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Selling in Online Marketplaces: The Pros and Cons

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Many small-business owners sell their products on Amazon or eBay or Etsy in addition to selling on their personal websites. The main reason is that they want to expand their market reach and make more sales. But is adding new sales platforms always profitable? 

 

Amazon and eBay are very large marketplaces that generate far more customer hits than small-business websites. On the other hand, these marketplaces charge fees for that boost in market reach, and those additional fees impact individual sellers' pricing. For example, let's say I sell a product on my website for $25. The same product might have to be sold for $22 to customers on Amazon or eBay to compensate for the fees associated with selling on those platforms. I also have to take into consideration how other sellers on those platforms are pricing similar products, so I can compete with them.

 

In addition, syncing inventory across multiple sales channels can be tricky. Software apps like Webgility's Unify and others can help manage this effectively, but it's definitely something to think about.

 

So, do the upsides outweigh the downsides? That depends on the seller, but here are some key points to consider.

 

Pros of Selling in an Online Marketplace

  • It's an established market, so there's no need to create demand.
  • It's instantly recognizable to consumers.
  • You can start selling as soon as you've uploaded your first product.
  • There's no need to worry about IT or infrastructure.
  • The marketplace offers 24/7 customer support.
  • Buyers make online transactions with confidence.
  • Marketplaces make it easy to ship products and manage deliveries.
  • You can test your product’s acceptability among buyers.
  • Some marketplaces even handle your inventory (e.g. Amazon Prime/FBA)

 

Cons of Selling in an Online Marketplace

  • There's a lower profit margin even if you make more sales.
  • Your buyers are not necessarily your customers.
  • There's more competition inside marketplace among similar types of sellers.
  • The marketplace is product-focused, not seller-focused - lower brand visibility.
  • You can't collect customer details for analysis and better customer relations management.
  • There are more stringent requirements for tax and legal documentation.
  • Payouts are more delayed than if you'd handled the transaction yourself.
  • There's no direct communication between Buyer and Seller, so it's difficult to build customer loyalty.
  • Many kinds of products are prohibited at online marketplaces.

 

The bottom line: It's smart for individual sellers to do this cost-benefit analysis before listing their products on large e-marketplaces where competition is surely waiting.

 

1 Comment
Senior Explorer **

Re: Selling in Online Marketplaces: The Pros and Cons

Bookkeeping for these online platforms presents it's own set of challenges. 

The money that is deposited into your account from Amazon is NET income. You need to post GROSS income.  The best way to do this I have found is to create a "bank" account on Quickbooks and reconcile it just like a bank account.  The reports aren't great, but get the job done once you figure them out.  The problem comes when you start selling on Amazon internationally.  The reports are in the local currency, not US dollars.  And to make matters worse, they are in the local language with no translations available.  (If you don't read Japanese don't even consider selling in Japan!)  

 

Quickbooks Online does a passable job importing transactions from these online retailers.  QB Desktop does not.  

 

Keep this in mind while doing your bookkeeping.  

 

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