Ecommerce Marketplaces are a great place for online merchants to expand their product visibility outside of comparison engines and their own websites.
Amazon, a major online marketplace for ecommerce merchants, alone generated $21.07 billion in revenue for Q4 2012, and a total revenue of $61.09 billion for the year.
What is an Ecommerce Marketplace?
Online marketplaces are sites which aggregate product information from multiple sellers, so users can compare and purchase products online.
Here is a very simplified version of how ecommerce marketplaces work. Since Amazon is one of the largest ecommerce marketplaces, I’ll use it as an example below and throughout the article.
1. Purchase on Ecommerce Marketplace
Shoppers get to the Amazon Marketplace (directly or via another site such as Google), browse and ultimately select an item(s) via a product page, which he or she purchases on the Amazon marketplace.
2. Ecommerce Marketplace Seller Sends Product
Amazon places that order through the seller who has that item (a third party seller), and the seller then handles fulfillment for that purchase.
Amazon has its own fulfillment warehouses, and there are many additional nuances of how Amazon works, but this is the basic structure of how items are sold on the Amazon Marketplaces and online retail marketplaces.
If you are unsure as to what a marketplace is, here is a brief explanation of how marketplaces differ from other online websites.
How Do Ecommerce Marketplaces Work?
Online retail marketplace such as the Amazon marketplace differ from other online websites and product comparison sites in 2 key ways:
1) Amazon Marketplace Purchases: All transactions Happen on the Marketplace
If you are an online merchant listing on the Amazon Marketplace, customers are viewing and purchasing a product on Amazon even though you are the seller and distributor. (This is not the case with Amazon Product Ads, which is a different program than the Amazon Marketplace).
Other sites like comparison shopping also list products on pages based on price and seller ratings, but these sites link OUT to merchant sites, where the shopper will finish the transaction:
2) Amazon Marketplace Fee Structure: Ecommerce Marketplaces charge a percent of spend.
Ecommerce marketplaces charge online retailers a percentage of their overall revenue (also known as a rev share) to list their products on the marketplace.
For example, an online merchant who makes $100 in revenue might be charged 10% by an ecommerce marketplace, and so might pay a $10 fee.
Some online retail marketplaces, including the Amazon marketplace also charge additional fees, such as a closing fee.
Other online seller sites which list products from different sellers, such as Google Shopping generally charge a cost per click (CPC) also known as a pay per click (PPC) charge.
So every time someone clicks through to your site, the comparison engine, such as Google Shopping charges a certain amount (depending on the engine rates and what your are bidding) for that visit (eg. $.30), regardless of if a purchase is made:
Please keep in mind this is a simplified version of how the Amazon Marketplace works. If you have any questions about listing on the Amazon Marketplace or Ecommerce Marketplaces, give us a shout.
Ecommerce Marketplaces list similar products from different sellers so online shoppers can make an informed purchase.
- Purchases Happen on the online retailer marketplace, and online sellers provide fulfillment.
- Transactions happen on the ecommerce marketplace (vs. seller websites or Google Shopping).
- Ecommerce marketplaces charge a percent of spend (vs. PPC).