Challenges in Adapting Traditional Business to an E-Commerce Marketplace

So you have a brick-and-mortar business going on for a while. But you’ve been hearing all the excitement about e-commerce marketplaces and how they’re the cool way to shop these days. Several brick-and-mortar retailers have adapted with the trend by using e-commerce to expand their business in the past few years.

Williams-Sonoma, an upscale homeware retailer has used the web to expand to more than 100 countries. Its online store now accounts for 44 percent of its sales. UK retailer Marks & Spencer is also expanding online with a recent $1.5 billion investment in logistics, IT, and systems. If you’re thinking about joining the marketplace boom for your business, whether it’s an extension of your physical store or switching to an e-commerce marketplace altogether, there’s a few things to think about:

Joining a marketplace

When you already have your own brand established through your physical store, it takes an effort to stand out in a pool of other brands in a marketplace. To be able to differentiate yourself from the others, a couple of things need to be considered.

Setting up a competitive price for your products is crucial, especially if other brands are also offering the same products. Joining an online marketplace also means being exposed to a larger audience; hence you need to have a consistent availability of supply when experiencing high volumes of orders.

Being able to provide stellar customer service through communications via phone and email will help you gain favorable reviews and ratings. Lastly, adapting with online transaction methods such as PayPal or Stripe is crucial as that’s how payments are managed.

Starting a marketplace

A marketplace is a collection of various merchants offering products and services. If you’ve decided to start your own marketplace instead of joining an exciting one, there are a few things to consider.

One of the biggest challenges when starting your own marketplace is gathering a consortium of like-minded merchants. Defining the different types of associations based on your market can help you narrow down the merchant groups. Once you’ve reached out to related organizations or community groups, it’ll be easier to build the right merchant group for your marketplace.

Similar as in joining a marketplace, obtaining online merchant facilities — such as setting up accounts, easy categorization of products and verification process — are necessary. It’s not uncommon for business owners to have high expectations that more sales will occur on a marketplace. In reality, much more needs to be done to get your marketplace off the ground. It’s important to set a realistic goal and have a plan B when targets are not met.

Preparing for freight and other issues

It’s not an easy task to create a streamlined flow of goods shipping or service delivery. Prepare to solve multiple logistics issues that may arise, from late pickups to lack of delivery facilities. For shipping items, your choice of shipping company needs to be strategic as well. Negotiate better rates on freight as an individual and not using a marketplace courier.

As a merchant on a marketplace, you can contact the marketplace operator for collective buying of freight services to save overall costs. If you are the marketplace operator, you might want to approach compatible and complementary product vendors.

The best place to look is any type of association or organizations associated with your product, some of which you might already be a member of. To lessen logistical issues in your marketplace flow, think about a way to consolidate the management of your inventory in one system.

Existing brick-and-mortar businesses have a head-start compared to new e-commerce marketplaces. They have the advantage of having an established brand and customer base, already knowing their suppliers, and having credit terms with them. They also know what to expect in terms of volumes issued as well as determining when drop shipping can be used. Joining an existing marketplace or starting up a new one can bring a lot of growth to your overall business. However it’s good to know what to expect and how to overcome the challenges.

About the writer: Sten Ivan writes for Arcadier, a SaaS company that powers next generation marketplace ideas. Follow Arcadier on Twitter, Facebook, and LinkedIn for news and updates.

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