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Marketplace platforms – why are they worth taking a closer look at?

  • Published: 16.11.2022
  • Updated:

Marketplace platforms continue to grow in popularity and increasingly retailers admit that it is these channels that are receiving the most attention. The question is whether it is a good move for all e-commerce businesses?

You can currently buy almost anything on platforms such as Amazon or eBay. And products that are not currently available there are likely to be found on other, relevant marketplaces. Brands and retailers around the world and from every imaginable industry are successfully selling their products through these channels, yet the decision to use them is never a simple one for e-commerce owners and managers.

marketplace platforms

So, in the following article, we will let you know when it is worthwhile (and when it is not) to sell on marketplaces, and what requirements you need to meet in order to launch sales.

What do I gain by entering a marketplace?

Selling via marketplaces involves costs, which depending on the sales model can vary considerably. Individual charges can actually turn out to be quite substantial. However, the profits and advantages they provide seem to far outweigh the costs, often making marketplaces the main (or even only) source of sales.

 

Access to (and retention of) a wider customer base

The most important value provided by sales platforms is access to new groups and the ability to build a wider circle of trusted customers. Platforms such as eBay and Amazon are increasingly the first and last place where customers search for products. If we are not selling on these platforms, a huge number of people will not even have the chance to come across our offer.

Users are attracted by competitive prices, free, fast shipping, especially with services such as Amazon Prime, and the reliability and trust in both reliable shipping, but also complaints and return procedures.

What’s more, thanks to the various marketing options available within the platforms and the marketplace account history, we significantly increase the chance that the consumer will return to our store.

 

Improving product access

The largest marketplace platforms, led by Amazon, are competing in the ways their apps are customised for people with a range of disabilities and a different types of devices (such as smart fridges).

By launching our product range on such platforms, we enable users to easily purchase products using, for example, voice apps like Alexa.

 

Increase brand confidence

One of the main reasons behind the marketplace platforms’ success is that they provide end-to-end shopping security for users. When a particular product is available on the platform, the customer feels confident that any product ordered via the marketplace will be as expected, and if not, there will be no problems with returns. All customer reviews are fully verified and, if sellers receive a lot of negative reviews, they are at risk of even having their accounts blocked.

The outcome is that users approach brands and retailers who successfully sell on marketplace platforms with much more confidence.

What requirements must be met to sell via marketplaces?

Before moving on to how marketplaces can benefit businesses, let’s briefly answer the question: just what exactly does such a move entail for a company?

 

Formalities

Marketplaces want as many sellers as possible, so the basic requirements are relatively easy to meet. In most cases, all that is needed to start selling is proof of identity, company details, a bank account and a VAT number. When it comes to formalities, that’s pretty much it.

 

Product approved for sale

Before you start planning your sales strategy, it is worth making sure that your products can be sold on a given platform. For almost all cases, they have very precise regulations and lists of unauthorised products and products that require specific procedures or permits to be sold.

Most importantly, one marketplace’s regulations can vary considerably between markets, as they rely on local regulations. For example, products authorised for sale on Amazon.co.uk may be considered unauthorised on Amazon.de or Amazon.fr.

More on the topic of Amazon regulations is covered in the following articles:

  1. What can you sell on Amazon?
  2. List of products banned by Amazon

Marketplace platforms sales

Labelling

For some marketplaces and sales models (e.g. Amazon FBA – Fulfilled by Amazon), products are required to be labelled according to the platform’s requirements. What is worth noting is that, in the case of incorrect labelling, the platform can withdraw the batch of products or charge the seller the additional cost of correcting the labelling.

 

Foreign taxes

Vendors who start selling on marketplaces abroad have to face the obligation to register as a VAT payer or VAT OSS payer within the entire EU. The obligation to pay VAT abroad occurs once the revenue exceeds €10,000. Moreover, the obligation to register as a VAT payer in another country arises any time you store goods there, so, for example, when you store goods in Amazon FBA warehouses outside the country.

The registration and VAT settlement process abroad can be time-consuming and pretty tricky for companies that don’t have a VAT compliance team, so in such circumstances we advise taking advantage of companies such as Taxology. You can read more about our VAT registration and settlement service on the VAT compliance subpage.

 

Translation and service in foreign languages

An additional challenge companies face when looking to expand into new markets is the professional translation of product descriptions, offers, instructions or packaging. Taking shortcuts in this area is definitely recommended, however, as the devil is in the detail, and any mistakes will significantly reduce the trust in your brand. Companies that specialise in e-commerce translations can be helpful in handling this issue.

Is this model bound to be profitable for me?

The aforementioned costs of selling on sales platforms can, in some cases, put these channels on the brink of profitability or even below the profit margin. If products have low profit margins and are often returned or exchanged, it may simply not be profitable to sell them on marketplaces.

If we want to sell under the FBA model or use fulfilment companies, non-standard weight or dimensions of products presents a new set of problems. For products that do not fit within the standard framework, higher warehousing and shipping costs apply, which finally may turn out to be unprofitable.

For more on the costs of selling on marketplaces, please read here:

How much is Amazon’s commission and what other costs do sellers incur?

Is selling on marketplaces a perfect solution for everyone?

Due to restrictions related to cost or product type, this route in some situations, will not be possible. However, overseeing the development of these platforms and considering how wide their range of products is, these cases can be seen as exceptions to the rule.

And, if your e-commerce is ready to expand into more markets (and marketplaces), we provide comprehensive VAT Compliance support. Schedule a free consultation.

Kamil Kempisty Co-founder in Taxology and KP Consulting. From 8 years in the accounting business.