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Friday, 21 February 2014

Are online marketplaces the best e-commerce strategy for small entrepreneurs?

As marketing consultants, we are often approached by small entrepreneurs who want a marketing strategy to market their products online. One question which we commonly face is, should I set sell via my own website or is it better to be present on a popular online marketplace such as Amazon? 

There are three business models for online retail. One is a regular ecommerce website such as The second model is also a website but here the website brand buys inventory from different sellers and sells online. Flipkart is a popular example of this model. The third model is an online marketplace such as Snapdeal. Amazon follows a hybrid of the second and the third model. Each model have their own pros and cons.  

A seller who sells through his own website not only needs to constantly monitor inventory, pricing, technology backend and other logistics, it also needs to generate traffic through aggressive marketing. Moreover, Indian consumers are increasingly becoming savvy about the whole experience of buying online. Only cheaper pricing and timely order fulfilment is not good enough any more. The whole shopping experience - right from ease of browsing to customer support is becoming a key consideration area while choosing one online merchant over another.   

In the marketplace model, the seller is responsible for maintaining inventories and pricing while the marketplace takes over the responsibility of generating traffic as well as the whole shopping experience. Most importantly, the marketplace also takes over the headache of the technology backend and payment gateways. 

In India, the Flipkart model is not showing very healthy signs. Most website owners, including Flipkart and Myntra are now shifting over to a marketplace model either completely or a hybrid version. 

The marketplace model may well be gaining popularity, but is it the right place for sellers who aspire to build a timeless brand? Currently, this model does not have any scope for individual brands to build any emotional connect which is critical in the long run. After all we certainly don’t buy a bottle of Coke because we love bottled, aerated sugar water.

For big brands with deep pockets that have an advertising budget to build their brand off line, this is a great distribution channel. But smaller brands with virtually no advertising budget, choosing to be present only in the marketplace might have the cash register ringing but it does not help in building a strong brand. While the uphill task of creating and maintaining one’s own website sounds daunting, but that really is the way to go from a long-term perspective. One's own brand website extends itself to a platform where the brand can not only demonstrate its personality and its values but also be a great distribution channel. For discerning shoppers who are looking for a little more than price, this could be the deal maker and the beginning of a long term relationship.  

An entrepreneur who is aspiring to build a strong brand, however daunting, should ideally work towards building a website which can also support online sales rather than look for an easy way out and sell via an online marketplace.