21.07.21

How Marketplaces Work With Suppliers In 2021

During the pandemic, marketplaces received an impetus for development. One of the prerequisites is the sellers' desire to sell on large e-commerce platforms, where the leading consumer audience is concentrated. Building a profile on the marketplace has become the easiest way for small and medium-sized retailers to expand their customer base and drive sales. In turn, marketplaces understand they need more quality suppliers and goods to be popular with customers.

2020 - 2021 is the golden time for merchants since the struggle between marketplaces means favorable terms of cooperation. What are the conditions? How do marketplaces work with suppliers, and how do they attract them during a pandemic? Let's consider further.
Standard schemes of work of marketplaces with suppliers
Marketplaces are one of the most promising sales channels for small and medium-sized businesses, along with aggregators. The latter differ from marketplaces in that they do not sell a product but simply post information about it, redirecting it to suppliers' websites for purchase.

The cooperation of aggregators with suppliers is reduced to the placement of advertisements. Whereas marketplaces automate part of the business processes of selling suppliers and sometimes even take over delivery. As a rule, the interaction between the marketplace and the merchant takes place through the supplier's personal account. It means the merchant's office on the marketplace, where he can upload his products and display them on the marketplace showcase. The most significant players Amazon, Etsy, eBay, Aliexpress, work in this way.

As for the delivery of goods, there are several popular options for interacting with merchants:
Suppliers (sellers) deliver
The supplier receives a notification that the buyer has selected and paid for the item. Then he packs the goods and sends them to the specified address - to the point of issue of orders on the marketplace or the customer's home. There are two delivery options: on your own or with the help of a transport company.
Marketplace delivers
The supplier is notified of a new deal. Packs the goods and transfers them to the warehouse of the marketplace - independently or through a courier. Then, the marketplace is responsible for delivery to the end customer.
Fulfillment
The supplier sends the goods to the warehouse of the marketplace, relieving himself of all obligations for storage, packaging, and delivery. This option of cooperation is more expensive, but it is justified if many transactions go through the store every day.
Often, a marketplace offers additional services: attracting customers through advertising, promoting a store on the site, automating workflow, solving problems with returns, providing valuable analytical data to merchants, for example, which of the popular products are in short supply now.

What are the benefits of the marketplaces themselves from cooperation with suppliers? It all depends on the chosen monetization method. One of the most common is to charge a commission on every sale (typically 5% to 25%), like eBay, for example. The commission can be paid by the seller or the buyer, or both. In addition, the site may charge fees for packaging goods, warehousing and logistics services, and in some cases, for returning goods that the buyer refused.

Some marketplaces charge suppliers for the fact of accessing the online market (membership fees), placing goods and services on the site (listing), displaying positions on the home page, or prominent places in product categories (featured). There are many options for monetization. It is convenient to work on a mixed model, offering suppliers several payment methods at once. The Ukrainian marketplace Prom does so, combining the classic annual subscription and promotion using its own advertising tool ProSale, with pay per click.
How marketplaces compete for suppliers during a pandemic
2020 was a good year for marketplaces. When the pandemic struck, they already had established supply chains and a broad customer base. And even large chain physical stores that previously avoided cooperation with e-commerce platforms were forced to change their strategy for various reasons: lack of experience in online sales, lack of resources for fully-fledged online business on their own, lack of a well-thought-out logistics system, etc.

At the same time, marketplaces are forced to fight to attract as many sellers as possible to their side. And this is how they do it:
Reduce commissions. Examples: Wildberries have reduced their commission by 2-3 times for certain product groups; AliExpress has zeroed commissions for new partners who join the platform;
Simplify delivery terms. Examples: AliExpress canceled shipping fees for the first ten orders and offered a shipping subsidy for all merchants.;
Simplify the withdrawal of funds. Example: AliExpress has reduced the withdrawal period from 10 to 7 days, on average;
Increase the security of transactions—example: Alibaba's escrow (withholding money) system;
Offer funding — examples: online loans at Wildberries;
Establish a barrier-free entrance. Example: Wildberries have reduced the partners' registration time to 5 minutes and launched online seminars for suppliers;
Expand monetization opportunities. Provide a choice of conditions for cooperation with the site (listing, commission on sales, subscription, etc.).
The fact that marketplaces are 100% aligned with online shoppers' preferences makes them one of the most popular selling channels on the web. However, due to the high competition in the online market, they have to fight for the attention of qualified sellers and brands. And the winner is the one who cares about the benefits of partner companies.

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