When choosing a method to sell products online, entrepreneurs often consider listing them on marketplaces. This is not surprising, as according to Statista, 47% of all online purchases are made through marketplaces, and this figure is increasing every year.

From this article, you will learn about the features of marketplaces, their advantages and disadvantages. We will also discuss the opportunities of network marketing as an alternative method for building a successful online business.

What are marketplaces

Marketplaces are online platforms that bring together numerous sellers and buyers to conduct trade transactions on a single web platform.

The emergence and popularization of marketplaces are a result of the digitization of the economy and its shift to an online mode. Now, for a transaction to take place, sellers and buyers don't need to leave their homes. All marketplaces operate on the same online market mechanism involving three parties: sellers, buyers, and platform administrators.

The largest marketplaces today are Amazon with 4.7 billion monthly visitors, eBay - 1.2 billion, and Rakuten - 563.3 million.

Marketplaces create a convenient environment for online commerce, but they are primarily focused on the needs of their end-users (buyers). To ensure a secure online shopping experience, they provide guarantees, product ratings, and open reviews for each product. This is how online markets attract more and more audiences and gain the attention of businesses.

The advantages of marketplaces for entrepreneurs include:

  • Large auditory

Each marketplace has its vast customer base with a high level of trust and loyalty. So, by launching your product, you immediately gain access to a large number of potential customers from different cities or even countries without significant costs for their acquisition.

  • Low entry barrier

On marketplaces, both large enterprises and small manufacturers, as well as regular individuals, can promote their products. To do this, it is sufficient to purchase a small quantity of goods and undergo mandatory registration according to the platform's terms.

  • Low advertising costs

Utilizing internal advertising on marketplaces significantly boosts the sales of products that rank lower in the catalog. The cost of such promotion is relatively low. For instance, advertising for sellers on the Amazon platform averages around $0.97 per click, whereas advertising on Google - $2.96. 

 

Marketplaces may seem like the most cost-effective and straightforward option for conducting business through online sales. However, online markets also have their drawbacks:

  • Intense competition

On marketplaces, there is fierce competition, with thousands of similar sellers and products. Additionally, product listings often include a feed of recommendations for the same product from competitors, which can attract the buyer's attention. Standing out can be achieved through a more competitive price, but excessively low prices may not allow for desired profitability.

  • High commissions

Marketplaces charge a commission for every transaction, which can be as high as 15-25% of the sale. Sometimes, there are additional fees or penalties on trading platforms. For instance, fees related to logistics, product returns, insufficient order quantities, or delayed product delivery to the warehouse.

  • Dictation from the Marketplace

Owners of online marketplaces establish clear rules that every seller must adhere to. Marketplaces have strict content and profile formatting guidelines, return policies, and they autonomously set discount percentages for sales. They can alter operational rules and even remove your products or suspend your account.

  • Challenges in gaining loyal customers

Seller profiles on marketplaces are nearly impossible to personalize to highlight your uniqueness. Even when a buyer orders your product, there is a low probability that they will become a repeat customer, and you will build a loyal customer base. This is because the marketplace audience tends to focus on product reviews, descriptions, and pricing rather than the seller itself.

Network Marketing for online sales growth

In the digital world, there are numerous options for developing an online sales business. Instead of listing on marketplaces, you can opt for a network marketing (MLM) strategy. Its adoption is becoming increasingly common, with annual turnovers of companies built on the MLM model reaching over $200 million.

Network marketing is a direct sales concept built on distributing products or services through a network of distributors.

The key feature of network marketing is the compensation plan, which defines the profit conditions for your partners. This plan includes commissions, bonuses, and rewards for distributors based on product sales and recruiting new partners. Thus, using the MLM model allows for business scalability without significant marketing expenses.

Implementing a network marketing strategy offers several advantages for entrepreneurs:

  • High income potential

Your products are sold by distributors, and their income depends on the quantity of sales, the quality of building their own structure, and the sales levels of the recruited participants. All of this motivates them to work harder and more efficiently to maximize their income. This leads to rapid growth in your product sales without advertising expenses.

  • Building a recognizable brand

When creating a business with your own online platforms, you have the autonomy to choose their design, product presentation, convey your values, and establish communication with customers. This enables you to stand out among competitors, create a positive image, and gain the attention and trust of consumers.

  • Active market expansion

Your network structures can include partners from different cities or countries, and they will promote your product, attracting distributors and customers in their respective areas. This facilitates entering new markets and gradually transforming your business into an international company.

  • Absence of restrictions

An MLM project is your own business where you can make any necessary changes. For example, you can adjust your development strategy or elements of the compensation plan, adapt to market trends, or improve products to meet the needs of your target audience.

 

Like any product promotion model, network marketing has its drawbacks:

  • One needs to grasp the specifics of the MLM industry

Implementing a network marketing strategy can be challenging as it has its unique features in each region and compensation plan norms. Understanding these nuances is essential for effectively utilizing the MLM model.

  • Higher entry barrier

To truly achieve desired results in entering the MLM market, it is necessary to develop a quality compensation plan and website. Additionally, integrating a payment system and other tools for automating business processes is crucial. This requires financial investments, knowledge, and time.

Marketplaces are online markets with a million-strong audience that are actively growing and help you quickly find customers. However, it's a game with someone else's rules and limited room for growth. That's why, for building a successful business with a loyal audience, it's better to use a network marketing strategy. MLM strategy provides the opportunity to significantly increase sales and transform your business into a global giant when implemented correctly.

The FlawlessMLM team thoroughly develops network projects from scratch and implements MLM into existing businesses. In our projects, we take into account all customer preferences, market trends, and regional launch characteristics to create flawless solutions. Follow the link https://flawlessmlm.com/en/mlm_consulting, to find out all the details and get answers to your questions.