At first, glance, selling on marketplaces would certainly seem to be slight profitable than selling on your store. After all, eBay and Amazon (and others) carry an average of 15% per sale as their commission. That’s a set of profit getting eaten up from the get-go.
If you source product for $70 and sell it for $100, your profit is completely slashed in half. Rather than making $30 per sale (as you would theoretically make by selling on your store), you are now making only $15 per sale. The other $15? Call it security money, if you will, and Amazon and eBay are the Corleones of online shopping and WordPress plugins.
This hurts even further if you drop ship. Your margins are now super tight, at 20% or less, so your practical margin on the sale above would be $5 or 5%.
Compare that to trading something on your store. Even if you drop-ship, you still go to pocket the full 20% profits, correct?
Well not accurately. You will require paying for your shopping platform, which is apparently between $30-$70 if you practice a hosted solution like Magento Extensions, Shopify or Bigcommerce, plus 2-3% transaction fees for credit cards.
But, that’s yet a lot greater than Amazon’s $40 per month + 15% per sale.
Wait, we appear to be forgetting something, though. What else do we need…
Amazon gets nearly 900 million prospects every month, and when you list your products on their marketplaces with PrestaShop Modules, they give you exposure to all of those people for (almost) free.
The chances are that even on Amazon or Ebay, you will be marketing fairly niche products. Let’s say you measured the interest for your niche using the Google Keyword Planner at 4000 searches per month, which is honestly decent to begin a store around.
Even if you only pushed back .001% of Amazon or eBay’s full traffic, that’s still 9,000 latent visits per month to your listings, and double what you would get if you succeeded to get to the first page of Google organic search and cannibalize every single click for the month. Whoo hoo! You’re rocking!!!
Even if you could get those 4000 possible buyers to your website, assume they convert at 1%, and that’s 40 orders per month or $800 if your product is $100 and you have an earning margin of 20%. At this rate, you are rinsing $2240 per month under the drain.
Whereas if you got the equivalent 40 orders per month from Amazon or eBay, you’d pocket $200 each month (15% fees on $100 = $15, with a whole margin of 20%, your earning is $5 per order).
Now that you state conversions, there’s the entire notion of actually getting anyone to transform to start with! Why would an individual buy from you, a comparatively small business who they don’t know or have the intent to trust and put their security in?
In 20 years of survival, eBay and Amazon have cemented themselves in our memories as being synonymous with online shopping. We unusually worry about the “trust factor” with them, but that ever is an issue when purchasing from a smaller shop. So an appended cost to having an online store is simply developing the “trust factor” – something that needs time, effort, and sometimes money, too.
Note: As you’ve probably recognized already, I’m grossly simplifying these examples.
It’s thoughtless to build your business thinking that you will only get traffic from your main keyword – it’s extremely likely that your traffic will apparently come from long-tail keywords and you’ll [hopefully] get an accumulation more than 40 orders a month. I’m only using this example to reveal you that marketplace selling isn’t just an “ok idea,” it’s a “brilliant idea” depending on where and when you are with your business.
That’s not to say, however, that you should scrap any dreams of having your store. In fact, it’s the opposite.
It’s necessary to have both as there are things you can do with an online store that you simply can’t on a marketplace.
Here are some examples:
To build a business, you require to build a brand just a storefront selling goods isn’t enough. Until you have a brand, it will be difficult for your business to take off really. On eBay and Amazon, you have to hold to their rules and design, and your brand is just your name and your feedback score. On your website, your brand can have a much bigger personality. You can sell a lifestyle and clothe your store the way you want it to look. You can have your blog. You can have a reliable social media following.
Amazon and eBay are terrific at moving product. But that’s about it for you as a merchant; there is no cross-sell, up-sell, or discount popups. There are no customized forms, or buying guides. All of that has to be on your storefront.
Email marketing was, is and will be a powerful sales driver for a long while to come. On eBay and Amazon, the customer’s email address is hidden from you all. You can see an alias that they generate for you instead. You can’t send marketing messages to these aliases, and in fact, the marketplaces have plans against doing so. They are not your customers; they relate to the marketplace. To cultivate your email list, you need your website.
On eBay and Amazon, there’s no opportunity for live chat or advertising a 800 number. And the contact seller link is regularly buried two or three clicks deep. On marketplaces, the only service you can produce is what the marketplace lets you. While that may be adequate, it’s certainly not going above and beyond, which you require doing to stand out from the competition.
So there you have it – it turns out that selling on marketplaces might make more financial sense than selling on your store when you’re still a young business. But ultimately it becomes necessary to a presence everywhere – and to nurture that presence on each channel.