Leveraging online marketplaces - FedEx E... · E-Commerce Thought Leadership Branching out...

Leveraging online marketplacesKey growth strategies on multi-merchant shopping portals

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Leveraging online marketplaces

2 A Report Commissioned by FedEx

E-Commerce Thought Leadership

Branching outEXECUTIVE SUMMARY

IT’S COMPETITIVE OUT THERE.

Total retail sales in the U.S. grew 3.6% last year, while e-commerce sales grew 16%, according to U.S. Commerce Dept. figures. That suggests traffic in physical stores is falling, and some retail chains are laser focused on growing their sales via the

web. Innovative startups are popping up with new ways to sell items such as mattresses or food online. More companies are trying to get a piece of the $450 billion U.S. e-commerce pie, and that means it’s increasingly challenging for merchants—especially small and midsized ones—to reach consumers online.

This is partly the reason why some merchants are using online marketplaces to appeal to more consumers—as many of these platforms already have an established customer base that’s hungry for products of all kinds.

Marketplaces are popular online shopping platforms because customers are attracted to the large number of products available, typically at lower prices, among other reasons. Of course, the world’s largest marketplaces, operated by Alibaba Holdings Group Ltd. and Amazon.com Inc., dominate the industry. But there are a number of marketplaces, many of which sell products in a particular retail category, increasing sales at a rapid pace. In fact, 41 of the 75 marketplaces Internet Retailer tracks grew faster than the 27 percent growth Amazon logged, and 15 of those marketplaces brought in more than $1 billion in sales in 2017.

In the U.S., Amazon is dominant, but it’s certainly not the only player. eBay’s marketplace, for instance, has been around since 1995 and has 1.1 billion items listed on its

site. Walmart Inc.’s marketplace is rapidly expanding, and small and midsized merchants have reported strong growth on the marketplace. In fact, 60 percent of Amazon sellers say they planned to expand to other marketplaces last year, according to a Feedvisor survey in 2017 of 1,600 Amazon sellers. Forty-four percent expect to expand globally, and 30 percent of those surveyed said they plan to focus on their business at Walmart and 22 percent plan to expand to Jet.com, which was acquired by Walmart in 2016.

This report will focus on the opportunities retailers and brands have for selling on online marketplaces beyond Amazon. Each one is different, so careful planning for each is key. Here’s a quick rundown of what sellers should keep in mind when considering their strategies for growing sales via online marketplaces:

Diversify. There are a lot of marketplaces out there, from large ones such as eBay and Walmart, to smaller ones such as Lyst and Brayola that sell products in a specific category. Each one has its own unique customer base, and may present opportunities for quick expansion.

Manage sales from different channels effectively. Keeping a close eye on all your sales across different online channels can be challenging. It’s important to gather and analyze data on a daily basis to track what’s working and what isn’t. A few retailers offer their strategies in this report.

Clean up product descriptions and images. It’s not enough that you list your products on these multi-merchant platforms. You have to show up in results when customers search for products on these sites, and then persuade them to make a purchase. Use titles, product descriptions and images to convert new customers.

This report covers key strategies for retailers and brands to best leverage online marketplaces to grow their e-commerce business.

Patrick F. Galvin, Vice President, Inside Sales, FedEx

Patrick F. Galvin, Vice President, Inside Sales, FedEx

Why online marketplaces should be a part of retailers’ growth strategy

3A Report Commissioned by FedEx

LEVERAGING ONLINE MARKETPLACESKey growth strategies on multi-merchant shopping portals

How the top 75 marketplaces grew sales in 2017

> 100% 50.1-100% 15.1-50% 0-15% < 0%

Marketplaces are big business. According to Internet Retailer’s analysis, $1.47 trillion worth of goods were sold on the world’s 75 largest online

shopping malls in 2017, up 27 percent from 2016. Gross merchandise sales on these sites account for more than 90 percent of global marketplace sales, and nearly half of all global online retail sales.

And it’s not just Amazon that’s growing. In fact, 55 of the 75 online marketplaces grew more than the broader U.S. e-commerce market, which grew 16 percent last year. Seven exceeded 100 percent growth.

Marketplaces are popular online shopping platforms because customers are attracted to the breadth of products available on one site with competitive prices.

Internet Retailer and Bizrate Insights surveyed 2,800 consumers last year to learn more about their online shopping habits. The survey asked consumers the first and second shopping sites they visit, and six of the 12 results are retailers that operate marketplaces (Amazon, Walmart, eBay, Etsy, Facebook and Newegg).

When asked which shopping apps are installed on their smartphones, six of the 14 results were marketplaces (Amazon, eBay, Walmart, Groupon, Etsy and Wish).

What’s interesting is that survey respondents were allowed to write in answers, and many wrote in smaller marketplaces such as Jet, as well as retailers such as Newegg that have

Source: Internet Retailer

7

15

33

16

4

Number of marketplaces in each range of 2017 GMV growth



Many merchants are taking advantage of the opportunity to sell their wares on marketplaces beyond Amazon. For instance, nearly 15 percent of the merchants tracked in the Internet Retailer Top 1000 sell on eBay’s marketplace and 11 percent sell on Walmart’s marketplace. It’s not just the U.S.-based marketplace operators that are attracting merchants: A handful of the Top 1000 retailers sell on Alibaba’s marketplaces, Tmall and Taobao.

These platforms can help merchants reach new customers, but crafting a strategy for success requires careful planning. This is what sellers should consider.

Diversify and sell on more than one marketplaceIt might be tempting to sell on just one marketplace, especially if it brings in the largest volume of sales by a wide margin. But there’s an issue here: That volume and growth may not last.

Marketplaces such as eBay.com and others continually update and change their platforms. That could mean that they also change technology, seller standards, search ranking algorithms, or seller fees. When changes are

recently opened up their sites to outside sellers. This should be a signal to many brands and merchants looking to appeal to a larger audience or branch out in new ways. The likelihood that a small retailer or brand is the first or second shopping destination for a large majority of consumers is slim. But if these small businesses sell on marketplaces, then they can get in front of consumers much earlier in their shopping journeys through these platforms.

When shopping online, where is the first and second place you go to find what you’re looking for?

Portion of Top 1000 retailers selling on each marketplace

CONSUMER SURVEY

FIRST SHOPPING SITEAmazon 59.0%Google 20.4%

Walmart.com 4.5%Other 3.4%eBay 2.9%

Target.com 1.5%Macys.com 1.2%

Bing 0.6%Etsy 0.14%

Facebook 0.14%Newegg 0.07%

Jet 0.00%Other 6.1%

SECOND SHOPPING SITEAmazon 23.4%Google 26.5%

Walmart.com 15.0%Other 5.6%eBay 4.5%

Target.com 8.7%Macys.com 2.7%

Bing 1.4%Etsy 0.14%

Facebook 0.6%Newegg 0.04%

Jet 0.11%Other 11.3%

Source: Internet Retailer survey of U.S. consumers conducted in 2017 by Bizrate Insights

eBay

14.4%

Rakuten

2.5%Jet

6.5%Taobao

1.2%

Walmart

10.8%

Tmall

1.2%Newegg

5.0%

0.4%

Sears

4.6%

AliExpress


E-commerce Thought Leadership


because big marketplaces such as eBay and Jet also bid aggressively for paid search ads, which give sellers exposure at no cost.

“Sellers shouldn’t put all their eggs in one basket, and should leverage other online marketplaces in order to grow business and increase revenue,” says Bart Mroz, co-founder and CEO of digital commerce consultancy SUMO Heavy. “Diversifying the platforms merchants sell on creates a multi-channel retail strategy that mitigates risk, which is the key to an e-commerce business that is built for long-term retail success.

A case for selling on smaller, niche marketplacesMany online marketplaces are small and very specialized, offering consumers a unique set of goods they are not likely to find elsewhere. In fact, of the 75 online marketplaces Internet Retailer tracks, 34 sell products from a particular merchant category, such as apparel or home furnishings; 29 marketplaces bring in less than $1 billion a year in GMV.

made—even seemingly minor ones—they can negatively impact sellers.

E-retailer BeckerTime LLC learned this lesson a few years ago. The company, which sells pre-owned luxury timepieces such as Rolex watches, began as primarily an eBay business in 1999. While it also operated its own e-commerce site, roughly 85 percent of its online revenue came from eBay until 2014. That’s when eBay changed seller standards that affected whether sellers were top-rated, above average or below average, says BeckerTime CEO and co-founder Matthew Becker. In general, the rating system affects where a seller ranks in search results and therefore impacts a company’s exposure to eBay customers.

BeckerTime was a top-rated seller for years, but after the changes to seller standards, it dropped to an above-average rating for a year and a half, Becker said. The rating dip resulted in an 80 percent drop in its eBay business over that period, he said.

“We thought, ‘If this is the new way eBay is doing it, we have to look at something else,’” Becker said. “I had to see what else would work.” The result was that BeckerTime began selling products on other marketplaces, such as Sears, Etsy and Bonanza.

eBay eventually reverted to its former seller standards, and BeckerTime once again became a top-rated seller. But Becker learned his lesson. While eBay still represents the largest portion of the business’ online sales, it accounts for just 45 percent of revenue instead of 85 percent, as it did a few years ago. BeckerTime has invested more in its own website and continually explores other marketplaces that fit its business. “We realized we can’t just be an eBay company anymore.”

In addition, selling on multiple marketplaces also helps with search engine optimization

Marketplace merchant category breakdown


Number of top 75 marketplaces that primarily sell products in each category

Mass Merchant 41

Apparel/Accessories 22

Housewares/Home Furnishings 3

Computers/Electronics 2

Sporting Goods 2

Automotive 1

Hardware/Home Improvement 1

Health/Beauty 1

Jewelry 1

Specialty 1



that sells hand-knitted finger puppets from Peru. “If you have a small budget and you’re new, you can get lost on big marketplaces,” Sorensen says. “Being a bigger fish in a smaller pond is a good way to start.”

Sorensen began selling on OpenSky.com, which brought in an Internet Retailer-estimated $150 million in gross merchandise sales last year (compared with $88 billion on eBay), and says the platform nearly saved his business. “When you type in ‘finger puppet’ on OpenSky, my company was one of the top results. On larger marketplaces, you wouldn’t believe how many finger puppet companies there are.”

These smaller online marketplaces can also be more effective customer acquisition channels than the larger ones. Sorensen says he has noticed that when customers purchase his products on a smaller platform such as OpenSky, they tend to go to his website for their next purchase. This is ideal, as those sales are typically more profitable than sales on marketplaces themselves. One reason may be that shoppers browse smaller marketplaces like OpenSky to discover new brands, he says.

Sellers on the larger platforms usually report that, after a first purchase, customers will typically return to the marketplace to purchase products again, as opposed to their own sites.

For musical instruments retailer Monster Music, the highly targeted audiences of some of the smaller marketplaces have made these attractive outlets for bringing in new sales, says owner Brian Reardon. In addition to its retail store on Long Island, the company sells on its own website, eBay and Reverb, an online marketplace for musical instruments. Reverb sold $385 million worth of goods last year from 150,000 merchants selling products

Small and specialized can be a good thing for sellers as long as the product lines of the seller and the marketplace match up.Consumers attracted to sites such as Orchard Mile, a high-end luxury fashion site, are likely certain about what they’re looking for.

Of the 34 platforms selling in a particular category, 22 operate a pure marketplace, meaning they only offer products from marketplace merchants and do not sell their own inventory. This is a plus for sellers because they aren’t competing with marketplace operators, who can often offer lower prices and promote their product listing pages.

Selling on a smaller online marketplace has worked great thus far for Robby Sorensen, CEO of Finger Puppets Inc., a company

Marketplace type

Source: Internet Retailer, company reports

Breakdown of top 75 marketplaces

Pure

52(The marketplace does not sell its own products)

Hybrid

23(The marketplace

sells its own products)

$1.47 trillionspent on the world’s 75 largest online marketplaces in 2017



Optimize content on product pagesMost marketplace sellers know that high-resolution images on product pages are important, but there are other ways to sell products through the effective use of images. Retailers and experts suggest the following best practices:

1. More is better. Show the customer what they will get by posting multiple pictures with different angles of each product.

2. Size matters. Show the scale of the product by taking a photo of the product next to something people are generally familiar with, like a coin.

3. Show detail when possible. Take photos of key components that are unique or useful.

targeted to customers looking for musical instruments or other related products.

Since it started selling on Reverb in 2014, Monster Music has had more than double the sales on Reverb than on eBay, Reardon says. Having a customer base that’s only looking for music products helps, especially because 70 percent of the items Monster Music sells are used items. “One of our biggest challenges is having a steady stream of used gear,” Reardon said.

Through relationships he’s built with the music community via Reverb, Reardon has developed a pipeline of used instruments to sell alongside those from his store.

Reardon says selling on Reverb has helped offset the loss in sales from its bricks-and-mortar location, and this year expects to cross $300,000 in sales on Reverb.

There’s also a button on the company’s store page on Reverb.com that links to Monster Music’s own e-commerce site, which has led to some traffic. Promotion of sellers’ own sites is rare on larger online shopping malls. For example, on eBay, sellers are not able to link back to their own website.

Global marketplace leaders2017 GMV, in billions

Taobao Tmall eBay JD.com Rakuten Ichiba

$380.0 $320.0 $197.7$87.3

$34.2Does not include Amazon.com Inc. Source: Internet Retailer, company reports

50% of global online retail sales

Marketplace sales account for



readable picture of the nutritional facts label found on its bottles. That drove a boost in conversion rates, Heller said.

Additionally, with eBay’s new image search functionality in its mobile app—where customers can use photos to search for products—better images may be the key to showing up in its search results.

In addition to photos, merchants should make sure product titles and descriptions are clear and descriptive because that content is what the marketplaces use to populate search results.

How to manage sales on multiple channelsSelling on multiple online channels has its challenges. To maximize sales on each platform, sellers should be paying attention to such things as orders, customer reviews and inventory levels daily. Here are some suggestions from a few retailers that sell on more than five marketplaces, on how to manage each one.

For example, if one of the selling points of a pen is that the grip is comfortable, zoom in on the grip and post a photo of just that.

4. Consider other types of art. Images don’t need to be standard photos of products or customers using the products. The content can include size charts, graphics or anything else that describes items clearly.

Better images can boost conversion rates and sales, says Eric Heller, founder of marketplace consulting firm Marketplace Ignition. For example, health supplements e-retailer Dr. Sinatra, one of Marketplace Ignition’s clients, learned from its product reviews that customers had questions about nutritional facts. Therefore, the retailer posted a clear,

U.S. marketplace leaders2017 GMV, in billions, with number of sellers

eBay Inc. Houzz Walmart Inc. Wish.com Etsy Inc.

Does not include Amazon.com Inc. Source: Internet Retailer, company reports

$87.3 $30.0 $7.0 $5.5 $3.225,000,000 sellers 10,000 sellers 20,000 sellers 15,000 sellers 1,900,000 sellers

90% of global marketplace sales

Top 75 marketplaces account for more than



Office supplies e-retailer Jam Paper & Envelope creates sales reports each morning which show the prior day’s sales per channel, as well as month- and year-to-date sales per channel. “This helps us identify any issues that might be occurring, and to dig in if necessary,” CEO Andrew Jacobs said. The company uses business intelligence software Tableau to help analyze the large sets of data. When Jam Paper looks at total orders and sales figures, they have projections or expectations in mind, so they can easily spot if a number looks way off.

Another challenge for sellers is pricing. Sellers can be strategic around prices on different marketplaces based on demand, time

Online sporting goods retailer Dazadi Inc., built software in-house that allows the company to keep track of all product data for all marketplaces in one central database. The database then connects via application programming interface (API) to the various marketplaces they sell on. “We definitely check performance daily, including weekends [for some marketplaces],” says co-founder and CEO Jason Boyce. He said the company spends the most time on marketplaces such as eBay and Jet that offer the most data about listings, products and customer comments. “Being able to process information improves success on those marketplaces,” he said.

Shopper profiles of the largest U.S. marketplaces

eBay Inc.

67%

33%

Etsy Inc.

42% 58%

Houzz

43% 57%

Walmart Inc.

56%44%

Wish.com

51% 49%

Male Female

Source: SimilarWeb

Dazadi Inc. spends the most time on marketplaces that offer the most data about listings, products and customer comments.

‘Being able to process information improves success on those marketplaces.’

—Jason Boyce, CEO, Dazadi Inc.



descriptions are typically the same across all channels. When the descriptions are the same, sellers risk being penalized by search engines like Google Inc., for duplicate content, and may see a dip in traffic to their own e-commerce sites as a result. Amitai Sasson, vice president of marketing and technology at overstockArt.com, says his company tries to have two sets of descriptions for every SKU: one description used on all marketplaces and another for its own site. “We separate descriptions on our own site versus marketplaces to keep the search engine optimization (SEO) value on our website,” he said. Meaning, the retailer uses more SEO keywords and more detailed descriptions on its own site so that overstockArt.com will rank higher in search results. The company also does this so Google doesn’t penalize the retailer’s website for duplicating content across multiple domains.

Conclusion

Bottom line is this: The e-commerce market is crowded, but that doesn’t mean small and midsized retailers can’t continue to grow their online business. Selling on online marketplaces is one of the ways to outpace the competition—and there are many marketplace options out there. As the marketplaces themselves grow and attract more consumers, those shopping portals will be even more fruitful for retailers.

of day or competitors’ prices. Accessories retailer Phoenix Leather Goods sets floor prices, or the lowest price an item can be sold for, for all products. This helps in maintaining gross margin per product on every marketplace, said Brad Rusin, director of e-commerce. They use an algorithmic repricing feature from technology firm ChannelAdvisor Corp., to set those prices for all products.

Fulfilling orders from multiple channels can become challenging when selling on marketplaces, particularly for small and midsized businesses. Upscale handbag brand Dagne Dover uses FedEx® Fulfillment for its business. In addition to picking, packing and shipping e-commerce orders for merchants, FedEx Fulfillment manages returns and can handle international e-commerce requirements in more than 200 countries where FedEx operates through FedEx Cross Border. “At every level, from the warehouse team on up, they function like Dagne Dover employees,” Deepa Gandhi, co-founder and chief operating officer said. “We have a high price point, and they understand that. It’s been a very collaborative process, and they’re utilizing us as a resource to learn the priorities of a direct-to-consumer brand.” The retailers’ signature tote series ranges from $129 to $495.

Many retailers sell the same products on marketplaces as they do on their own e-commerce sites, and the product

Dagne Dover uses FedEx® Fulfillment for picking, packing and shipping e-commerce orders, returns and international e-commerce requirements.

‘At every level, from the warehouse team on up, they function like Dagne Dover employees.’

—Deepa Gandhi, co-founder and chief operating officer, Dagne Dover

Check out the world.There’s a world of consumers out there, help them plug into the global marketplace. Our e-commerce technology helps localize your user experience and capture new markets.

Learn more at fedex.com

Check out the world.There’s a world of consumers out there — help them plug in to the global marketplace. Our e-commerce technology helps localize your user experience and capture new markets.

Learn more at fedex.com.

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