The pace of growth of independent sellers on marketplaces is not waning anytime soon. Propelled by robust online sales, independent — or third-party — sellers as a segment are expected to rise by triple digits in the next year. But anyone looking to get in on the game needs a clear strategy, and an understanding of the challenges they face.
According to Amazon’s financial report released last February, the online giant had $4.8 billion in sales from independent sellers alone during the kickoff of the 2020 holiday shopping season, the four-day period between Black Friday and Cyber Monday. And in data provided by Marketplace Pulse to Reuters, Walmart’s marketplace swelled to 70,000 independent sellers last year and is poised to rise 146 percent by the end of next year.
Michael Bennett, cofounder and managing director at Envoy, told WWD that Amazon’s third-party market “has offered business owners an amazing opportunity over the years to reach millions of online shoppers worldwide and increase brand awareness.”
“The year-over-year growth has been explosive and it seems everyone wants a slice of this profitable pie,” Bennett said. “Business owners and individuals new to the e-commerce world are scrambling to get their accounts set up to private label or pivot their dot-com or brick-and-mortar stores to Amazon. There are over 6 million third-party sellers on Amazon and more than half of them sell in North America. Amazon is rapidly expanding its reach internationally and there will soon be an additional surge in other marketplaces.”
While the opportunity is ripe, anyone looking to be a third-party seller needs a sound business plan and a clear strategy. Bennett said “the roadmap must include a long-term strategy of which path your business will take. Many are looking to make a quick buck by reselling branded items, others are looking to build something from the ground up or simply expand their current business within the e-commerce channel. Creating a structured path will allow sellers to simplify their approach and avoid many hurdles.”
Entrants to the world of independent selling on marketplaces also have to be aware of the challenges. “More often than not, e-commerce sellers on Amazon and Walmart are caught flatfooted when faced with the policies, fees, and approval processes that these platforms enforce,” Bennett explained. “Before diving into the deep end, it’s imperative to research the category you are selling in, dialing in your fees and bottom-line numbers, and being prepared to spend on Pay-Per-Click. Many have been in the trenches with these issues and finding the right resources to guide the journey can potentially save sellers hundreds of thousands of dollars, precious man-hours and brand loyalty.”
Mousumi Behari, digital strategy practice lead at Avionos, said the third-party seller’s market is growing rapidly, “and on Amazon alone, the marketplace generated between $25 billion and $39 billion in profits in 2020. Initial growth was sparked by a surge in online shopping due to the pandemic; however, this current market will continue to grow as consumers’ reliance on the convenience of e-commerce increases.”
“In fact, 59 percent of consumers shopped at major retailers — such as Walmart, Target and Amazon — more often during the pandemic than before March 2020,” Behari said.
“Amazon is the mecca for third-party sellers, and the relationship is mutual,” Behari told WWD. “For the third-party seller Amazon gives them access to a customer base, and a platform that they can build a sales strategy to drive revenue and growth. For Amazon, an increase in third-party sellers leads to competition in pricing and products, which ultimately benefits the customer.”
Behari also urged newbies to have a strategy, and understand all of the options and rules that each marketplace has in place. Once the platform is chosen, the e-commerce strategy is anchored by the product display page.
“Building a strong digital and e-commerce strategy on a marketplace starts with personalizing the product page to look and feel like the brand itself, rather than creating just another landing page on Amazon or Walmart’s website,” she said. “This page should provide consumers with everything they need to complete their purchase, while feeling like an extension of the brand itself. Customizing this product page to meet the target consumers’ needs builds trust with shoppers and encourages repeat, loyal customers.”
Behari said that beyond the product display page, “understanding the customer through data and insights around purchasing habits and interests is crucial. These insights provide third-party sellers with the ability to create more personalized experiences, relevant product recommendations and a better e-commerce experience to make shopping on their specific marketplace page even easier.”
In regard to other challenges, Behari said one of the biggest obstacles third-party sellers face “is standing out from the competition within the marketplace. “Amazon boasts over 2.5 million sellers, which can be daunting for someone looking to make a profit.”
To stand out, she suggests improving the online shopping experience, regardless of the marketplace, which “starts with doubling down on customer favorites like great product information, and helpful reviews.”
“Additionally, focusing on fulfillment can leave a lasting impact on consumers,” Behari said. “Third-party sellers risk harming customer loyalty and potentially creating bad reviews for products if delivery and fulfillment aren’t met promptly. Reviews can make or break the success of a brand, so refining the aspects of the customer experience you can control — such as fulfillment, product quality and brand credibility — is crucial to standing out in the marketplace and succeeding.”
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