Last year, we sold my late father-in-law’s pocket knife collection on eBay. It was the right platform for a project like that. He had collected an impressive number of knives over his long life, but the total amount we were able to sell online was about $5,000 over the course of a few months.
EBay works for selling a few knives but if I were actually going into the knife business, there is no way I would have entrusted my livelihood to a third-party platform. As recent events have shown, there are a number of risk factors that you can’t control when you take that approach.
Here’s a few things that you should think about when deciding whether to set up your own online store vs. using a platform or marketplace.
Control and Analyze Your Data
Amazon gave testimony to Congress last year that it uses “‘aggregate customer data’ to inform its private label brands”. This means they use 3rd party sellers information to create their own version of everything from data cables to clothing. They’ve learned what types, lengths, colors, and sizes sell best – by letting their resellers figure it out for them while giving them the data in real-time.
Direct access to your analytics data is also important. As your site traffic grows, you (or an agency you hire) can analyze data from Google, Yahoo, Glew and other sources to find out where your marketing is succeeding or failing, and where your site converts well and where it doesn’t. As your business matures, you can even personalize your product recommendations, customer experience, and even pricing based on who is visiting your site.
Control Your Reputation (and Refunds)
Your reputation as a seller is important. If you treat customers badly, word will get around, and that’s as it should be, but the major marketplaces are sometimes buyer-friendly to a fault. Before choosing to open up online on someone else’s store, read their forums to find out what experiences other sellers have had. A 2019 eBay scam forced a seller to spend a lot of time disputing a refund with eBay, and it’s likely that thousands of other sellers were affected.
Decide What Products You’re Willing to Sell
There are a number of legal products that are nevertheless banned from different platforms. We actually found that one of my father-in-laws knives was considered a gravity knife – legal in most states but not sellable on eBay. CBD products, firearms and related items, vaping products – the list goes on and on. What’s worse, it’s subject to change. Shopify once welcomed firearms-related products, but changed course in 2018, leaving merchants scrambling to find a new solution.
When you own your own ecommerce store you’ll never have to replatform because someone in an office somewhere decides it’s no longer appropriate.
Decide What Payment Processor to Use
Controversial products like the ones mentioned above are sometimes not allowed because of the preference of the platform or the marketplace owner. But sometimes they are not allowed because they are considered higher risk credit card transactions. That’s fair enough, but when your platform of choice doesn’t work with the card processor you need, the effect is the same – you’re out of business.
Having a choice about your card processor is also important because card processors vary widely in the fees and percentages they charge for each transaction. Some SaaS platforms charge transaction fees if you DON’T use their in-house payment processor, on top of the fees charged by your merchant bank. If you do enough volume, these fees can really add up.
Decide How (and When) You Will Do Fulfillment and Shipping
Amazon again made the news recently when it announced that it would restrict shipping of items it deemed “nonessential” during the COVID-19 crisis. While this action may be necessary during these unprecedented times, it illustrates the power that Amazon has over their customers who have opted for Amazon fulfillment and shipping. If you’re a seller on Amazon you literally can’t make money since Amazon isn’t fulfilling those non-essential orders.
Setting up your own fulfillment operation is easy enough for most small businesses, and as you scale you can either grow your own fulfillment operation or negotiate with other fulfillment centers that operate worldwide – unless you’re locked in to a platform that determines this for you.
Operating a small online business requires you to make a number of hard choices – being locked into a platform or marketplace that dictates these choices for you can make it difficult to succeed. Look at WooCommerce or Magento open-source platforms which preserve your ability to grow and adapt your business.
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