Wednesday, October 2, 2013

E-commerce strategy and third party advertising - the pro's and con's

Many company's who are into e-commerce, sooner or later will ask themselves the question "is it an advantage or disadvantage for us to promote our products at third party websites like Amazon, Ebay or local variants"?

This question is not so easy to answer. It really depends per organization, but we tried to establish a list with pro's and con's.

You have to remember that the philosophy of many of the real large "third party" marketplaces like Amazon, Rakuten, E-bay, is that they expect, that in a few years time there will be only a few real large webshops available for the mainstream products. They are tend to be one of them! They need your product feed to establish that!



The position of third party advertising in your e-commerce strategy?


Pro's (why sent your product feed to a third party webshop)

Reach

Third party webshops usually have an enormous reach! Millions of people search for a product and because of price of reputation they might choose your product at a third party webshop.

Branding

Due to the reach factor, people see your brand more often. Your brand recognition might improve.

Turnover

In short term, working with these marketplaces can increase your turnover rapidly. You will reach a lot of new customers!

Test new markets (internationlisation)

Of course with an international view, third party advertisements are a great way to test a new market. Thinking of expanding your online business abroad? Try selling your products via third party's first!

Con's 

Insights

By selling your products at a third party webshop, the third party webshop will gain enormous valuable information about your productline. They might start selling your products themselves in the future!

No exclusivity

There might be a fierce competition between other merchants who offer similar products. It is possible to get into a fierce price competition at the third party webshop.

Profiling

This is really very important to understand. Many company's have old fashioned CRM systems where they cannot profile. But don't worry these big marketplaces will gain very, very valuable information about your customers! And they will use this information to target and profile them! There is a huge risk that customers keep on buying from the third party because of their very extensive profiling possibilities.
Don't forget that e-commerce customers more and more want retailers to "understand what they want" , Amazon, Rakuten, and similar party's know this! And all of their business intelligence helps them offering what the visitor wants (even if the visitor it does not know yet!)

Contracts

When you co-operate with those third party webshops, often you have to sign a contract which indicates that you do not own the customer data from the people that order.You cannot sent them e-mail marketing, you might not even brand your company in the parcel's customers order via this channel. It is very important to realise this and to see the connection between this and the profiling part. Of course they do not want you to brand your own company! They loose this valuable profiling information if you do!

SEO

Be aware that these marketplaces have a very good SEO ranking. Your website might rank lower then these marketplaces, with your own products! In your "third party strategy" think about this. By for example sending over separate or less extensive product content, you might lower this risk.

Pockets

Third party's like Amazon, Rakuten etc. have billions of dollars (or Yens). They overclass you in possibilities or duration!

Webshop features and relations

The party's you sell your products are more likely to be able to offer new functionalities or inspiration for a certain product range then you can. They might not return or not even ever visit your website! Relations between the third party grow stronger an stronger by tailor made discounts and offering everything one needs!

Technical adjustments

To work with third party's you often have to comply to their requirements. They do not adjust to you! They are way to large for that. This might result in investing in (new) software or change your internal processes.

Legal

Third party's might state in their terms and conditions that they may alter your images (copyright).

Conclusion

So in your e-commerce strategy think about these things and adapt them in your strategy. Focus at things you can distinguish with. For example customer service and customer experience. Give people a reason to shop with you and not with the third party's. Differentiation at price is very difficult to hold in the long run. Find other ways to differentiate. Think of a strategy to get the customers back to your webshop after they first bought with the third party. This is difficult, given all the restrictions, but be creative! There are possibilities.
You might want to think about a short term and long term vision for these kind of e-commerce promotions.

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