traffic to a foreign site.

In many cases, the larger marketplaces are present in countries with the largest internet adoption and population. You can use their infrastructure to expand your business to new markets abroad much more easily and cost effectively than you would probably be able to do on your own.

If you want to start selling for example on multiple European marketplaces, you can set up an Amazon European seller account. Probably the easiest from Luxembourg is on Amazon.de or Amazon.fr. For a single monthly subscription fee, you will be able to list from the one account on all of Amazon’s European marketplaces in local language, manage your inventory, process your orders and get an overview of your European Amazon online business via customised reports.

Furthermore, if you choose to use FBA (Fulfilment by Amazon), Amazon takes care of fulfilling your orders EU wide from a single local inventory pool using Amazon’s European Fulfilment Network. Amazon also takes care of customer service on your behalf in the local language of the Amazon marketplace.  You can also sign up to use Amazon’s FBA Export programme, i.e. whenever out-of-country customers place orders for your products listed on Amazon’s European Marketplaces, Amazon picks, packs, and delivers non-media items EU wide and media items worldwide, again from your local inventory in Amazon fulfilment centres and at no extra charge to the seller.

One significant advantage of using FBA is that your products will be eligible for Amazon Prime (some 150 million prime members) who receive free next day delivery on items purchased. This very often results in increased sales for FBA sellers. You can also use FBA to fulfil orders from other channels using the multi-channel fulfilment option but this can be quite expensive so is only suitable for very high value items.

Ebay has similar international listing functionality. You can make your listings available worldwide or just to buyers in certain countries. You will simply need to add international shipping options to your listings for buyers to know that they are available for their region.

Want to sell globally?

Amazon has Marketplaces around the world in the United States, Canada, China, Japan, India and Brasil. You can check out Amazon’s global selling manual for more details about the different international seller programmes on offer.

The same goes for Ebay who has 23 international sites and a wider presence in over 100 countries worldwide.

It will come as no surprise that China is the largest consumer market in the world and its e-commerce sales are about 3 times bigger than in the USA. If you feel you have international markets such as North America covered and would like the challenge of taking on Asia as a next step, there are a few things you should bear in mind.

To sell online in China on your own you will need to

  • Incorporate a company in China
  • Open a bank account in China
  • Ship from within China
  • List and invoice in Chinese

Several service providers offer support to Western sellers to overcome these hurdles. If you would like more information, our Luxembourg Trade and Invest offices around the world can answer any questions you may have about doing business in their region. You will find details in the Meet the team section at the bottom of this page.

However, two of the largest Chinese marketplaces have set up programmes to help Western sellers do business on their marketplaces in China.

Alibaba’s Tmall Global was opened in 2014. Western sellers have a customisable storefront and the ability to fulfil orders outside of China and be paid in Euros.

China’s second largest marketplace Jingdon (JD.com) offers 3 options to cross-border sellers.

  • JD Direct sales – JD sources products from international suppliers
  • JD Marketplace – principally for sellers registered in China
  • JD Worldwide – for cross-border sales

As competition on these very large marketplaces is high, after checking product fit you should also foresee quite a sizeable budget for marketing in order to get visibility for your products.

In Japan, Rakuten is the largest e-commerce site with over 100 million customers. Both Rakuten and Amazon write that they can help cross border sellers target the Japanese market.

Best practices

  • Optimise your listings (images and descriptions) and ensure they are placed in the right product category. Copywriting of your product description is key as content is the main differentiator
  • Build search terms in your product descriptions to improve the chances of being found via the marketplace search bar
  • Combine items with sizes and colours into variation listings allowing a combined sales score to help your product ranking
  • Promote strong selling products to boost sales further and taking into account seasonal trends using marketplace promotional tools available to sellers
  • Make promotions on slow-moving inventory to reduce stock levels
  • Encourage buyers to leave positive reviews (can be requested when forwarding the invoice) to improve your ranking and seller rating
  • Have a clear returns process to improve trust and encourage repeat sales
  • Offer different shipping options, including standard free shipping. Customers appreciate choice
  • Deal with negative feedback by contacting the buyer and trying to address the complaint (small discount, replacement product) and ask the buyer to remove the feedback as it will have a direct negative effect on your seller rating which buyers will see when reviewing your products
  • Input a compelling company description in your marketplace account with your values and what makes you stand out from the competition

Cybersecurity

  • 20

    years are needed to build a reputation and a few minutes of cyber-incident to ruin it

    Technology trust is a good thing but control is a better one

    Source: Stephane Nappo, Global Head of IT, Société Générale International Banking and Financial Services

     

  • 71%

    of breaches were financially motivated and 25% were motivated by espionage

    Source: enterprise.verzion.com
  • 20

    years are needed to build a reputation and a few minutes of cyber-incident to ruin it

    Technology trust is a good thing but control is a better one

    Source: Stephane Nappo, Global Head of IT, Société Générale International Banking and Financial Services

     

  • 71%

    of breaches were financially motivated and 25% were motivated by espionage

    Source: enterprise.verzion.com

Protect your business

No company with an online presence is immune to a cyberattack. However, there are several precautions you can and should take to protect yourself and your business.

Third-party platforms are popular and are therefore a target for cybercriminals. The marketplaces themselves have strict security measures in place but sellers need to pay particular attention to phishing emails which look as though they come from the marketplace itself.

If clicked, the cybercriminal may be able to gain access to the seller account, place false listings and payment information and even redirect proceeds destined for the seller.

To mitigate this risk, Two Factor Authentication (TFA) must be enabled wherever it is possible. If your marketplace does not propose it, you should consider choosing another one.

From your own side, you should take 2 additional precautions:

  1. The device you will use to access the marketplace must be clean and regularly updated. This way, you will avoid that any un-patched vulnerability allows the criminals to access your account.
  2. Accessing the marketplace through a VPN is the best way to make sure that nobody can read the data you send and receive from the marketplace. This is important to protect yourself, and also to protect your client’s personal data.

Advice available from SECURITYMADEIN.LU. Visit our website www.securitymadein.lu for more information and to contact us.

Tax considerations and reporting

Selling internationally entails tax implications which are different in each country, even within the EU. Before starting to sell online in other countries, do talk to your accountant or to a tax expert about what you will be required to do. You will need to pay tax on the sales you make in a particular country. If you list for example on Amazon.de, you will need a German VAT number which you can apply for online via the Steueramt in Saarbrücken.

You or your accountant can then make your monthly VAT declaration based on sales volume online. If you use the Amazon European selling account, there is a sales threshold established for each country, after which you will need a local VAT number for that country e.g. in France, Italy, Spain etc. Your accountant should be able to provide more details.

Measurement

Make data-driven decisions

Marketplaces provide their sellers with downloadable reports including:

  • Sales per country for VAT reporting
  • Product views and reviews
  • Order and item information
  • Buyers
  • Billing
  • Inventory status if you are using their fulfilment services
  • Conversion rate (search/product views/payment)

 

Companies have the option to use APIs or dedicated marketplace software packages to integrate this information into their own ERP system. Some of the available software packages will have their own reports and analytics. It really all depends on the size of your operations and your requirements to effectively manage your business.

Growing Together

You’re not alone – we’re in this together.

  • Financial Support Packages

    Government backed subsidies to support marketing activities for Luxembourg companies expanding internationally

    Read more
  • Training and support

    Available training and digital support packages for Luxembourg companies of all sizes

    Read more
  • Meet the Team

    The International Affairs division of the Chamber of Commerce helps Luxembourg companies with their international expansion

    Read more

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