Online sales continue to grow, not only due to the Covid 19 pandemic. Zalando recently adjusted its figures to again report growth for 2020 and expects GMV growth of 10-20%. As an online shop, Zalando offers brands two ways to sell their products: As a traditional wholesale business, where Zalando acts as a retailer, and through its in-house online marketplace. What Zalando calls its Partner Program (PP) is also offered by many other online shops. This is called online marketplace. Amazon, About you, La Redoute, Bol, MyToys, Sportscheck or Douglas are some examples of marketplaces in Europe. And with most of them you have the possibility to do online marketplace and wholesale business.
There are so many different ways for brands to sell their products online. Here I focus on selling through an online marketplace in a B2C set-up and wholesale business in a B2B set-up.
1. wholesale business: sales, shipping & finishing
Online wholesale is the sales channel most brands are familiar with. Meet your buyer every season for your order appointment, get a budget based on the previous season's sales and show the buyer the new products for the coming season. You then receive the pre-order for the season, send the products to the online shop's warehouse when the season starts and provide your product data and product images.
Once the products are shipped, you don't have to worry about them anymore. Everything is done, and it' s quite convenient. Next season, you start all over again. Are there additional ways to support your products in sales subsequently? Sure, but you don't have to, however, it's up to you.
This is what the wholesale model looks like. The brand receives a budget and sends the order of products to the buyer. A selection of your brand's top items could look like in the table below. The buyer orders items 1, 2, 4 and 5. He is not interested in item 3 and therefore does not order it. The buyer receives the products and sells them in his online shop at a price of his choice.
The advantage of this model is less risk with your stock. The online shop may or may not adopt your recommended retail price. This is out of your control.
To summarise the online wholesale business for a brand:
- The buyer selects items
- Not all items are being ordered
- You have to work with a limited budget
- The buyer determines the selling price of your products
- Your end customer has no access to your complete product range
- You are dependent on your buyer
- It's a pretty comfortable business model
2. Combination of online marketplace and wholesale business by adding additional stock to selected items
In recent years, many online shops have started to offer brands the opportunity to sell their own products through their marketplaces. This means that you can combine your wholesale business with a marketplace business .
By linking your wholesale business to the marketplace business, you have the opportunity to offer additional stock for those items that have been pre-ordered by the buyer. You may feel that the buyer has not ordered enough of your top items. In our example, 800 pieces of item 1 were ordered wholesale. You then have the option to add another 50 pieces through the marketplace model to meet customer demand.
In this case, you serve as a backup as soon as your buyer runs out of stock of the item. Sometimes this is even the case with "never out of stock" products if the buyer has not reordered quickly enough. As a marketplace seller, you become your own backup when an item is out of stock. However, as the owner of your market stock, you also take the full risk.
Summary on the supplementation of the online wholesale assortment with additional items from the marketplace business
- Higher availability of your articles
- Fewer sold out items for your end customer
- More sales
- The inventory risk is on your side
3. Combination of online marketplace and wholesale business by selling additional items via the marketplace
Your buyer didn't order all the items you were hoping for? You want to show a much larger selection of your brand in the online shop? Or did you get a budget cut for some categories?
Besides adding stock to pre-ordered items, you can also add items through the marketplace that have not been chosen for wholesale ordering. This way you can decide which items to sell and where, or display your entire assortment if you wish. You do also have control over the selling price when you sell directly to end customers. However, depending on the market, there may be price competition for your items if other retailers sell the same products.
This means that you can add extra stock to items ordered wholesale and add further items you want to sell online yourself. This example shows how you add 600 pieces of your top 3 items via the marketplace.
Even if a buyer has selected 20% of your assortment, you can still offer 100% of your product range through the marketplace. 20% as a backup if the buyer runs out of stock, and the remaining 80% as an additional selection for the end customer.
To summarise the combined online wholesale and marketplace business for a brand:
- Brand decides on the range of products offered
- Greater choice for the end customer
- Brand controls the selling price
- More sales
- No external restrictions
- Brand is its own sales hero
- The inventory risk is on your side
4. Only sell via the online marketplace
You didn't get a budget for the coming season? You don't want to sell your products via online wholesale? Or is your brand only offered the marketplace model? This is your opportunity to decide independently which products you want to sell through the marketplace business. You can choose to sell your full assortment, just a few pieces or a curated range of products for each market and country. It's up to you and your options.
Building your own marketplace business means extra work, but at the same time the opportunity to become your own sales hero. You have to set up all your processes for B2C shipping and you have to control this sales channel yourself. Also, you can decide on the selling price of your products and it's also a good and fast way to test new products in my opinion.
The example shows that you have the choice to offer a selection from your assortment in the width and depth of your choice. As you are fully responsible for your marketplace business, you have to order and ship to end customers yourself and are responsible for all steps in between.
To prevent price competition on items already sold wholesale, the marketplace business gives you the opportunity to reinvent yourself and adapt your products respectively. You can consider optimising your assortment and creating entirely new items that are sold exclusively through the marketplace to offer unique products.
At the same time, you have the possibility to customise and diversify existing products. For example, you could create multipacks or matching sets, such as selling a multipack of leggings or a baby romper together with a matching jacket.
To summarise the marketplace business for a brand:
- Brand owns selection of items
- Brand bears full responsibility for the entire B2C process
- Brand controls the selling price
- Turnover restrictions are made by you if at all
- Fully flexible and responsible
- No external restrictions
- Brand is its own sales hero
4 ways you can benefit as a brand from the online marketplace and wholesale business
The 4 best practices - choose wisely!
Up to this point, we have looked at four different ways to sell your products through online shops:
- Only wholesale
- Wholesale & marketplace by adding stock for pre-ordered items
- Wholesale & marketplace by adding additional items that have not been pre-ordered
- Only marketplace
As a brand, you are free to choose which marketplace and wholesale business model best suits you and your products. Remember that each model has its own advantages, but also challenges.
Consider your online sales goals before you start. Wholesale is the more familiar and comfortable business model and carries a little less risk. The marketplace business offers many opportunities to grow your brand. You define your own selling price, are only limited by your own boundaries, e.g. turnover, and are fully responsible for your stock and processes.
Choose wisely! If you need help with this decision, feel free to contact us or use the Marketplace Uni to build your skills. Find our current courses here.
