Latest update: 23.02.2024 | by Lili
If you are a casual user of online marketplaces like eBay or AliExpress, you might not have put much thought into how they actually work. If you get the right order on time then you may not have any reason to think about it at all.
But what if they got your order wrong and you want to learn why, or if you’re simply interested in the inner workings of an online marketplace? Read on to find out everything you want to know.
An online marketplace is an e-Commerce platform that allows a user to shop around a number of different merchants on one website or app. This is extremely beneficial to the user, as it often means they get to choose from a larger array of products and pick the best deal.
Merchants sign up to online marketplaces because these bring users to their stores and may even take care of various tasks for them, including marketing and fulfillment.
A person shopping online
So you have opened an online store and now you want all of your products to be listed on a marketplace. Of course, depending on the marketplace, this usually comes at a price. There are a few different ways vendors can pay to be listed on an online marketplace.
Some online marketplaces, including Amazon and eBay, may charge a weekly, yearly or monthly subscription fee for a vendor to have their online store appear on their platform. Most of the time, this is a fixed fee and there tend to be different subscription options.
Another common way for marketplaces to charge sellers is levying a commission, which is a certain percentage of any sale a seller is making via the marketplace. So each qualifying sale that happens has a commission attached to it which is paid by the vendor to the marketplace. This is attractive to vendors because they only pay when they make a sale.
The actual percentage of the commission depends on the marketplace and the type of goods sold. Some marketplaces, like AliExpress advertise themselves for charging lower commission fees than others. AliExpress usually charges between 5-8%, while Amazon commissions average around 15%.
This is an easy model for both marketplace and vendor: a flat rate fee is charged each time the vendor publishes a listing. This payment structure is more suited to smaller vendors with fewer listings who are reasonably sure they’ll make a sale. Otherwise the listing fee can be money down the drain if your product doesn’t sell.
Some marketplaces abstain from levying listing fees for that particular reason. Especially platforms mainly aimed at C2C markets, like Facebook Marketplace may find it counterproductive to charge listing fees.
Online marketplaces have different profiles based on their structure and target market. There are some marketplaces that cater to B2B, some that are aimed at B2C and then some that offer a mix. Altogether, there are three main different types of marketplaces.
This is a marketplace that focuses on a certain niche or, a “vertical”. We have introduced quite a few such niche marketplaces on our blog, including Chrono 24 (luxury watches), Gamivo (gaming), Zalando (fashion) and Turbosquid (3D printing).
A horizontal marketplace focuses on more than one “vertical”, but there will be something that ties together all of the products sold, a common characteristic. A good example of this is second-hand goods, and platforms like Facebook Marketplace that offer these kinds of products.
Global marketplaces like Amazon, AliExpress and eBay sell everything. They offer new items, second-hand goods, and any sort of product ranging from cars to electrical items and clothing.
Screenshot of AliExpress.com
As we’ve seen, online marketplaces can significantly differ from each other, but the way they work is usually very similar.
After the initial sign-up and providing various personal and business details, the first step the vendor needs to take is adding all of their inventory to their store. Most online marketplaces will give the option to customize a storefront. Many, like Wish, also offer seamless integration with social media advertising. This is why social media monitoring is so important if you are creating a comprehensive online brand protection strategy.
Once a customer finds one of the vendor’s items they like and orders it, the order is flagged up to the store owner, who then needs to fulfill it.
This can either be done by the vendor or by a third-party. Fulfillment is a very complex process; no wonder that some vendors turn to third parties (or even the marketplace itself) for help.
A warehouse containing packages to be shipped
Whether fulfillment is done in-house or by a third-party, the next stage is always shipping. A lot of companies that offer fulfillment provide shipping too. This process covers the product’s journey from warehouse to customer, and it’s a crucial step to establish (or destroy) customer trust.
The majority of the online marketplaces have the option to let people review the vendor’s store. Amazon, for example, aggregates the reviews and gives the vendor a rating, which is a popular method on other marketplaces too.
While featuring your products on online marketplaces is definitely helpful if you want to widen your reach, there are certain dangers your brand could face on these platforms. IP-infringements, counterfeiting, or grey marketing are just a few examples of these threats that could seriously harm your brand’s reputation and revenue.
Our marketplace monitoring service, for example, is geared towards detecting and removing IP-infringing listings on over a hundred online marketplaces worldwide. Armed with specialized software tools, our dedicated online brand protection experts check the marketplaces of your choice and find any unauthorized listing, whether they’re counterfeit, grey market, or anything else. We then make sure to remove the listing from circulation and prevent it from doing any further harm to your brand.