top 6 levers to online marketplace profitability
I have worked on many marketplace P&L’s and profitability reviews over the years and I think it is important that brands/sellers understand the key nuances of marketplaces. When you are coming at this with experience in other channels, there can be some blind spots and misconceptions, so here are some thoughts on the main drivers of profit on marketplaces and costs to consider:
“rarely does this come without a caveat on the amount of profit required”
1. WHAT A DIFFERENCE A BASKET CAN MAKE
2. DISPATCHING YOUR MARGIN
So when looking at profitability it is important to compare cross border rates, with both cross border and in market 3PL’s and marketplace 3PL’s where relevant/possible to get the full picture on potential profitability.
“it is about finding the illusive balance between profitability and sales volume”
3. PRICING TO SUCCEED
4. RETURNING TO FASHION
- Should they offer free returns, or not?
- What is the cost of offering this?
- What is the potential sales upside?
- What is the cost of not offering this?
“know when you should expect the return so you don’t pull the plug prematurely”
5. ADS TO ADD VALUE
6. BUYING TIME
OTHER THINGS TO CONSIDER
- Marketplace commission rate
- Listing management system costs
- Channel resource costs – internal and/or external
- Customer service costs
- Tax and duty in new markets
- Bulk shipment costs (is using a 3PL/FBA type option)
- Repackaging costs (if relevant)