Selling through online marketplaces

Do you want to start selling though online market places?

Even when you are a small retailer, you can easily reach the whole world by offering your products on online marketplaces. This way of selling has advantages and disadvantages. You also have to deal with extra costs, VAT and European rules.

Five advantages of using selling platforms

• No substantial investments are needed. You will have to pay a commission to the platform for each sale.
• Cost savings. You do not have to build and maintain your own website with local extensions.
• Free-riding on the marketing activities and reputation of the selling platform. You do not have to invest in generating traffic to the website yourself.
• Most online platforms deal with the administrative matters, such as the actual purchase, the payment, the service and the logistics.
• Opening up to international markets occurs relatively fast. You access new target groups and generate more sales.

Five disadvantages

• When your products sell well, the marketplace could start selling the product itself.
• Because you are selling through an external platform, your brand name will gain less recognition than in your own online shop. This also applies to the communication with your end customer. Communication with your customers goes via the selling platform and is less direct.
• The correct stock level is important when it comes to online marketplaces. If there are delivery problems, the consequences for your sales account can be serious. As a result, your store could drop in the rankings of the marketplace, or your sales account might be closed.
• The price transparency is high. Your products are being viewed next to other providers of similar products. You also share content (product description) with a platform.
• You hand in a margin for marketing and other costs of the marketplace. The commission is sometimes considered to be high.

Investment

The investment in an online marketplace is relatively small compared to building your own (mobile) shop in a different language with local extensions. These are additional costs when you invest in a platform:

• You pay a fixed amount per month for your sales account. This amount differs per marketplace. Compare the prices of the marketplaces before you make a choice. Placing the products on the platform is usually free.
• You need a financial buffer, considering that the first payout can take up to a couple of weeks.
• For each sale you pay commission to the marketplace. Usually, this is a percentage of the sales and it differs among marketplaces. The percentage often depends on the product category.
• When the marketplace does not sell products yet, keep in mind the (extra) translating costs you might need to pay for the product and the product description.
• Many marketplaces offer a fulfillment service. This means that your products can be held in stock in a logistics centre. The marketplace carries out the entire logistical processing. For every package you ship, you pay a certain amount. Notice that having a local stock could have tax consequences (e.g. registering a (local) foreign VAT number and declaring VAT abroad).

Springboard

A foreign platform could be the ideal springboard to starting your own international online shop. Selling your products through a platform first could serve as market research for examining whether there is a market for your products in a specific country. If this is the case, starting your own online shop could be a sensible choice.

Regulations for transparency and fairness in trading practices

European regulations aim to make the online business environment for smaller businesses more transparent and fair. Key points include:

• Online marketplaces cannot terminate a seller’s account without a reason and the possibility to appeal.
• The terms and conditions must be easily available and written in plain language.
• Marketplaces and search engines must be transparent about their ranking system.
• Online platforms that both provide and sell on the same marketplace must disclose any advantages they give to their products.
• Online marketplaces must integrate a complaint-handling system on their platform to give sellers the opportunity to easily appeal or leave a complaint.