E-commerce made up 7.3 percent of total retail sales around the world in 2015. By 2019, it’s estimated to have 12.4 percent of sales. Marketplace sellers have a great opportunity to grow.
But there are also a number of significant challenges that sellers face. This post shares the 10 most common challenges that sellers must overcome.
1. Peer Competition
The biggest challenge that marketplace sellers face is peer competition.
The competition for a nice pair of shoes is not just the shoe store down the street anymore. Now it’s the shoe store halfway across the world.
Anyone can sell anything from anywhere.
Companies that can produce goods and services for less win out. That is good for the consumer because increased competition drives down price.
It’s also good for companies around the world that can produce things for less. But this could be a problem for small businesses that cannot.
2. Pricing Volatility
In the good old days, the price of an item on the shelf might change every couple months if there was a sale.
These days, the price of an item in an online market can change every few minutes.
Now computers monitor the price of an object on the internet and can automatically update your price if a competitor has it for less.
While this can be a good thing for sellers, it also can present a challenge.
A common problem is that in their effort to undercut prices, sellers are actually not making any profit.
Other factors, like computer errors, can also happen. In 2014, a common pricing software had a glitch and accidentally dropped prices on thousands of items on Amazon to one penny.
In 2011, a glitch raised the price of a standard biology textbook to $24 million.
3. Branding Challenges
Another potential challenge for marketplace sellers has to do with branding.
When most buyers shop on a marketplace, they remember which marketplace they purchased the item from. They could tell you if they bought it from Amazon, eBay, etc.
But do they remember the seller himself?
When was the last time you bought something online? Do you remember the seller? But you do remember the website you bought it from.
Getting people to remember your brand on an online store can be hard. And when people don’t remember you, they won’t be loyal customers.
4. Return Policies
Amazon has long been known for its awesome return policies. Customers can return any Amazon product for nearly any reason, without a hassle.
Recently, Amazon changed their return policy to allow all consumers to return items not just from their own store, but from all businesses that sell on Amazon.com.
This change, while good for customers, can be a challenge for marketplace sellers.
Sellers now have to deal with returns on items that are damaged or used. This can be offset by restocking fees, but it can still be a burden.
5. Payment Delays
One big challenge for sellers in the marketplace is payment delays. Some marketplaces may not pay out sales immediately.
With online shopping, getting a paycheck every Friday is not the norm. Sellers rely on immediate payment and often live paycheck to paycheck.
Since they depend on prompt payment, if something goes wrong with a transaction, they could be late on their car payment, for example.
This can present a challenge for many sellers, and often little can be done to prevent these problems.
If a seller cannot handle such hiccups, they may need to adjust their expectations or create new business procedures to compensate.
6. Inventory Tracking
Another problem for many marketplace sellers involves tracking their inventory.
Let’s say a company sells shampoo. They have a local storefront in San Diego, and they’re selling their products through three different online marketplaces.
Keeping track of inventory in the storefront is fairly easy. You can track and update it manually as needed.
When you have three online stores to keep track of instead of just one storefront, tracking your inventory can be much more difficult.
Now, some marketplaces such as Amazon and eBay have technological solutions for this. They can make the process smoother.
But many smaller marketplaces do not. In cases like these, sometimes it is easier to ask another company to handle the inventory tracking for you.
7. Inventory Allocation
Allocating your inventory to different stores at different times can be challenging for marketplace sellers, as well. You want to allocate your resources for the right time, portal and price.
Let’s go back to the shampoo example. Different sales portals in the marketplace can have different times for having sales. The competition in one portal may have sales the first week in June, while another portal may have sales running the last week in June.
Keeping track of your inventory across different portals can take a lot of work. Setting the pricing correctly based on sales at different times is an undertaking that you may not have time for.
Using an agency like Marketplace Valet can help with this.
8. Commissions and Fees
Marketplaces make money off commissions. If a consumer buys a product, one marketplace will charge the seller a certain amount, and another will charge a different amount.
Marketplace sellers must be aware that each marketplace has their own fee structure.
9. Transparency of Fees
It’s important for sellers to read the fine print when it comes to fees.
Some marketplaces slap on extra fees for certain kinds of purchases.
For example, legacy systems often apply fees to cross-border payments. This means that for older systems if you buy a product in the US from a company in China, you’ll have to pay extra.
Often fees go unnoticed until they are charged to your account. You may think that you’ll get the full $3.00 on an item only to discover that you actually only made $0.80 after extra charges are accounted for.
10. Running Out
Sometimes, even though you do everything right, you run out of stock on certain items. While this does mean that you’re a popular seller, it also means that customers will go to other buyers who have the item in stock.
This can hurt your image and limit your profits. But, you can adjust your inventory as needed to ensure that you don’t run out in the future.
Tips for Marketplace Sellers
The marketplace can be a hard place for sellers to do business. Marketplace Valet can help you overcome many of these obstacles.