An introduction to online marketplaces

Explore the 4 main online marketplaces and the key considerations for each to help you determine whether they would be a good fit for your business.

Guide

12 min read

1. Overview

If you sell physical products and are developing your eCommerce strategy, there are many different routes to market that you can take to find customers, sell online and fulfill orders.

The purpose of this guide is to help you decide whether online marketplaces could be a good fit for your business. Here we’ll explain more about the role of an online marketplace, provide an overview of the four main online marketplaces operating just now, and help you understand how they work and what the key considerations are for each.

2. Why sell through an online marketplace?

An offline example

Let’s think about an offline environment. Imagine you are setting up a small stall. You locate it on its own at the end of a cul-de-sac. You then have to spend money advertising to attract people to go out of their way to come to the cul-de-sac to see your stall. Then, even when people are interested, it’s quite hard for them to get there. If they arrive with a shopping list of things they need, they find they can’t buy anything else so they still need to go to other shops, and they can’t easily compare your items with similar products that are available.

Although some people will still make the effort, there are a lot of barriers there, so others who might be potential customers will never make it to see you and your products.

This is why locating your stall in a marketplace with other similar businesses would make sense - such as a farmers’ market, or town centre, where there’s already a high footfall of people who are there already because they want to buy.

Online, it’s similar. It’s perfectly possible to be a stand-alone website and attract people to your online store. Having a presence on a social media platform is also very useful.

However, if you locate all or part of your business in an online marketplace, it can be easier to reach the large numbers of people who are already actively shopping in that marketplace and looking to make purchases.

Existing audiences and infrastructure

You can also benefit from the infrastructure marketplaces provide, for example managing payments and returns, tracking orders, templates for listing products and analytics to help inform future decisions on what to sell. This can save you some upfront time and costs in designing and building your own website and functionality for taking orders. Potentially you can also save some money or time on marketing.

As you’d expect there is usually a cost attached to this. In the same way you’d pay to have a space at a farmers’ market, the online marketplace will have charges such as fees to have a storefront and list products, a commission for each sale or a combination of these things. There will likely also be a large number of competitors also on that marketplace, so you’ll need to put your research in to determine whether you can compete.

As a seller, you need to work out - often by testing - if these costs are worth the benefits of the infrastructure and ‘footfall’ the marketplace provides. Clearly, for many businesses they do in the long-term, which is why these marketplaces are so popular.

Issues to consider

Online marketplaces do not exist to help you as an individual seller. They are businesses in their own right and are ultimately focused on the end customers - the buyers. These marketplaces will adapt as they need to, to generate the most profit in the long term.

This means they can make changes at short notice for the benefit of buyers or sellers as a whole, but which may disadvantage you as an individual seller. These changes might include pricing structures or terms and conditions of trading.

Therefore, it can be a problem to have your entire business completely reliant on a single marketplace.

This is why, after becoming established, you will see many sellers, in parallel, operating on their own ecommerce sites and/or through multiple channels or other marketplaces so they are better able to weather the storm of any changes.

The most popular marketplaces

In this guide we’ll look closer at the biggest marketplaces to help you decide if they could be right for your business, and give an overview of their charging structures as well as the scope they can give you for your own brand presence:

  • Etsy
  • Not on the High Street
  • eBay
  • Amazon

These are the largest and longest established marketplaces operating in the UK. There are, of course, numerous niche marketplaces in specific sectors such as fashion and lifestyle as well as the likes of Gumtree, Instagram and Facebook marketplaces and even unofficial Facebook groups for local makers. These are all worth considering but as a starting point, this guide contains the main things to look at first when deciding whether any of the big four in the UK are right for you.

3. Etsy

A global platform, Etsy has over 4m sellers from over 260 countries, with UK businesses accounting for 13% of sellers. In 2020, they had over 40m active buyers.

Seller profile

Etsy could be a platform to consider if you are a crafter, artist or collector and:

  • you are selling handmade goods (handmade by you - not repackaging someone else’s)
  • providing craft supplies for others making handmade goods
  • selling vintage items (‘vintage’ is defined as more than 20 years old)

These are the only products that Etsy accepts, and they fall into categories like home and living, wedding and party, art and collectibles, clothing and shoes, jewellery and accessories, and toys and entertainment.

The benefit of using this marketplace is that customers who come to Etsy are specifically looking for items in these limited categories. However, on the flip side, you will be competing with thousands of others offering similar products. Therefore, it’s important that what you offer is unique in some way.

Costs

As with all online marketplaces, you will need to pay fees to Etsy to sell your products. Etsy’s fees are calculated in USD (US dollars) so currency fluctuations can change the price of fixed fees such as the listing fee. The fees you need to pay include:

  • Listing fee for each product - around £0.14
  • Standard commission - around 5% which also applies to any gift-wrapping and shipping fees you charge
  • Offside adverts commission - Etsy advertises your items elsewhere on the internet - you will pay a fee if you make a sale from one of those ads - expect to pay around 15%
  • Transaction fee (for the whole amount including shipping) - around 4% with a fixed £0.20 payment processing fee
  • No joining fee or ongoing annual fees

All those different fees may make it seem a bit complicated. Let’s take an example, if you sell a plant pot at £5 including shipping fees (which you charge the client for), you would expect to pay a listing fee of £0.14, a commission of £0.25, a transaction fee of £0.20 and a payment processing fee of £0.20 - total £0.79. If the sale came through an online ad, then you would add an additional £0.75 to this - to a total of £1.54.

If you didn’t sell the pot, you would still pay the listing fee of £0.14

For an additional monthly subscription, you can access more tools including options to customise your shop, and a custom Etsy web address to use on literature and business cards to make it easier for customers to find your shop.

Boosting sales

Esty offers a range of features to help boost your sales. Once you have a shop front and product listings then it’s worth being aware of some of the additional marketing options, however it is best to get established and build some reviews before spending too much on advertising.

  • Offsite marketing: Etsy automatically enrolls sellers in their Offsite Ad programme, which runs on platforms such as Google, Facebook, Instagram and Pinterest, as well as publishing partners such as Buzzfeed. This will only cost you commission if you make a sale from an ad within 30 days of the customer clicking on it. If you sell less than the sterling equivalent of 10,000 USD in a year, you can opt out of this if you wish, but participation is mandatory for shops selling more than 10,000 USD in a year.
  • Etsy Ads: Etsy gives sellers the opportunity to purchase advertising space to gain more exposure within Etsy’s search results. You decide what budget you can afford and then set up a campaign to run for at least 30 days to gather enough data to see what is effective. Etsy uses data to see what’s working for similar sellers which informs them when to show your ads, so you are likely to reach the right shoppers. They automatically track when people click on your ads and what they searched for to help optimise your campaign. They have a detailed guide to help you understand the metrics and actions to take to improve the performance of your ads.
  • Create your own price promotion: Etsy gives you the functionality to create a coupon code unique to you as a seller so you can run your own price promotions and discounts and create targeted offers.
  • Marketing on other platforms: You should also put effort into marketing your Etsy store for example by sharing your listings on your social media presence and Etsy has guides and tools to help you do that effectively.

Support

You can use the Etsy app to manage your shop, there are free social media tools to help build your presence, and detailed stats on your shop’s performance so you can optimise for future.

Transactions that are processed through Etsy Payments are automatically covered by Etsy’s Seller Protection Policy, backed-up by fraud-detection systems, provided sellers comply with Etsy’s customer service standards. Etsy can offer assistance if there is a dispute with a buyer, although, depending on the circumstances, this does not guarantee a resolution that is in the seller’s favour.

How to get started

Unlike Not on the High Street, you do not need to apply and be approved to sell on Etsy. You simply begin by creating an Etsy account and selecting your shop location and currency.

UK businesses will receive customer payments through ‘Etsy Payments’. This enables customers to pay using a range of options such as different credit cards, Google Pay, Apple Pay and Klarna as well as Etsy gift cards and also means they can pay in their local currency. Then Etsy deposits the money in your bank account - you can choose if this is daily, weekly, fortnightly or monthly.

You will also provide your own card details for paying your Etsy listing, commission and transaction fees.

If you take enquiries for bespoke commissions which cannot be listed as a specific item in your Etsy shop, you may need to set up another method of taking payments for those orders - e.g. directly through PayPal.

You will need a logo and a banner, as well as a welcoming introduction and text, photos and maybe video to go on your ‘About’ page to tell your brand story.

Then you just need to work out what your policies will be for managing deliveries and returns for standard and personalised items.

Read more on Etsy’s page for sellers.

4. Not on the High Street (NOTHS)

Not on the High Street sells over 250,000 products from over 5,000 creative businesses in the UK and Ireland. The site receives over 39 million unique visitors per year and in 2020 it served over 2.8m customers with sales of over £35m and has high ratings on review sites like Feefo and Trustpilot.

Seller profile

The average seller has a turnover of nearly £29,000 per year, while over 220 small businesses have now sold more than £1m through the marketplace.

The main categories of items for sale include jewellery, home and garden, food and drink, crafting and hobbies. Sellers include:

  • Producers of high quality creative items that make thoughtful gifts - often handmade
  • Bespoke manufacturers of personalised products
  • Boutique retailers that source and curate unique or original items on a small scale are welcome (in contrast with Etsy which will not accept resellers unless it is vintage goods or craft materials)

Sellers have to apply to be a partner on NOTHS and must meet certain requirements to be considered. Once accepted, you create a storefront with your own text and imagery using their content management system and templates. Their platform manages payments and refunds as well as any messages you exchange with customers.

When a customer places an order for one of your products, you then formally accept that order - ideally within 24 hours.

Costs

Again, you will need to pay to sell on this marketplace. Costs are not published on their site - you need to apply to access this information. However, the model at the moment is:

  • A one-off joining fee that is non-refundable to cover set-up of your store front - expect around £200 plus VAT
  • Commission on each sale including delivery charges - this is quite high so expect to pay around 25% plus VAT
  • Refund fee - you will have to pay NOTHS a percentage of any refund they need to make if a product is returned - this could be around 2.5% of the total amount refunded
  • No transaction fee (this is covered by the higher commission)
  • No ongoing annual fee
  • No fee to list individual products

The benefit of paying commission rather than a listing fee is that you will only incur that cost if you make a sale. However, if you fail to keep stock levels on your storefront up-to-date or forget to mark an item as ‘no longer available’ you may still be charged the commission if a customer places an order and then has to be refunded.

Boosting sales

NOTHS offers a good range of features and options for sellers looking to promote their listings.

  • Brand campaigns: NOTHS actively runs high profile marketing campaigns including TV and press around key seasons such as Christmas and Mothers’ Day. They run partnerships with lifestyle publications as well as leveraging a large social media following. Pre-pandemic they ran regular events as well. There can be opportunities for individual sellers to be featured in these.
  • General price promotions: Sometimes Not on the High Street runs price promotions across the site, such as seasonal discounted prices or free delivery and generally they will bear the cost of this. If there is a cost for the seller, you will have the option not to participate.
  • Sponsored product listings: sellers can pay to be featured in the top row of search results for certain categories and these features will be labelled ‘sponsored’. Costs will vary depending on demand and location and are run through an ‘auction’ system similar to other marketplaces.
  • Seller discounts: Sellers have the option to operate their own price promotions within your storefront.

Support

As well as managing all payment processing, NOTHS provides a range of support to its 5,000 partners:

  • Help with launching
  • Performance support in your first year
  • Online information hub
  • Content covering the latest trends and customer insights to inspire new business and product ideas
  • Ambassadors to provide more personal local support and networking

How to get started

You will have to apply and supply a good standard of product photography as part of your application and effectively communicate how unique you and your products are.

Be ready to launch within three months of acceptance or your offer to sell on the site may be withdrawn.

Check out the terms and conditions.

Apply to become a seller.

5. eBay

eBay is one of the largest online marketplaces in the world, with over 1 billion active product listings and 180 million active users across the globe. It is the second largest online marketplace in the UK, (behind Amazon) with almost 250million visits to its site per month.

Founded in 1995 it originally operated as an auction site, connecting buyers with individual sellers of used items. However, eBay has evolved, and the majority of items are now sold by businesses, 80% of all items sold are new, and almost 90% of products don’t require bidding and are sold on a set price ‘buy it now’ basis.

Seller profile

There are many different types of eBay sellers, ranging from household retailers selling excess stock (such as Office shoes or Argos) to small stores selling niche products to “power sellers” selling huge quantities of trending products.

You can buy and sell almost anything on eBay, from 80s toys to luxury cars, however some of the top selling categories include: mobile phones and accessories, electronics, video games, health & beauty, home & garden, fashion, car parts and crafts.

eBay appeals to many sellers as the large volume of traffic means that the potential pool of buyers is huge. You can also start selling almost immediately after setting up a business seller account which means you can theoretically get up and running quickly.

However, the level of competition on products can be extremely high, which for some products keeps prices and margins low. To determine whether eBay is right for you and your business, you’ll need to research your competition and the platform, and determine whether your product offering, and your business processes can compete in your vertical.

How it works

In simplistic terms, to sell on eBay, you pay to add listings for your products, which you aim be listed when a user searches on eBay. Your goal is to create compelling and competitive listings that appear prominently in relevant searches.

In practice there is obviously more to it than this - and a lot of work needs to go into the creation, ranking and promotion of successful listings. You need to determine your listing type (auction based vs fixed price) and set the right price; you need to select the correct product categories, write compelling listing copy, use high quality images, and optimise your listings; and you need to provide the right postage and payment options for your customers.

You can also opt to create your own eBay shop, where you can create your own customisable shopfront to help build your brand and better showcase all of your products. eBay also allows you to sell to customers anywhere in the world (provided you can arrange the shipping) so you are not limited to a local or national audience.

Costs

eBay charge a number of fees that include:

  • Fees to sell items: There are two main types of fee charged - a listing fee (around 30p) to list an item for sale and then a final value fee (this varies but is around 10%) which is a percentage of final sale price.
  • Shop subscription: If you want to open an eBay shop (which has the benefit of reduced selling fees), you will need to pay a monthly subscription, which starters at £25 per month
  • Listing upgrade fees: You can also opt to add additional features to your listing (such as a reserve prices or ‘buy it now’ prices) for an additional fee per listing
  • Third party payment processing fees*: If a buyer uses PayPal to pay you, then you will also need to pay a fee to PayPal of 2.9% of the total sale price, plus a 30p transaction fee.

* NOTE: As eBay moves all sellers onto Managed Payments, sellers will no longer need a third-party payments processor, and will therefore not need to pay this payments processing fee - although eBay’s final value fees will be changing.

For more information on fees see eBay’s Seller Centre.

Boosting sales

eBay offers a great range of tools and features to help you promote your items and grow your business.

The Terapeak Product Research is an eBay insight tool that can help you identify new product opportunities. It analyses a year’s worth of eBay marketplace data on product demand and pricing trends to help you identify what to sell, when, and at what price - all of which can be hugely valuable in the development of your business.

eBay also offers the option to boost the visibility of your listings by ‘promoting’ them. This puts your listings in a more prominent position, and operates on a pay-per-sale basis. Promoting listings can have a huge impact on sales when done well.

You can also ‘optimise’ your listings by creating high quality content and by adding more data (called ‘item specifics’) to your listings. Much like SEO on your site, this helps your items be found on both eBay and external search engines.

eBay also offers business sellers a number of promotional tools, which can be used on listings, such as multi-buy discounts, sale events and codeless coupons.

Find out more in Seller Centre.

Support

eBay offers a wealth of online resources to help you find out about all of the features available and to help you get started selling online. These can be found within eBay’s Seller Centre.

You can also access a large support forum where sellers can ask questions, search for answers and connect with eBay’s wider community of members and experts. As a seller you also have access to Seller Hub, which helps sellers manage their listings and see your sales data in one place, and for an additional fee you can sign up to Selling Manager Pro, where you can access additional reporting, inventory management, and automation features.

For larger more established shops with the premium monthly shop subscription, you also get access to ‘eBay Concierge, an enhanced customer support offering with direct access to a dedicated team of experts.

eBay also operates ‘Seller protection’, a range of policies to help protect sellers from abusive buyer behaviour and from events outside their control, for example by blocking abusive buyers from leaving negative feedback.

How to get started

Getting started on eBay is relatively simple - the first step is to create a business account. According to eBay, you’ll need to register for a business account if you want to sell large quantities, if you have items that you've made or bought to resell, or if you already have a business outside of eBay.

To set up a business account, you will need basic information including your business name, type of business, email, phone number and address. You’ll also need your bank details or card number (for the payment of eBay fees). Note, you’ll need to create a username - which is visible to your customers - so select a name that closely ties with your business brand (ideally your business name).

Once you have created your account, you’ll need to put some research in to learn about all of the different features and determine which will be best for you. With an account you’ll be able to sign up for additional services, such as creating an eBay shop if you need one, or tools like selling manager pro.

To start selling you just need to add your first listing - although again we would suggest looking through eBay’s resources to determine what best practices are, to help you create string listings that will convert.

6. Amazon

The global scale of Amazon is truly staggering, with over 300 million active customer accounts globally. It is the largest online retailer in the world and is by far the largest online marketplace in the UK, dwarfing even second place online retailer eBay. Nearly 90% of UK shoppers use Amazon and almost 40% of these consumers subscribe to Amazon Prime. Also, over 40% of shoppers start on Amazon (compared with 33% on Google), which highlights the fact that for many, Amazon is synonymous with online shopping.

Amazon offers businesses the chance to sell their products to its enormous captive audience, and almost anyone can sell on Amazon - from established eCommerce businesses to newcomers planning to sell their first product online.

Amazon can offer a huge opportunity to grow your online sales, however this is a complex and hugely competitive marketplace. Sellers who are successful spend considerable time researching how to optimise their presence, products and pricing and often take a ‘test and learn’ approach to identify any pitfalls with minimum risk and spot opportunities.

Seller profile

There are generally two types of sellers on Amazon - ‘Resellers’ who sell products that already exist, and which can also be sold by other sellers - and ‘Brand owners’ who manufacture and sell their own unique products or source products to sell under a private label. However, many sellers offer both. Do your research into both to determine the best approach for your business.

You can sell almost anything on Amazon, however, do note that while over 20 product categories are unrestricted (and are open to all sellers) a number of product categories are restricted, and some are even prohibited. You can find more information on product categories here.

Reaching individuals and businesses

As well as selling direct to individuals, UK businesses can also now sell direct to businesses on Amazon.

  • Selling to individuals - referred to as ‘Selling on Amazon’ where sellers can sell on all of Amazon’s European marketplaces and manage this from a single seller account
  • Selling to businesses within the UK as an ‘Amazon Business Seller’. This is available to sellers on the Professional plan (see more on this below) and tailors Amazon’s well known approach for individuals to help sellers serve businesses with the likes of:

    ● Automatic VAT invoicing
    ● VAT-exclusive price display
    ● Business pricing and quantity discounts
    ● Ability to make products and prices available to business customers only
    ● Pay by invoice service where Amazon removes the risk involved in selling on terms and handles the credit risk assessment, billing and collection activities

Cost options

As a seller, you need to pay fees to Amazon to sell your products on their marketplace, and Amazon’s fee structure can be confusing for newcomers, so it is essential that you take the time to understand what fees you will need to pay, so you can work our accurate cost data.

Amazon offers two main selling plans:

  • Sell a little (the Basic plan): for businesses selling less than 35 items per month - no monthly fees but you pay 75p for every item sold plus a number of other referral fees and charges.
  • Sell a lot (the Professional plan): for businesses selling more than 35 items monthly - you pay a monthly subscription fee of £25 + VAT, which allows you to sell an unlimited number of products, plus additional selling fees (which still apply).

There are also a number of different fees depending on the type of product you sell, including referral fees, closing fees and fulfilment fees. Due to the breadth of product categories sold on Amazon, it is not surprising that fee structures are more complex than the simpler market places of Etsy and NOTHS. Amazon provides details of all of these fees and product categories within their Seller Central. It is worth setting aside time to examine this properly. To start, have a look at Amazon’s fee calculator.

Fulfilled by Amazon (FBA)

Sellers have two main options when it comes to fulfillment: Fulfilled by Merchant (FBM) and Fulfilled by Amazon (FBA).

With FBM, you sell your products on Amazon and then ship and fulfil your products yourself from a local inventory. You will need to manage customer support in the local language if selling in other countries and providing a local address for returns or offering a refund for international shipping

With Fulfilment by Amazon (FBA) , you send all your stock (inventory) to an Amazon fulfillment centre for storage, and they then pick, pack and send your products to your customers for you. Amazon will also manage any customer service (in the local language) and process returns and refunds. Your products will have Amazon Prime badge status on eligible products which can make them more attractive to buyers.

Within FBA there are two further options:

  • Sold On Amazon - where they fulfill your products sold on Amazon’s site
  • Multichannel fulfillment - where they fulfill your products sold on other websites. The advantages of this is that it enables you to manage your entire online business with a single source.

FBA can offer huge opportunities for small businesses, and the advantage of these options is you can scale your business without increasing fixed costs such as warehouse storage. You can also manage peaks in demand without recruiting more staff. The catch with both these options? The costs are very complex so you will need to do your maths very carefully to understand how they apply relation to your specific products.

Support

As you’d expect, Amazon has a full hub of content to help sellers.

Interestingly, Amazon also offers warehouse tours which can be especially useful to sellers who want to understand more about how this works. Pre-Covid these were on-site, but they provide virtual tours as well.

Boosting sales

Amazon has really strong advertising options for sellers looking to boost their visibility and rankings. There are a few options for paid advertising which most sellers can use on Amazon (unless they are selling products that are not eligible, e.g. refurbished products or those in closed categories). These paid options include:

  • Sponsored products: raising availability of your products by creating ads that appear in shopping results when buyers search, and on product detail pages
  • Sponsored brands: helping sellers have more of a brand presence with their brand logo and customised headline appearing in results and product pages
  • Sponsored display advertising: sellers can participate in Amazon advertising on other websites through this option which can help extend reach
  • Creating a store front: existing sellers can create their own multi-page store on Amazon, free of charge, to communicate more of their brand story

Find out more about advertising on Amazon.

You can also optimise your product listings (similar to SEO) to try to help your listings rank more prominently in Amazon’s search results and to make your listings convert better, by optimising listing titles, using quality images and writing compelling descriptions. This is an artform in itself and there are numerous guides online to help you, but remember to always abide by Amazons terms of service.

How to get started

As you’d expect with Amazon’s slick processes, it is technically quick to launch your business on Amazon. However, you will need to take time to think through the options properly and decide on your preferred cost option - Basic or Professional, whether you are selling to individuals and/or businesses and whether you are fulfilling orders yourself or using Fulfilled by Amazon.

Find out more about setting up your seller account.

7. More help

Online marketplaces can offer a huge opportunity for eCommerce sellers, as ultimately that already have a large audience looking for what you want to sell.

However, this doesn’t mean they are an easy ride! Using marketplaces requires the same amount of time, research and care than any other method of selling does. So, make sure you take the time to fully understand the marketplace, your competitors, the charging structures and how this relates to the products you propose to sell. The good news is you can quickly set up and trial things at a fairly low risk if you begin with just one or two items to test and understand how everything works.

It’s unlikely you will get it 100% right immediately and start clocking up huge profits off the bat, but by taking a test and learn approach you can quickly understand if it’s right for you.

Our DigitalBoost programme offers a wide range of support and resources on all things digital. Upskill on a variety of topics, including Digital Strategy, eCommerce, Social Media and more, and take advantage of our free digital health check, webinars, guides, video tutorials and podcasts.

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