Imagine for a second you discover a magical lamp, you rub it, and a genie pops out and says I’ll give you any car you want. You’re probably going to get a Tesla, a Porsche, a ginormous truck, or my personal favorite – a Lotus Elise.
Now, imagine you get the same genie but instead, he says he’ll give you any car you want but it’s the only car you’ll have for the rest of your life. Some people might still go for the exotic sports car, but others will get sedans, minivans, or SUVs. That’s because you’re considering the car in the context of your whole life. Not just the next 5 minutes.
Access to a Huge Network
Imagine now, instead of a genie, a massive marketplace like Amazon where 1 out of 100,000 visitors is interested in your product and 1 out of 10 will buy it.
With numbers like that, you can get your product in front of a large audience for almost no work, start selling quickly, and get some cash in your bank account. And if that’s how you want to start your online business, kudos to you! It is a great way to make extra revenue.
But for just a second, consider the full context:
- What happens if Amazon has affiliates who are lying about your product? Can you disavow that affiliate?
- What if someone rips off your product and sends in counterfeit goods? How can you make sure your customers get the real version and not the rip-off?
- What if you want to run a 2 for 1 giveaway? Or give frequent customers a discount?
- What if another health crisis arrives and your marketplace won’t accept your products?
Back to that genie. If you’re purely looking at horsepower, you might choose a sports car. Similarly, if you’re just looking at sales numbers, you might pick a marketplace. If you’re just getting started I understand wanting to list your products on a marketplace. This is a great place to start creating & releasing products without ever touching a website.
But there is a certain point in your business – usually once you proved there’s “product-market fit” which is just a fancy way of saying that people want to buy your product. And that’s when all of the above reasons become more important.
Building a Customer Base
One of the important aspects for any business is predictable revenue. You want to know that every month you’ll bring in a certain amount of sales and you try to keep your expenses below that number generating a profit.
In ecommerce the key to predictable revenue is repeat customers. Sure you can try to get a steady stream of new customers but they’re so much more costly to acquire (LINK). Instead, you’ll want to have a product line where customers keep coming back to buy more.
One of the best tools to do that is email. And you can build incredibly powerful and complex autoresponders with email clients like Klavio that are designed specifically for ecommerce stores.
Do you know the biggest weakness in marketplaces?
Not having a connection to your customer. On the two largest marketplaces: Amazon & Etsy you can’t get people’s email addresses and let them know about new products, about bundles, sales events, or a product that would relate to one they already have.
It’s hard to get returning customers without a way to reach out to them. So if you want to have an audience outside of the marketplace you need to get their contact information.
Sales and marketplaces are great. But they also come with fees. Huge marketplaces don’t let you list products for free. You’ll have to get up a percentage of each sale to these marketplaces.
That’s all fine and good – but what if the rules suddenly change? Say you pay a 10% fee on a $100 product and after the fee you keep $20 in your pocket. If they increase the fee to 20% you’ve lost ½ of your profit. Who can you talk to or get in contact with?
And even if you do get in contact with someone do you think they’ll be able to change the rules just for you? Ultimately they have their own business to run. In the content management world there’s an expression: Don’t build your brand on rented land.
And the same is true for your business. You never want to rely on someone never changing their rules.
A Hybrid Approach Can Work
I don’t want anyone to think marketplaces are horrible places. They aren’t. I use Amazon… a lot.
But you never want to completely give up the ability to reach your customers. So feel free to use marketplaces to boost numbers. But you also want to have a home base – your website. You’ll want to make sure to have your own products on your site, your own reviews, your own policies, etc.
That way should a marketplace change their rules or should one of their restrictions hamper your growth you can always do that through your own website. And worst-case scenario you can abandon that marketplace and rely on your own site entirely.
Whether you decide to use WooCommerce, Magento, or StoreBuilder, there are products that let you sync details and inventory levels between your own store and a marketplace like Amazon. So there’s not much extra administration and you can build your own website while you get some bonus sales from marketplaces.