Choosing sales channels for your business
Whether you’ve launched your eCommerce business this year, or you’ve been in retail for years, the decisions you’ll need to make about where you’re going to sell will be the key to the success of your business. Whether you’re planning to sell purely on marketplaces, on your own website, or on a combination of both (and maybe making some offline sales too) then there are a number of things to consider before you rush in and get started.
For many new retailers, the ‘eCommerce business starter kit’ is often considered to be Amazon and eBay, with a Shopify website. But these channels might not be the right ones (or the most profitable ones) for your business, for various reasons. Let’s take a look at what to consider when you’re choosing your sales channels.
How to choose your sales channels
Most retailers choose to have their products available on a number of different sales channels, to maximise the number of potential customers that their products can reach. The sales channels that you decide are right for your business will depend on a number of different factors.
The type of products that you’re selling will very much influence where you sell – and indeed, you might sell some items on certain sales channels and not on others. You’re likely to sell low cost items better on Wish and eBay, for example, while handmade or artisan items are often better sold through Etsy, your website and in person.
Your target customer
We’ve talked about the importance of defining target customers plenty of times on the blog before, because it is an essential part of your success. Knowing who you are going to be selling to will help you to know whether a sales channel is likely to generate a lot of sales for you, and at the right price to maintain your margins. If you’re selling aspirational products that cost more, then you’re unlikely to make lots of sales on marketplaces such as Wish, where the focus is on bargain products that are little treats. Customers that are looking for more aspirational products will head elsewhere – possibly your website.
We’ll get to talking about costs for each type of sales channel in a moment, but costs will almost certainly influence where you decide to sell. If the costs cut into your profit margins too much, then you may reconsider selling on those platforms. If you’re starting out right now, watch our social media and weekend reading posts – we’re currently running an incredible promotion that could boost your business at absolutely no cost for 3 months.
Your sales channel strategy shouldn’t be set in stone, and should be considered from month to month. Some sales channels are also much more appropriate to start selling through at different points in the development of your business – with some being more suited to younger businesses, and others better tackled as the business is more mature and robust.
Selling in response to customer demand is absolutely normal too – so you can sell on a channel that will generate sales during the run-up to Christmas, and then stop selling there at the end of the peak season, if that suits your business. Unless you have a subscription to pay for a fixed term, you don’t need to be loyal to a sales channel. If you’re not making enough sales, and especially if it is costing you to list products there, then stopping selling on that sales channel – even temporarily – is totally fine.
Why sell on marketplaces?
Selling on marketplaces comes with a whole host of benefits – which is why so many retailers have them as part of their strategy. For businesses that are starting small, in many cases marketplaces is where their first sales come from – even if they don’t continue to sell there in the longer term.
When you build your website, it can take time for the site to rank, and for your products to show up in the search results when people Google the product. In addition to that, it can take time for reviews to be submitted on your website, and for customers to trust that the site is secure. With that in mind, listing your products on marketplaces can build your sales while you’re working on building your website and enhancing your SEO.
Trust has already been built
Millions of people are already visiting marketplaces to get the products they want and need – think about how many times you’ve heard someone say that they found a product on Amazon or eBay?! While there still some customers who are suspicious of shopping online and worry about falling victim to internet scams, the COVID-19 pandemic has forced them to go online for things that they need. Many of those people are comfortable buying from household name retailers, and marketplaces like Amazon and eBay that facilitate sales. Customers aren’t buying from you, they’re buying from the marketplace – or at least, that is what they think. If they realise they’re buying from a third party seller, then they know that they will have support from the marketplace if there is an issue with their order.
They can help reduce marketing spend
It is in the interest of marketplaces to help retailers to make sales – especially where commission is paid after the sale is made. Some marketplaces, such as Wish, actively promote items to the customers that are most likely to want those items – and as we said before, achieving that kind of exposure is nearly impossible without spending huge amounts of money.
Testing unknown products
If you’re considering adding a product to your inventory but you’re unsure whether to invest in stock, or whether there is a real customer demand, then listing those products on marketplaces can help you to make that decision. This is particularly the case where the marketplace charges a commission, or you’re already paying a subscription.
Challenges of selling on marketplaces
While there are loads of great reasons to sell on marketplaces, they can present difficulties for retailers too. Let’s take a quick look at some of the issues that are encountered on many marketplaces.
While you’re thinking about your inventory, the next thing to think about is whether you have items in your inventory that might be restricted on any of the marketplaces that you’re considering. If you list products on marketplaces that are on their list of restricted items (which may include branded items) you’ll be breaking their terms and conditions, and so you can expect to have your seller account sanctioned, or terminated. If this happens, there are absolutely no guarantees that you’ll get any funds that you’re waiting for released to you, so it can be a costly mistake to make.
Competition is high
There’s no way around this – there are quite literally hundreds of thousands of other businesses that are selling on marketplaces. Amazon and eBay are flooded with sellers, and while some marketplaces may have fewer sellers, they may have fewer potential customers too. The number of competitors that you’ll encounter also means that marketplaces don’t have to worry about retaining sellers – there will always be another business to take the place of any retailers that break the rules, so there are absolutely no qualms about suspending seller accounts.
Nothing in life comes free, and that’s the same for selling your products on marketplaces and websites. Those companies have to make their profits too, after all. There are several types of fee models that the majority of marketplaces run on – commission, subscription, and listing fee – but some marketplaces use a combination of those models. Checking small print carefully is essential here.
Using marketplaces that use the commission model are great for testing the popularity of new products, or when a business has only recently started and doesn’t have much capital spare to list their products. Retailers don’t pay a fee for listing, since there is simply a fee to pay once the item sells. These fees can be a standard flat fee for all times, or a percentage of the item’s cost. In some cases, it is a combination of both – so the commission could be 50p + 5% of the final sales cost, as an example, but there are all kinds of variations.
Marketplaces that work on this type of fee model only profit when items sell, so often they have ways to help you make more sales. There may be tools built into your seller account that assist you with things like SEO, and advanced reporting that helps you to identify what is working, and what isn’t – which can help you plan your future inventory.
Not only that, marketplaces that work on the commission model make also promote your listings to the type of customer that is looking for that type of item, through their algorithm. That kind of exposure is really hard to create without investing huge amounts of time and money – which is often impossible for businesses that are just starting to sell online, but can be equally difficult for established retailers to create.
This model is where marketplaces charge a fee to their sellers, whether that is on a monthly, quarterly, or yearly basis. Where products are known to sell well, and there is confidence in the number of sales that can be made, marketplaces that charge a subscription model can be well worth it – since the more you sell, the smaller the fee ends up being per item.
The advantage here is that retailers know exactly what their outgoings will be – but there are calculations that should be once they have signed up for a subscription-based marketplace. If the number of sales drops below a level that paying for the subscription is no longer worth it – or even leaves the company at a loss – then leaving the marketplace will be essential. Some subscription-based marketplaces have minimum terms though, so be sure you know what those terms are before you get started.
Listing fee model
When marketplaces use listing fee models, retailers must pay for the fee up front when they list their item. This can be a risk to the business, since there is no guarantee that the product will sell – but the fee will be paid, nevertheless. To reduce this risk, retailers might opt to only sell their bestselling items on marketplaces that charge listing fees, and put items that they haven’t yet proven on other sales channels.
Building brand awareness is difficult
When customers buy from a marketplace, they’re essentially buying from the brand of the marketplace – so when they are asked where they bought something, it is “from Amazon” or “from eBay”. They won’t necessarily know, or care that they are buying from your business – and they are extremely unlikely to search for your brand in the future.
We’re talking about the biggest marketplaces in this post, since there are so many – we could talk about the merits of different marketplaces for ages! While we’ve restricted ourselves here, that definitely isn’t something you should do for your business – as long as you have the automation to support your business, sell on as many marketplaces as you feel are appropriate.
Amazon is absolutely by far the world’s biggest marketplace, so for many retailers it makes sense to add inventory there – but selling on Amazon is definitely not without some serious challenges. There is huge brand awareness, and being able to sell easily on Amazon marketplaces worldwide is a significant draw too – as well as the possibility of working with FBA (Fulfilled By Amazon) arrangements. It is pretty easy to think of other reasons to be selling on Amazon too – the sheer number of customers that are already shopping there, and getting your account set up is relatively straightforward, for example.
But selling on Amazon – and to continuing to sell on Amazon successfully – can be a really big challenge. Getting started in certain categories can be difficult, since approval may need to be sought before you’re allowed to sell in those categories – and that’s before we mention the restrictions on branded items that we’ve talked about before.
Since Amazon is so popular with customers, there is huge amounts of competition amongst sellers on the platform – and in some cases, sellers will undercut one another on price in order to win the Buy box. Because of the sheer number of sellers that want to make sales on Amazon, they can be really ruthless in who they allow to sell on the platform, and they have absolutely no qualms about stopping people selling either. Look at any of the seller support forums online and you’ll find hundreds of thousands of posts from retailers that have had their seller account disabled for seemingly insignificant reasons.
Even once you’re up and running selling on Amazon, continuing to do so can be a huge challenge in terms of money. Amazon fees are significant, with a subscription AND a ‘referral fee’ – essentially, commission on each sale. And that isn’t all – Amazon don’t release payments for your orders immediately, and you could be waiting for your payments for up to 30 days after the payment has been received. If you’re using DropShipping for these orders, this can be a huge challenge, since you’ll need to pay your supplier before they send the order. Building up capital, or using a credit card to pay your suppliers might be necessary when selling on Amazon this way.
Finally – and we don’t mean this to present so many challenges – in most cases, customers won’t care about your brand, and won’t look for it again in the future. Mentally, they are shopping ‘from Amazon’ – and that won’t change.
Find out more about DropShipping on Amazon here.
Like Amazon, eBay has huge brand awareness, and more than 182 million customers worldwide. With such potential, it makes sense that eBay have made it so simple for retailers to start selling – you simply enter your details on the registration page and you’re off. Once you want to start selling internationally (and you meet the requirements) doing so is simple, and means you can sell on 23 international sites.
Listing on eBay can be something of a challenge too though – their fees are based on a listing fee plus commission, so your margins could be impacted. Be sure to do your calculations carefully before you start listing. In addition to the fees, there’s also limited seller customisation available, so like with Amazon, you’ll be making sales, but those sales won’t necessarily contribute to building brand awareness. Despite that, the actual process of listing on eBay is much easier when you list in bulk.
You can read more about the advantages of selling with eBay here.
If you haven’t heard of OnBuy, or considered selling with OnBuy yet, then you’re missing a huge opportunity. OnBuy is the fastest-growing marketplace in the UK, and they have plans to expand internationally that are already underway. Unlike other marketplaces, when you make a sale through OnBuy, your payment is available to you immediately, and fees are low – and when you don’t make at least £500 in sales, OnBuy will waive your subscription fee. They’ll help you to make those sales by promoting your products to the most relevant customers.
When it comes to challenges of selling with OnBuy, the main challenge that we can see is that OnBuy doesn’t yet have quite the brand awareness with UK customers that sellers might prefer. However, that is changing pretty rapidly, and they’re going heavy with marketing activity to work on that – and it is paying off, since they’re constantly reporting record sales month after month.
Selling on Wish presents some pretty incredible opportunities for businesses that are DropShipping. They have customers buying from all over the world, and the app has been downloaded well over 100 million times. Like OnBuy, they help to increase the likelihood that you’ll make sales by showing items to the customers that are most likely to buy them. This is based on an incredibly powerful algorithm, and that’s likely to be why they operate on a commission model – you don’t pay any fees until you have made a sale.
As with other marketplaces, using Wish to make sales isn’t without challenges. The emphasis on bargain prices means that Wish customers are often reluctant to pay higher prices that they would on other marketplaces. Not only that, but competition is also high, and there are so many other sellers that can push their prices lower. That means profit margins on each product are likely to be pretty low. Where suppliers of the products that you’re selling are based overseas, you may be able to encourage sales by emphasising how your products are already in the country and so delivery times are faster, but customers expect to wait for products from Wish – so this may not be a complete solution.
Wish is enjoying much wider brand awareness than it once did, and more customers than ever are using the platform, but that doesn’t mean it is without claims of scams and so on – around a quarter of Trustpilot reviews are negative. As the platform continues to increase brand awareness, that is likely to improve, so it is well worth giving Wish a try – especially with the commission-based fee model.
Your own eCommerce website
There are a lot of excellent reasons to sell on your own eCommerce website – although like with marketplaces, there are a lot of challenges to take on too.
Reasons to sell on your own website
Selling on marketplaces can be a great part of your sales channel strategy, but by having your own website, you can eliminate some of those challenges.
You can access funds immediately
Particularly during the first few months of trading, cashflow can be tight. When you’re attempting to build something that depends on having cash available, not having payments released for weeks isn’t helpful. Since you’re in control of your website, you won’t have to wait to make use of cash – as soon as your customer pays for their order, you can use it.
Your fees are lower
There are definitely going to be fees associated with having a website – you’ll need to pay for your domain, and if you’re using a website builder like Shopify or BigCommerce then you’ll have fees – but you won’t pay fees in the same way.
Brand recognition can build
As customers find the items that they want on your website at the price they’re willing to pay, then there is an increased possibility of them returning to you for future purchases. Add strong social media marketing to your strategy, and that brand awareness can really start to build.
Making income from products you’re not listing might seem a bit of a strange concept to those who aren’t yet familiar with affiliate marketing, but there are definitely opportunities to be found here. Amazon has a referral scheme that pays a commission if customers click through from your website and buy from them
Challenges of selling on your own website
Having your own website is part of the strategy for most businesses – but it isn’t always as straightforward as it sounds. Even once your website is up and running, there are challenges to face that can be ongoing – so be sure to know what they are.
Designing your website
Web design used to be restricted to those of us who know HTML and who understand UI/UX. That’s no longer the case (although understanding design and having some coding skills can come in handy) since you can create a website using Shopify or BigCommerce just using drag and drop to add functionality in, or using and customising one of the many templates. However, relying on templates won’t get you a completely unique look – which may become an issue when your business scales up.
Creating a website is the easy part. Getting people to actually visit your website? Not quite as easy. Investing time in SEO (that’s Search Engine Optimisation) is essential to enable customers to find your website. It isn’t just using the right keywords – there are a whole host of other considerations you’ll need to implement. For clear, actionable SEO advice without too many technical terms or acronyms, a great place to start is Backlinko.
Keeping it secure
Building your website is just the first step. Would you purchase from a website that was built several years ago and that hadn’t had any updates applied since then? Of course you wouldn’t, so you can’t expect your customers to either. Keeping your website updated, however it is built, is an absolutely essential task to schedule in your calendar.
The website builders
Although there are almost as many different ways to build a website as there are marketplaces, the most straightforward ways are the website builders – as we’ve already mentioned, Shopify and BigCommerce. They’re the most popular ones worldwide, and they provide solutions from beginner to enterprise level. Part of the reason they’re so popular is of course, that they enable users to build their stores quickly, without needing the assistance of a developer.
With well over 1 million Shopify stores in existence, there is plenty of evidence to show that Shopify is a tried and tested platform. The idea for Shopify was actually born out of necessity, and today there are thousands of customisation options, from templates to integrations and marketing tools.
Like every channel though, there are challenges to face when you’re selling on a Shopify store. Those templates are great, but with so many other businesses using them, creating a really unique website might be tricky without using a developer. The apps and add-ons for additional functionality are charged in addition to your Shopify fees, which can push the monthly cost to a level that you might not want to pay. The biggest issue that we know of is that there are restrictions on the number of variant listings that you can create, so be sure to test Shopify extensively during the two week free trial period. Read more about Shopify in this post.
While Shopify is often the first in line to be considered, BigCommerce is not far behind. Although some pricing is similar, there is more functionality available on BigCommerce without needing to use apps, and transaction fees are 0% on all BigCommerce plans (that’s the same on Shopify, but only if you use Shopify Payments, rather than third party payment providers).
There are some challenges that might be relevant for BigCommerce users – such as maximum annual sales limits, where BigCommerce have restrictions, but these are clear and you’ll simply need to upgrade your plan if that happens. When you’re choosing a payment gateway for your BigCommerce store, you’ll find there are fewer available than on Shopify, but there are still more than 40 available – which is more than enough choice for most of us.
There is also a 15-day free trial for BigCommerce, but if you’re looking for even more time to get your head around the BigCommerce platform, you can get three months free with our special offer here.
You’ve probably seen plenty of articles in the media talking about how the high street is dead, and how eCommerce is taking over retail. But the reality is that although there is a significant shift required for high streets to thrive, there’s evidence that high street stores will always be in demand from customers. With the right approach, offline sales can definitely be part of your strategy.
Even if having a permanent bricks and mortar store isn’t going to be profitable in the longer term, that doesn’t mean that offline retail can’t play a part in your strategy. Short-term popup shops are becoming commonplace in town centres, which can allow you to test the water, to sell excess stock or to make additional sales during peak seasons.
In addition, if you have the right type of inventory and you hold stock, it can be possible to boost your profits by selling at events such as festivals, spring fairs, summer fetes, and Christmas markets.
There is no single correct number of sales channels, and there are a huge number of variables that will have an impact on where you decide to sell. Ultimately though, it is a case of trial and error, and your sales channel strategy will evolve over time. Starting out by doing your research carefully will always pay dividends – you don’t want to end up stuck paying for a service that isn’t returning a decent profit.
Ensuring you have enough inventory, using reliable suppliers for DropShipped sales, and having automation available is a major contributor to the success of your business. Once you’ve got a strong sales channel strategy, and your products in place, then getting started with marketing your products is the next step. Keep growing your social media following, work on any paid ad strategies, and then rinse and repeat, all the while testing ideas to see what other strategies can increase your sales.