It seems everyone wants to play the markeplace game. Who doesn’t?
A marketplace is extremely scalable. You don’t own inventories, you don’t need to spend money on warehouses and security. You don’t need to hire people to pick and pack. A wonderful business model. But like any businesses, if what you offer is pretty much the same thing your competitors offer, it won’t be long you start playing the price war game to get market shar. That’s when you start racing your way to the bottom of the food chain.
If you have been selling on Etsy, you would realize these people are not just out to make money on your transactions or to use your sales data against you (marketplaces are known to source products that are hot-selling and compete against their own sellers). Etsy is serious about helping sellers make a living.
Etsy made a compelling product for the supply side of the marketplace, the supply then unlocked the demand through white hat social media. Etsy’s incredible organic channel is the entrepreneurial drive of its sellers.
The underlying strength of this organic channel is evidenced by Etsy’s repeat purchase rate. That is, the majority of Etsy’s GMS is generated from repeat purchases. Incredibly, in 2014, 78% of purchases were from repeat customers.
Higher revenues for sellers => Higher seller retention => Higher seller personal promotion through social media => Higher visibility for Etsy’s products => Higher GMS => IPO
I totally agree with >Nicolò. And from my experience, eBay is exactly the opposite of Etsy and that’s why eBay is becoming irrelevant in today’s e-commerce marketplace.
On another note, Etsy has seldom, if ever asked their sellers to offer their products at deep discount to attract customers. They understood the economics of things. You cannot keep giving discounts and expect to run a healthy long term business. Let’s face it, all business needs profit to survive and thrive. But marketplaces in Malaysia doesn’t seem to think so- they are always offering vouchers, deep discounts and pricing gimmicks just to get the transaction, often at the expenses of their merchants.
If you are doing your business so you can win the title for ‘The Most Popular Merchant on ABC Marketplace’, by all means keep offering discounts and reduce your margins. If you are like most of the other normal business, then I strongly suggest that you be very careful with the marketing campaigns these marketplaces are requesting you to participate.
You should continue to sell on online marketplaces as long as it justifies the resources you invest in them.
I have been selling on major marketplaces, and the good ones will make sure sellers can thrive using their platform. Because in the grand scheme of things, as an online marketpalce, your merchants are also your customers.