International e-commerce: Advantages and disadvantages of marketplaces [5 reading tips]
Cross-border e-commerce is booming. Consumers are increasingly buying online and are increasingly attracted to foreign brands and retailers. Cross-border retail is, therefore, a great opportunity for brands and retailers looking for growth. But entering this market is not easy and requires a lot of preparatory work.
One of the questions that you should ask in advance is: Which channel offers the greatest opportunities in the target market? Do you start with your own localised version of the online shop or do you test marketplaces like Amazon, eBay, Tmall (Alibaba) oder JD?
Getting started with international e-commerce via the marketplace is not only worthwhile because of the lower initial costs. There are also countries where marketplaces are worthwhile because of user preference. In China, where Tmall and JD are the market leaders, online retail takes place in marketplaces primarily. In fact, brands like Burberry, Estée Lauder, Swarovski or RayBan, and others have opened stores on Tmall. In addition, retailers multiply their customer base via international marketplaces.
The door to marketplaces through interfaces
The integration of the marketplace with your own backend system can be simplified by integrating an interface. Using an interface, a channel doesn’t have to be maintained separately, but data can be exchanged between the respective commerce solution and the marketplace. For the development of an interface or the use of a suitable marketplace middleware, it is advisable to work together with an experienced digital agency.
Key data of a marketplace interface is product data, order data, and status data.
- Products and categories with their information (prices, pictures and description).
- Order data (address and payment data)
- Statuses (availability and order status)
Marketplaces, on the other hand, try to divulge only a small amount of data to companies. In particular, customer data and analysis data often do not force marketplaces out voluntarily. In order to be able to offer a proper order history, the status of the order has to be transferred, as the suppliers, if they do not rely on dropshipping, take over the shipping themselves. This distribution of order data varies greatly from marketplace to marketplace.
What are the main advantages and disadvantages of a marketplace?
For international e-commerce projects, it may be good to enter a marketplace to gain a foothold – especially if you do not have a very large budget at first.
We’ve summarised the advantages and disadvantages of a marketplace for international e-commerce projects:
- Less effort and risk
- Predictable costs
- Fame and reach of marketplaces
- New markets can be tested
- Fast test results of different pricing strategies
- Low technical entry barriers
- Customer data belongs to the marketplace
- Less control over your own brand experience
- Dependence on the marketplace in terms of design and service
- Customer expectations must be served in line with the marketplace: Service inquiries, delivery times, returns
- Adaptation of interfaces and preparation of product data according to marketplace specifications
- Comparable products are subject to great competition and price pressure
According to a recent study by eBay and ECC, 79 per cent of respondents agree that online marketplaces offer advantages over online stores by making it easier to sell products internationally. But also consumer habits in international markets have to be considered. In particular, for the Chinese market, it is advised to sell through marketplaces, because Chinese consumers, unlike European customers, rarely visit online shops, but rather shop via online marketplaces such as Tmall (Alibaba) and JD.com.
Amazon and eBay, however, play no role in China, but already do in the rest of international retail. In fact, every 1.7 seconds a retailer from Germany sells something on eBay abroad.
Successfully globalising your business
Even if the effort and risk are higher than when entering new markets via the marketplace, an online shop can be the more worthwhile first step into a new market. A copy of the online shop in the national language can serve as an initial test environment. Of course, adapting the shop to local standards is indispensable in the long term.
For example, you need to consider not just the language, but also the official currency, and the most popular payment methods. You have to set the tone in marketing. And content management and product data also play a major role in the conquest of the international market.