Marketplaces are a key component of an omnichannel expansion strategy for retailers and brands alike. Selling on a popular online marketplace like Amazon, Etsy, Kroger, and Walmart allows consumers to purchase your products where and how they want.
As the cost of customer acquisition via advertising rises, brands seeking profitability and scale are using online marketplace channels to drive discovery and growth. Not only can your products reach new consumers, but selling on marketplaces also offers some specific advantages over single channel strategies.
How can you tell if a marketplace fulfillment service is right for your brand and what are the benefits and pitfalls of this popular ecommerce channel? Read on for answers to these questions and more.
What Is a Marketplace?
A marketplace allows multiple vendors and brands to sell their products for a fee through the same online storefront, while the retailer or marketplace operator sells its own products alongside these third-party sellers. An example of a marketplace is Amazon. Amazon has its own products listed right along with products from other brands.
What Is Marketplace Fulfillment?
Marketplace fulfillment is the process of fulfilling products sold on marketplaces.
One approach to selling on marketplaces involves delegating the task of fulfillment service to the marketplace itself. This marketplace fulfillment strategy outsources the storage, determines the shipping method, handles the return process, and even provides customer service to the marketplace provider.
For example, sellers can sell on the Amazon marketplace, but they can also take advantage of Fulfillment by Amazon. This means that Amazon handles warehousing, picking, packaging, shipping, and returns.
Other approaches include third-party order fulfillment, in which a brand outsources operations to a partner capable of fulfilling orders from marketplaces as well as other sales channels, and self-fulfillment, in which a brand manages storage and fulfillment operations directly.
Marketplaces are an increasingly popular way for DTC brands to reach new customers and increase sales. Like any ecommerce strategy, marketplace fulfillment has its own benefits and drawbacks, and each brand will need to take into account its own unique situation to decide if it’s the right strategy for them.
Benefits of Marketplace Fulfillment
Using a partner or relying on the marketplace itself for marketplace fulfillment allows a brand to get its products in customers’ hands quickly and offers a larger reach than if the brand were to handle the fulfillment process themselves. The brand won’t have to find room for overflow storage, won’t have to pay warehousing fees, won’t have to worry about transport stress, and won’t lose time managing returns. All a brand has to do is send the products off to the marketplace fulfillment partner and watch the sales come in.
Choosing to sell on a marketplace can also help a brand expand to new or even international markets without having to pay for foreign warehouse management or send goods to foreign countries since most marketplaces have local distribution centers. In addition, selling on a marketplace also allows your brand to borrow the reputation from the marketplace. If a consumer trusts Amazon, and your products are on the Amazon marketplace, it’s more likely the consumers will trust your products as well.
Some marketplaces also handle customer service and returns. These two areas can drastically impact customer service, and being able to outsource those functions can help support a brand’s growth.
Downfalls of Marketplace Fulfillment
While marketplace fulfillment has some major benefits, there are also some downfalls as well.
While Amazon is a marketplace that also handles fulfillment, that’s not common. Typically brands rely on individual third-party logistics companies (3PLs) or partners to manage fulfillment for marketplace orders as well as other channels. This can often mean working with a 3PL just to handle marketplace orders, which separates that fulfillment operation channel from other fulfillment operation channels. It can be a challenge to manage things separately.
The other side of being able to borrow the reputation of a marketplace is that if the marketplace takes a hit, your brand will take that hit as well. For example, Amazon has faced fulfillment warehouse shutdowns because of labor conditions. In response, Amazon changed how much stock sellers could send to its warehouses. That can leave sellers holding onto extra stock. Amazon has also faced backlash for its labor conditions, which can mean some consumers are less likely to shop on the platform.
While marketplace fulfillment can be a convenient option for brands, that convenience can come at a cost. While a marketplace might take care of inventory management, storage, restocking, relabeling, and disposal, those things often come with hefty fees attached.
Does marketplace fulfillment make sense for your brand?
Deciding whether marketplace fulfillment makes sense for your brand is key before settling on a sales and fulfillment strategy.
The first thing to decide is whether or not to outsource fulfillment operations. Self-fulfillment has a low initial investment and is easier to get started, but it’s harder to scale and can get expensive fast as your brand grows. Self-fulfillment might make sense if you’re just launching your brand and want to test the waters or if you want to maintain tight control over every aspect of fulfillment, including packaging and customer service.
Relying on the marketplace for fulfillment could be beneficial if it is your main channel of commerce. If you already have regular sales and are looking to expand, however, it could limit your ability to sell and fulfill across other channels.
Using a third-party partner for omnichannel, including marketplace fulfillment, allows a brand to get its products out to consumers as quickly and simply as possible because the brand is free to focus on expanding the business, advertising, and improving customer satisfaction.
If you’re still wondering whether or not your brand should take the marketplace or ecommerce fulfillment route, make sure to read up on the differences to see which one fits your business needs.
How to get started and optimize marketplace fulfillment
It’s important to understand each marketplace your brand wants to sell on. That includes understanding their customers and their fulfillment requirements. These vary from marketplace to marketplace. For example, you’ll need to understand how much stock you should allocate for each marketplace as well as exactly how to prepare and ship your products, as some have strict packaging and shipment requirements.
A key to success in scaling marketplaces is to create the same customer experience on a marketplace as the consumer would have received if they purchased on your own website. For that, brands need a fulfillment solution that can satisfy consumer expectations for “Prime-like” delivery.
One way to do that is by engaging a third-party logistic company. Flowspace’s OmniFlow Visibility Suite offers brands real-time visibility into inventory, orders, and fulfillment activity across all channels, providing access to the predictive insights and data needed to anticipate consumer and market demands to ensure that end customers receive their purchases as quickly and efficiently as possible, no matter the order source.
One of the challenges of marketplace fulfillment is that brands often end up using disparate 3PLs for different channels, but a tool like Flowspace brings all of the channels together and allows brands to manage everything in one place. This can help streamline fulfillment and tracking and provide that omnichannel experience needed to succeed across multiple channels.
Flowspace is pre-integrated with leading marketplace shopping platforms, including Amazon integration and Walmart Marketplace integration, which makes managing multiple marketplaces easier than ever. Flowspace powers ecommerce fulfillment for sellers across more than 300 Mirakl-powered marketplaces, including 1-800-Flowers, Bed Bath and Beyond, Kroger, Urban Outfitters, and more. The partnership gives brands who sell on those partners access to Flowspace’s software that supports order flow and fulfillment across all Mirakl marketplaces within its centralized dashboard.
Marketplace fulfillment is an exciting development for a growing ecommerce brand and has some distinct advantages for brand scale. Ensuring that you’ve done your research and have the tools you need can make sure marketplace fulfillment is a successful strategy for your brand.
To find out how Flowspace’s OmniFlow Visibility Suite can help your brand optimize for marketplace fulfillment and provide a seamless experience everywhere you sell, get in touch.