The Top Online Marketplaces for Your eCommerce Business

About the Article

If you're like the 25 million people who offer items for sale on eBay, or the 2.5 million sellers active on Amazon, you have products you'd like to sell online – but you don't necessarily want to manage a standalone eCommerce store. Instead, you turn to an online marketplace which brings communities of buyers and sellers together.

And even if you do run your own online store, you may be able to generate additional revenue for your eCommerce business by participating in online marketplaces as well. They offer larger exposure to buyers and may simplify eCommerce operations. At the same time, online marketplaces pose some challenges.

Keep reading for an explanation of how online marketplaces work, why you may or may not choose to use them as part of your eCommerce business strategy, and what to look for when selecting an online marketplace.

What Is An Online Marketplace? 

An online marketplace is a website which connects buyers to third-party sellers. In contrast to an eCommerce platform where the operator of the site is the exclusive seller of products on that site, an online marketplace lets independent sellers display products and connect with buyers.

There are a variety of different categories of online marketplaces. Some are general-purpose sites catering to buyers and sellers of all types, while others focus on specific niches or verticals, such as the gaming industry or handmade products. Some cater to particular geographic regions, while others operate worldwide. Some online marketplaces also provide their sellers with services such as fulfillment operations, but others are limited strictly to matching buyers with sellers.

Online marketplaces account for a very significant share of the world's overall eCommerce market. They represented 57 percent of total online sales in 2019. In the same year, the top one hundred online marketplaces generated about $1.97 trillion in revenue.

Benefits of Using Online Marketplaces 

The previously cited stats reflect the benefits that draw sellers to participate in online marketplaces. Key advantages of using one of these platforms include:

  • Simplicity
    With an online marketplace, sellers don't need to set up their own eCommerce website. They can use virtual storefronts that are provided by the online marketplace.
  • Exposure
    Large, established online marketplaces draw large audiences – Amazon receives 200 million unique visitors every month. This means sellers who use an online marketplace gain exposure to a larger audience. This is a key benefit for smaller retailers in particular since they may have trouble attracting significant traffic to their own eCommerce sites.
  • Additional services
    Some online marketplaces provide their sellers with additional services, like fulfillment or dropshipping solutions. These offerings may come in handy for online retailers who lack the logistical resources to manage these types of operations on their own. And although you can obtain these services from independent companies, being able to bundle them into an online marketplace platform simplifies retail operations.
  • Repeat business
    By connecting with buyers through an online marketplace, sellers can increase the potential for repeat business. Buyers who have satisfactory shopping experience may return to the same marketplace(s) on a regular basis to purchase a wide array of items. It can be harder to generate repeat business with a smaller, independent eCommerce site which offers a limited range of products because customers will be less likely to visit the site on a frequent basis.
  • SEO benefits
    Established online marketplaces are well-indexed by search engines. As a result, it’s often easier to drive web traffic to a virtual storefront within an online marketplace. Contrast with the difficulty of generating strong SEO performance for a smaller, independent site which doesn’t rank as highly in online searches.

Popular Online Marketplaces

While there are hundreds of online marketplaces, the ecosystem is dominated by a group of globally recognized marketplaces, including:

  • Amazon
    Although Amazon sells products directly through its website, it also allows third-party sellers to list their products to create a sprawling online marketplace. As the largest eCommerce site in the world, Amazon enjoys unparalleled brand recognition and online traffic rates.
  • Alibaba
    Although Alibaba is sometimes called the "Amazon of China," the eCommerce site today operates in 200 countries around the world and is the largest online marketplace for B2B sales.
    A key competitor with Alibaba in the Chinese market is, which counts about 300 million registered users. JD also has a presence in certain markets outside China, such as Indonesia and Spain, although its international operations are less pronounced than those of Alibaba.
  • EBay
    Founded in 1995 and conceived from the start as a place where third-party sellers can connect with buyers, eBay is the oldest major online marketplace in existence today. EBay's traditional sales model is oriented around putting items up for auction, but the site also allows sellers to set fixed prices for their items in order to forego the auction process.
  • Etsy
    Etsy is a prime example of an online marketplace focusing on a specific commerce niche – artisan crafts and lifestyle merchandise. This limited scope gives the site a smaller overall presence within the eCommerce space than larger sites with Etsy's annual revenue is around 800 million dollars. The site's strong association with hand crafted goods makes it ideal for artists and other creatives seeking the ideal outlet to do business online.

Disadvantages of Online Marketplaces 

Although online marketplaces offer a range of advantages for sellers, it's important to consider their downsides before integrating online marketplaces into your eCommerce strategy. The major disadvantages of online marketplaces include:

  • Lower profitability
    Most online marketplaces require sellers to pay the online marketplace provider a share of the revenue for each sale they make. They may also charge fixed fees for each item you sell or list. They sometimes charge subscription fees in order to sign up as a seller as well. With these charges, online marketplaces reduce profit margins for sellers relative to revenue which can be made selling through your own online store.
  • Site design
    Online marketplaces may be less flexible regarding how you design your virtual storefront and list products. They may also limit the amount of detail you can include in product descriptions or restrict how many images you can upload for a product. In contrast, when you run your own eCommerce site, you have total freedom to design the site in whichever ways work best for your business.
  • Product restrictions
    Online marketplaces may place restrictions on what you are allowed to sell. For example, Amazon prohibits or restricts the sale of various items.
  • Competition
    Although online marketplaces may expose sellers to a large audience of buyers, they also increase your competition because those buyers can view other sellers' offerings on the same site. This increases the importance of pricing items competitively and ensuring faster shipping times than your competitors.
  • Manageability
    You might be using multiple online marketplaces to sell the same items, or use an online marketplace while also running your own eCommerce site. But the effort required to manage sales operations across multiple sites is greater than it would be when working with just a single site. You'll need to ensure you can accept and fulfill orders from multiple channels, keep your inventory listings in sync across sites, and so on.

Tips for Choosing the Best Marketplace for Your Business

Online marketplaces can be a great asset for an eCommerce business, provided you think strategically about which type of online marketplace is best for your needs.

Major factors to consider when selecting an online marketplace include:

  • Brand awareness
    Strive to find a marketplace which is well known among your target audience. This may mean choosing a very large online marketplace, but it could also entail selecting a marketplace which isn’t as popular but is well known within the specific market segment you are focusing on.
  • Logistics support
    Consider the extent to which you need services like fulfillment bundled into your online marketplace subscription. If you can handle these services on your own or obtain them from a third-party provider, they might not be necessary for your business plan.
  • Pricing
    Ensure the fees you'll have to pay to the online marketplace provider align with your budget and profit goals. Just as important, make sure the pricing model is a good fit for you. For example, if you lack a lot of spare cash to invest in a marketplace subscription, you may be better served by an online marketplace that charges you no upfront fees and instead takes a percentage of the revenue generated by each sale that you make. Meanwhile, some marketplaces charge lower commissions but impose upfront costs in order to sign up or list products.
  • Reliability
    You don't want to invest in building a presence on an online marketplace if the marketplace may shut down. Although infrequent, it has happened as in the case of Rakuten's Americas marketplace. Sellers should research the financial health of marketplaces they are considering to ensure they’re worth the investment.

Alternatives to Online Marketplaces 

If you determine an online marketplace is not the best way to achieve your eCommerce goals, the main alternative is to build your own online store. Again, operating your own store provides you with greater flexibility to design it in whichever ways best fit your goals. It also improves your profit margins by allowing you to avoid paying commissions or fees. And it means you will not face any restrictions regarding which types of items you can sell or how they are presented on your site.

Another potential alternative to online marketplaces is to participate in a physical marketplace. If you sell homemade food products, a farmer's market will allow you to reach buyers in a way similar to an online marketplace. Likewise, selling items at a crafts fair could be an alternative to using a site like Etsy. There are, of course, major limitations to these alternatives. Your exposure to buyers when operating in a physical location will be much smaller than it would be on the Internet, you need to manage a physical storefront, and you can't take full advantage of digital marketing and sales tools.

Using Magento to Enhance your Online Marketplace Strategy 

Online marketplaces offer a range of benefits, but they're not the best fit for every type of eCommerce strategy.

Whether it’s an online marketplace alongside a standalone online store, or relying solely on a singular eCommerce site, Magento Commerce can help you manage your presence across today’s biggest digital marketplaces. With Magento Commerce, you can accelerate the creation and launch of a customized online store. And using integrated marketing, sales, and inventory management tools, you can manage online retail operations through your site and third-party channels as well.

To learn more about how Magento Commerce transforms your approach to eCommerce with or without an online marketplace component, schedule a personalized demo.

The Top Online Marketplaces for Your eCommerce Business