Does Your Online Business Need a Marketplace Exit Strategy?

Online marketplaces like Amazon, Etsy and eBay offer small businesses the ability to sell and promote their products to a large, diverse audience. On Amazon alone, independent sellers in the U.S. sold more than 4.5 billion items in 2023 and averaged more than $250,000 in annual sales.

Selling the bulk of your products via online marketplaces may seem like the quickest route to success, but is it sustainable? And how can you tell if it will remain profitable for your business over time?

The Benefits of Selling on Marketplaces

For consumers, marketplaces simplify online shopping by creating one centralized platform with thousands of options from multiple sellers across multiple categories.

If you run a small business, you’re likely to experience the following benefits of marketplaces.

1. Access to a large consumer audience. Online marketplaces’ large built-in audience allows you to reach a wider, potentially national audience, increasing awareness of your business and helping you drive sales.
2. Marketplace reviews help build consumer trust. With marketplaces like Etsy and Amazon encourage product reviews, which help increase trust in your products. The more reviews, the more consumers feel more comfortable buying from a brand that they’d previously not heard of.
3. Built-in resources to make selling easier. Marketplaces sell access to additional resources that can also reduce some of the operational burdens of selling products online. This includes increased shipping speed, logistics for handling returns and customer service inquiries.

The Drawbacks of Solely Relying on Large Marketplaces for Your Small Business

Marketplace selling clearly has its benefits. However, solely selling on online marketplaces can be risky, and it’s important for you to be aware of the downsides of selling on these popular platforms.

1. Constantly changing marketplace fees. Each marketplace charges referral fees, or a percentage of the total sale price. And as we’ve seen in recent months, marketplaces can and do change their fees with little advanced notice, which can make it challenging for you to predict your income and maintain your profit margins. For example, if you make $5 for each t-shirt you sell and Amazon increases its referral fees, you’re left with two tough choices: raise the price of your t-shirts and risk pricing out some of your customers or keep the cost the same, lowering your profit margins.
2. Unpredictable algorithms. Online marketplaces control the algorithm and whether your product is listed first or last in a consumer’s search. Often brands have to pay to appear at the top of the page, and small businesses can’t always compete.
3. Strict rules and guidelines. Marketplaces also outline specific seller guidelines that control what and how you sell. Etsy, for example, recently announced new guidelines requiring all sellers to detail how their product or offering was sourced, created, or designed due to the influx of AI-generated art. This could impact your sales depending on the type of products you sell.
4. Increased competition. Because marketplaces attract millions of customers, there is an equally large number of businesses trying to capture their attention. Making your business stand out can be difficult. You’re competing with other small businesses as well as more established brands that have the flexibility to offer additional discounts and sales.

Creating Your Marketplace Exit Plan

To maintain the long-term success of your business, you need to prioritize brand recognition and customer loyalty. A good way to accomplish this is by selling through your own online store.

In doing so, you’ll have control over all critical business and pricing decisions, branding, customer interactions and more. Plus, you can easily store all your customer and product review data and refer back to it when planning upcoming marketing campaigns or engagement opportunities.

If you don’t already have an online store or think your current online store needs some refreshing, you can lean on AI innovations like GoDaddy Airo to create a new, professional looking store in minutes. GoDaddy Airo can quickly build you a professional website, design a unique logo and draft personalized social media content and ads. You just need to provide it with a basic description of your business.

As you think about transitioning some or all your marketplace sales to your own online store, make sure you use the same brand colors, logo and imagery across your online store and marketplace listings so consumers trust they’re shopping with the real you. Next, you’ll want to map out a strategy to ramp up your online store while continuing to take advantage of the benefits online marketplaces provide.

Here are a few ideas to funnel marketplace customers to your online store:

1. Consider releasing a limited edition of your product available only on your business’ website. You can include a small insert in each marketplace order to promote the limited-edition item.
2. Lean on your current marketing channels to promote your online store. Increasing website traffic can be difficult, add links to your online store on your business’s social media and even marketplace profiles to help build SEO and attract new customers to your website.
3. Create a post-purchase experience that will keep customers coming back and reward them for sending new customers your way. This can look like offering a discount when they leave a review, creating a loyalty program or incentivizing them to refer a friend to your store.

Remember, a solution that worked for you 10 years ago might not work for you today. As a business owner, you should annually reassess your overarching business goals and the possible routes and roadblocks to achieving them. Running a thriving business requires flexibility and adapting to new strategies as the market and your customers change—and sales channels play a massive role in this journey.

Alex Avramenko, head of commerce growth at GoDaddy, who has 12 + years of experience in digital marketing leader and commerce, driving growth and ROI in companies ranging from startups to Fortune 250 firms.

Online marketplace stock image by /Shutterstock