While the internet made it easier than ever before for a company to sell goods to a global audience, it has also empowered a second phenomenon: marketplaces. Large online retailers like Amazon and WalMart capture an incredible level of demand due to their power in search rankings, and they have expanded their supply by partnering with sellers—like you. If you have a product that will perform well against the kind of competition these large marketplaces feature, they can be a powerful vehicle for increasing your audience and, by extension, your sales.
MARKETPLACE VS. DROP SHIPPING
There are two basic models used by these large online retailers to partner with sellers: a marketplace model and a drop shipping model. Each has specific pluses and minuses, so it’s important to do a full analysis to determine which is best for your business. In general, a marketplace model is more transparent to the customer, a drop shipping model is less transparent to the customer. Let’s take a closer look to see how each model functions.
MARKETPLACE
With a marketplace model, the retailer is transparent about the fact that they are selling goods that are made and shipped by a third party vendor. If the maker of the goods has a strong brand name, a marketplace model can be advantageous to both parties. The retailer gets the added cache of carrying a name brand. The brand gets increased exposure through the retailer’s marketplace. Here are some advantages of a marketplace model:
Sellers typically set the price of their goods in a marketplace model. This is not the case with a drop shipping model.
Sellers that have high return rates on their merchandise can benefit from using a marketplace model because the customer communicates directly with the seller in handling returns.
DROP SHIPPING
With a drop shipping model, the retailer presents the product as if it were their own. Potential buyers don’t know that the product is being manufactured and shipped by a third party. Drop shipping can be a good solution for a company that has a strong product, but not a strong brand name. The arrangement gives the maker of the product the added cache of the retailer’s brand. Here are some advantages of a drop shipping model:
Sellers don’t have to handle returns. The retailer is responsible.
Sellers may not need to focus on marketing, freeing up resources to optimize production and distribution.
Selling through a large retailer can give your business a huge boost, but it’s a complex operation with many moving parts. If you’d like to talk through best practices to see how your company could best utilize a marketplace or drop shipping model, we’d be happy to help. You can call us at 1-866-289-9010 or email us at sales (at) owd (dot) com.
