It's difficult to overstate the role of online marketplaces in online sales today. The fact is, most of the world’s online buyers are purchasing goods from marketplaces rather than from individual retailers' own stores. In Asia and Emerging Markets, marketplaces have been the norm from the start, due to the trust and security they offer. In the Western world, where retailers' own .com sites have traditionally been the primary go-to-market, marketplaces are currently growing faster than overall ecommerce. They are set to become the largest driver of online sales, with many countries already seeing the majority of buying journeys starting on a marketplace rather than through Google search or direct visits to a merchant's site. For example, a recent report by PowerReviews (here) found in the US 50% of buying journeys started on Amazon compared to Google which was at 31%, and this is change being echoed across countries.
A Historical Perspective on Distance Selling
In Europe and North America, distance buying and selling have been established practices for decades, even centuries. The earliest retail catalogues date back hundreds of years, but modern mail order, or distance selling, started in the mid-1800s. Notable examples include Tiffany's Blue Book catalogue in 1845, the Thonet brothers' furniture mail order service in 1859, Pryce-Jones' Royal Welsh Warehouse in 1861, and Montgomery Ward, founded by Aaron Montgomery Ward in 1872. The expansion of the railways at this time undoubtedly helped these entrepreneurs succeed.
By the time online stores emerged, Europe and the USA had an established tradition of distance buying and selling without seeing goods in person. There was an efficient delivery network and a long history of sending payments via checks, dating back to the 1600s. This existing trust in distance selling made the transition to online stores a natural progression.
Building Trust in New Markets
Much of the rest of the world did not have this history and affinity with catalogues. When Jack Ma and his co-founders set up the first eBay marketplace clone in China, success was not immediate. Initially, buyers did not trust sellers to send their goods, and there was a fear that sellers would send counterfeit or low-quality products. The original C2C (consumer-to-consumer) website pivoted to focus on providing store fronts for Chinese businesses.
By implementing measures to build trust, such as providing guarantees, Alibaba and its group of marketplaces became successful. Buyers didn't need to trust individual sellers; they just needed to trust Alibaba.
The Global Expansion of Marketplaces
Other regions with rapidly growing e-commerce, such as India, Latin America, and Southeast Asia, are finding the Alibaba business model more suitable than the eBay/Amazon models. This is often because these regions haven't yet developed a strong tradition of distance buying and selling. Consequently, marketplaces are capturing the lion’s share of e-commerce traffic in these regions.
In the West, the shift to marketplaces has a different reason. Marketplaces now offer virtually any product imaginable, and buyers have grown accustomed to the convenience and reliability of these platforms. Many buyers now start their shopping journeys on marketplaces, effectively using them as product search engines rather than relying on Google.
Why You Should Be on Marketplaces
If you're not present on a marketplace where buyers are searching, you're missing out on potential customers. Even major brands now have an incentive to sell on marketplaces due to the intense competition and the broad reach these platforms offer.
Fitting Marketplaces into Your Strategy
To determine where to sell, you can categorize marketplaces by:
Geography: Global reach, regional reach, and local/national reach.
Seller Focus: Platforms that provide a space for retailers to sell their goods (e.g., eBay) versus those that prioritize their own products (e.g., Amazon).
Categories: General marketplaces versus specialist ones.
Recommendations for Retailers looking to scale overseas
When considering localization, initially opt for marketplaces with the greatest reach. For most sellers, testing in Europe and the US is straightforward. Platforms like eBay and Amazon remain essential. Additionally, consider Mercado Libre if you have Spanish listings and are prepared for more challenging markets. Listing on these marketplaces will provide access to most of the top economies in the West.
For APAC (excluding Australia), it can be more challenging for non-APAC sellers. However, listing on Amazon and eBay can provide some access to these regions. Consider exploring regional marketplaces such as Flipkart in India and Shopee in Southeast Asia.
The best advice is to start with what's easiest but ensure you are visible in all regions by offering shipping to those areas. In the coming weeks, we will provide detailed guides on how to sell on these individual marketplaces internationally. In the meantime, start by buying and selling a few items to understand how they function if you aren't already familiar.
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