The online marketplace parasites and how to beat them

The online marketplace parasites and how to beat them

I work in ecommerce, and our company has been selling online for around ten years now. A couple of recent news stories about online marketplaces disturbed me, so I thought I’d chip in with my own thoughts.

Earlier this month, complaints had been raised about the Etsy marketplace, which specialises in original handmade wares.

On Monday, the BBC reported that hundreds of Etsy sellers had received an email from the website notifying them it was actioning its “reserve system”.

Etsy told the BBC payment reserves were used to “keep the marketplace safe” and cover any potential refunds.

Dan, who sold made-to-order wood furniture told the BBC: “Etsy are holding around £7,000 of my money, leaving us to use credit cards and family loans to try and keep our business running and keep food on the table.”

Ceramics seller Rachel Collyer said Etsy was holding £899 of her money, which meant she cannot afford to buy materials to keep producing.

“Etsy U-turn in row over withholding sellers’ money” – BBC News, 2nd August 2023

Then just yesterday, it was revealed that Amazon have also started playing the same trick, though I can tell you that they do have ‘history’ when it comes to holding funds in ‘reserve’ before paying out to its sellers.

The government has demanded answers from Amazon after its recent policy change led to hundreds of sellers unable to access their money.

In a letter seen by the BBC, small business minister Kevin Hollinrake asks the tech giant to explain how it will “mitigate” the impact on sellers.

One seller, Daniel Moore, who sells ink cartridges, says he has £263,000 locked and cannot pay his VAT bill.

Amazon said the policy change had affected a small number of sellers.

The letter from Mr Hollinrake was sent after the BBC spoke to several businesses who say the recent policy change leaves them unable to restock or pay staff and bills.

Amazon’s recently amended policy is to hold back some money from sellers in case buyers demand a refund.

That leads to sellers not having access to their takings for around two weeks, although Amazon says the policy will only hold money from seven days from the delivery date.

This was implemented on 3 August across the UK and EU for sellers registered before August 2016. Amazon said some sellers should soon be able to access some of their funds.

But its email about the policy change was not seen by many EU and UK sellers, and in many cases was automatically sent to their junk folder.

“Amazon asked by minister to justify temporarily withholding sellers’ funds” – BBC News, 12th August 2023

In the case of Amazon, I’m not surprised really – they’ve made it so easy for buyers to get refunds, there’s almost a level of expectation from buyers that they only have to make the slightest complaint about a product, which means they are ‘entitled’ to a refund, without actually having to return the product to the seller.

Now Amazon is slightly different, in that they also sell their own branded products, as well as products from other manufacturers themselves.

But it is worth pointing out that other online marketplaces, such as eBay, Etsy, OnBuy etc, don’t actually retail any products themselves, they rely solely on third-party sellers. These platforms make their money from ‘commission’ or fees from sales made, as well as monthly membership or subscription costs.

If you make a purchase from any of these platforms, you don’t pay that merchant directly. Your payment is made to the marketplace, and they then ‘payout’ to the merchant, usually once dispatch is confirmed, less the marketplace fees of course.

In a roundabout way, these marketplaces have become the retailer of record, rather than the merchants offering their products for sale directly to buyers, as used to be the case with eBay.

If you’re selling products online, marketplaces such as eBay, Amazon, Etsy etc are a comparatively inexpensive way to get your products seen by a huge number of potential buyers, due to the amount of traffic directed towards those sites by (very) aggressive Google and Bing advertising strategies.

But in my opinion, if you ‘rely’ on these marketplaces, you are just exposing yourself, and making yourself vulnerable to their whims and ‘policy changes’, which can leave you out of pocket, as in the above examples.

What’s the point of selling thousands of pounds of goods on eBay, Etsy or Amazon, if it takes you a couple of weeks to actually get that revenue into your own bank account?

By all means, offer your products for sale on these marketplaces. As I said already, they are a great way to ‘attract traffic’, get people interested, and make a purchase from you.

But in the background, get your own website set up, so buyers can purchase direct from you. At the end of the day, you should be able to offer cheaper prices there, because you don’t have to factor in any fees or commission being charged to you.

I know for a fact that ‘savvy shoppers’ (myself included!) might find an item they want offered for sale on eBay or Amazon, and then go looking to see if that seller has a website they can buy direct from.

If your own website is only even slightly cheaper, then you’ll get that business, because the buyer thinks they’ve made a saving.

Otherwise, if someone buys from your eBay, Etsy or Amazon store, bung a card or leaflet in their package that advertises your website for their next purchase. Probably cheaper than spending money on Google or Bing advertising campaigns, and if your customer is impressed enough, then probably far more effective. (Sometimes people underestimate the value of “word of mouth” promotion!)

At the end of the day, these platforms and marketplaces are great for attracting business, but don’t ever rely on them, because they are just parasites, leeching off your own success and endeavours.

Carve out your own destiny, and just ‘use’ them, in the same way they just ‘use’ you.