If I had a dollar for every “Get rich with Amazon FBA” course out there, I could quit working and retire early. Whether these courses are useful or not is irrelevant. The sheer number of gurus selling these methods shows how much attention Amazon has been getting for the past decade. Their net revenue went from $61B in 2022 to over $513B in 2022. However, Amazon is not the only marketplace out there. Everyone knows eBay—I remember waking up early to bid on video games and pairs of rollerblades when I was still in middle school. There is also Walmart Marketplace, which is gaining more and more traction, or Etsy for those who like shopping for handmade goods.

Because of the millions of customers these platforms attract, it can be a tremendous opportunity for entrepreneurs. While selling on marketplaces has its risks and issues, they can still be very profitable sales channels. After writing about the dark side of marketplaces, I’d like to talk about the flip side and go over the main reasons why some companies would consider joining one of these platforms.

Low set up investment

As you know, building a custom website can be a lengthy and costly process. Startup costs can range from a few thousand dollars for basic websites to several million for more complex projects. It requires hiring a team of developers, software engineers, project managers, and graphic designers. Additionally, it can take months, or even years, before the website is ready to open for visitors. An alternative approach would be going with a platform like Wix, Shopify, or WooCommerce. However, even with these platforms, building the website won’t happen overnight and won’t be free.

On the other hand, joining a marketplace is much easier. Unless you are considering marketplaces located overseas (where there may be different regulations or the need to register a local business), the registration process is usually short and only requires a few documents. There may be some subscription costs, but these are rarely prohibitive. The time-consuming aspects may be product listing creation, uploading content, and setting up advertising campaigns, but even newbies can handle these tasks without much difficulty. Finally, another advantage of joining a marketplace is that hiring qualified employees is becoming easier. With marketplaces gaining popularity, more people possess the necessary skills to use them, and it requires less training compared to managing a custom website.

Increased reach and exposure

In 2023, marketplaces like Amazon consistently receive over two billion visitors per month. While other marketplaces may have slightly lower numbers, they still attract a significant amount of traffic. Etsy, for example, receives a billion visitors per month, which is impressive. Here is a chart illustrating the increase in Amazon Prime users in the US over the years.

When you join one of these leading platforms, you can expect a substantial amount of traffic with millions of potential buyers. If you operate within the right niche, offer a compelling value proposition, have a manageable competitive environment, and do your homework right (which means doing proper keyword research, advertising, and internal SEO), you can easily drive traffic to your product pages. Even the initial version of my very first Amazon listing, which was a hot mess, managed to attract a decent amount of traffic.

On the other hand, with a custom website, in most cases, you will need to put in much more effort to generate traffic. You will have to drive traffic from social media platforms, focus on SEO, manage complex advertising campaigns, and implement other strategies. The acquisition cost is usually higher with a custom website for the first purchase, which is why customer retention rate is one of the most important metrics in my opinion.

Another advantage (or disadvantage, depending on how you look at it) of selling on a marketplace is that you receive traffic directly from your competitors. There is often a “Customers also looked at” section where competitor products appear on a listing. This encourages competition but also definitely serves as a source of traffic.”

Enhanced customer trust

On the other hand, while well known brands can also be trusted by customers, new and smaller businesses can have more difficulties building customer trust. Finally, some customers simply refuse to shop off Amazon, and would rather pay a higher price for a product rather than buying it from another source.

When shopping online, 61% of shoppers start their product search on Amazon.com. Not only do customers appreciate the wide product selection and the benefits of their prime membership, they also tend to place their trust in large marketplaces.

Most marketplaces have strict policies and quickly remove scammers from their platforms. They have to protect their reputation and ensure that sellers are legit. Through years of operation, they have built a trustworthy track record that will attract customers. They also feature customer reviews, which contribute to building credibility despite the potential issues with review manipulations. Finally, marketplaces tend to offer secure payment systems with sophisticated security features to protect customer financial information and make sure they won’t get robbed

On the other hand, while well known brands can also be trusted by customers, new and smaller businesses may face challenges in building customer trust. Some customers simply refuse to shop anywhere other than Amazon and would rather pay a higher price for a product rather than buying it from another source.

Built in services

Lastly, a huge advantage of marketplaces is the wide variety of built-in services they offer. One of the main reasons there are so many ecommerce gurus selling “Amazon FBA get-rich-quick guides” is because of the FBA program: Fulfilled By Amazon. Other marketplaces, such as Walmart with their WFS (Walmart Fulfillment Services) program, also offer to take care of logistics for sellers. This is huge because logistics is a time-consuming activity, and requires special expertise. Amazon ships fast and reliably, which is one of the main reasons customers shop on that platform. Not only is this convenient for sellers, it also often saves them money too. Due to the huge volumes of orders, Amazon is able to offer heavily discounted shipping rates to their sellers.

Platforms offer customer service that is often available 24/7, saving sellers a lot of time. Customer service is very valuable to customers, and many of them are not satisfied with a company that can’t answer them anytime they need it.

As I explained in previous blog posts, advertising can be more controversial, but some sellers can see it as a benefit. Advertising on Amazon can be costly but is now necessary to get enough exposure, especially in well established niches and categories. Generally, advertising on these platforms is easier to manage than many other advertising mediums which can be a plus for new ecommerce entrepreneurs.

Conclusion

I believe for most businesses, marketplaces can be a great channel and generate a lot of extra revenues. It makes it easy to get traffic, and handle logistics. However, I see it more as an addition to the sales channel mix, more than a replacement. There is still a ton of advantage of having a custom website, and I think both channels can coexist. There is no one solution that works for every business, every entrepreneur should understand the pros and cons of each channel before making decisions.

I believe that, for most businesses, marketplaces can be a great sale channel to generate extra revenue. They make it easy to attract traffic and handle logistics. However, I see them more as an addition to the sales channel mix rather than a replacement. Having a custom website still has a ton of advantages, and I believe that both channels can easily coexist. There is no one-size-fits-all solution that works for every business, and every entrepreneur should understand the pros and cons of each channel before making decisions.

https://amzscout.net/blog/amazon-statistics/

https://www.insiderintelligence.com/content/online-shoppers-search-on-amazon