Ten years ago, when my small business wanted to sell products online, we created our own website that worked well for our limited orders. Fast forward to today and online sales makes up 13% of all US retail sales. As online sales are forecasted to continue to grow rapidly, small-to-midsized business (SMB) owners need to invest in their online sales channels to grow their businesses.
According to New York, NY based online sales research firm eMarketer, Amazon currently accounts for nearly 50% of all online retail sales in the US. Thus, SMBs should sell on Amazon if they desire to grow their online revenue stream.
Now that we have that out of the way, for a multitude of reasons, SMBs need to diversify their online sales across multiple marketplaces to both grow and reduce the risk of their online sales.
Amazon is Both a Partner & Competitor
The elephant in the room is that Amazon is both a marketplace to sell your product and competitor. We must consider this as part of our strategy. Not all marketplaces also sell their own products – e.g., Wish.
Big companies such as Duracell and Procter & Gamble have experienced direct competition from Amazon’s Basics batteries and Mama Bear baby diaper products. Amazon’s recent trend of developing and selling its products on its own eCommerce platform to compete with high-margin products should create pause.
Utilize Multiple Marketplaces to Reduce Sales Risk
Outside of the direct competition concern, there are several best practices for selling in multiple marketplaces; fending off competitors is arguably one of the most important reasons. Plus, if you have a presence in multiple marketplaces, it reduces the risk of competitors starting and developing a foothold in other markets.
Marketplaces come and go. In fact, more than half of the top global online marketplaces have been launched since 2010. We need to be constantly experimenting in new marketplaces to keep up with the latest trends in online selling. Online sales, although vast and growing markets, are still relatively new. Thus, new marketplaces are expected to continue to start and wither, so keeping a pulse on the latest trends is critical for sustainable success.
Your Online Sales Diversification Plan
The tried and true 80/20 rule applies. Generally, if you’re selling in the top-five marketplaces, then you’re covering 80% of the US online market. As a best practice, I’d advocate for starting with the largest marketplace, Amazon, then adding the second and third largest; however, a more refined top-five online marketplace diversification plan should generate better results versus simply launching a presence in the top five marketplaces.
First, launch and/or maximize your own website, followed by launching a presence in the US market leader, your market niche leader, a new upstart, and a China market leader.
It’s important to understand the nuances of each marketplace and its target audience. All marketplaces are not created equal. Amazon retails everything while Esty focuses on crafts. Refine your top-five marketplaces based on the highest return on investment for your time.
Also, if you’re not selling online currently or your own website makes up a small percentage of your sales, it’s critical that you invest in your online selling capabilities. US consumer buying behavior will continue to shift as more members of Generations Y and Z prefer, and transition to, spending online. Consequently, selling online is becoming less of an afterthought and more of a requirement.
Focus on Your Own Website to Drive Higher Margins
Selling on your own website enables you to offer customers things that marketplaces don’t. Control of the customer delivery experience is one compelling reason – e.g., receiving a uniquely packaged product versus a standard cardboard box – and custom promotions and rebates can be offered more easily using your own website. The net result is that different customer engagement experiences can be offered through each online selling channel. Lastly, selling products on your own website typically offers the highest gross margin channel, so neglecting to do this is like throwing money away.
Sell Across Multiple Marketplaces to Accelerate Growth
Diversifying your online selling across multiple marketplaces will allow your business to increase the likelihood of capturing a new customer sale. Unfortunately, we as business owners don’t have a crystal ball to predict the future of the next hot marketplace. But, one thing is certain: the future will likely be different, posing new online selling opportunities for those that have the best pulse on the market.
A multi-front offensive strategy puts you in the driver seat for your business to better control and shape your company’s future. Sell across multiple marketplaces today to realize continued and greater success tomorrow.