Why it is hard to get past online selling platforms

Own web shop or platform? This is a question that moves many online merchants. The truth is that both elements are part of a reasonable e-commerce strategy.

Why it is hard to get past platforms

When it comes to flexibility, one’s own online shop can hardly to be topped and there are no real alternatives for many reasons. At least this is what we learned for many years in online commerce. However, in the meantime an increasing share of the trading volume in Germany and around the world comes from platforms like Ebay, Amazon Marketplace and Co. and there are situations not only at the beginning of the business activity where one’s own web shop is only the second best alternative.

According to the Online Monitor of the German Trade Association, online platforms are now responsible for around one in three euros of turnover in online trade – and Amazon Marketplace alone, as the top dog in the industry, accounts for 27 percent of the trade volume in Germany. According to the Federal Cartel Office, the company recently achieved a total net trading volume of more than 20 billion euros. This was and is a lucrative business both for the 300,000 retailers and for the Bezos empire itself. Some sales figures, which recently leaked and which Amazon did not want to confirm seem realistic in light of this. A good 10 billion euros – that is around one seventh of the total German online trade turnover forecast for 2019 by the German E-Commerce and Mail Order Association (Bundesverband E-Commerce und Versandhandel – BEVH).

Platforms provide additional sales volume and create reach

But what role should portals like Ebay or Amazon play for you as a retailer? On the one hand, it is clear that you only have full sovereignty over your business in your own web shop. Retailers have suffered from this when they were banned by Amazon for some reason (often accusations of them selling inferior or counterfeit goods, or providing poor service) and were left sitting on their goods overnight.

The advice can therefore only be to take along the additional sales volume that platforms like Amazon Marketplace, Ebay or possibly Stylight and Rakuten open up, but not to rely too much on it. After all, the platform sets the rules and have extensive power to change them independently. In the worst case, this can even happen overnight. Higher fees, a change in the sorting of the order and presentation of dealer offers or a change in the presentation of recommended products can all quickly lead to dealers generating significantly less sales than before. Although EU Competition Commissioner Margarethe Vestager wants to force Amazon to provide its Marketplace retailers with fairer rules in the future, marketplace operators will always remain the ones who set the pace.

On the other hand, such a marketplace presence is particularly pleasant in the early stages of business operations as a way of gaining experience without having to bear the high initial investments that your own online shop naturally entails. Fees and sales commissions remain predictable and manageable. In some cases they are even only charged for successful sales. As a platform retailer, you don’t have to worry about the technology or the creation of product descriptions, but simply have to make sure your offers are published according to the rules.

Over time, you should be careful to develop your business on as many pillars as possible and not be too dependent on any one partner. One’s own shop remains decisive even due to the possible brand formation alone. After all, customers shopping on commerce platform usually don’t care which retailer they are buying from and will rarely come back if another retailer is only slightly cheaper and has a similarly good rating. And what’s worse: due to the strong Amazon branding, many less experienced customers are still unaware that they are buying their product from a third party. However, you can’t afford to provide poor service or voice objections when processing an exchange request. Both Amazon and Ebay tend to stick to the customer rather than to the retailer in almost all cases.

Platforms are suitable for testing new markets and products

A shop is regarded as an unpredictably high cost risk, especially in the early phases. However, it is not easy to calculate the costs and the margin resulting from the sale. After all, selling via a platform is always a marketing investment as well. You pay commissions and fees, but in return you always get a lot of publicity via a platform. Customers may therefore discover you on Amazon Marketplace or Ebay and then end up shopping in your web shop. If you rely purely on your own web shop, you will need a comprehensive marketing strategy that includes advertising on online and social channels or creates awareness in other ways.

Using a marketplace can pay off for you in other respects as well. For example, they can provide a perfect way to test sales potential in a new country market or if you are experimenting with new product groups or products that may not fit into your existing portfolio. To avoid being considered a “junk shop” for all sorts of things and possibly damage your painstakingly built up retailer brand, you should first test such sales on Ebay or Amazon.

The bottom line: The best of both worlds

There are good reasons to use your own web shop and e-commerce platforms. Online merchants should see marketplaces like Ebay and Amazon Marketplace as an extension of their territory, and generate additional revenue from them. They can also be used as a way of experimenting with new markets and target groups. But it should also be clear that your own web shop is comparable to your own property. You determine your own rules and conditions there.

What are the advantages of your own web shop and what are the advantages of trading via an e-commerce platform? Download our table on the topic here!

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