We have partnered with Social Enterprise Alliance to produce a learning series on the growing landscape of conscious online marketplaces in order to equip social enterprises with the knowledge and the tools they need to access these markets and sell their products. This learning guide was produced with the valuable input from leaders from three social enterprises – Kelly Bell from Women’s Bean Project, Allie Sundet from Bright Endeavors, and Derek Sabori from Kozm – to learn about their experiences selling through online marketplaces and share their advice.
This year, 10% of all shopping will be done online, twice the amount it was a decade ago. With this rapid growth, which is projected to continue, has come an increase in the number of online marketplaces on which companies can sell their products.
The conscious consumer movement is also rapidly growing, and there have emerged a number of online marketplaces that are set up specifically to help socially impactful businesses reach new customers. However, many social enterprises continue to sell only through their own websites, potentially missing out on opportunities for expansion of their audience and profits.
This learning guide explores the landscape of online marketplaces, the advantages of selling through third-party marketplaces, and key considerations for your social enterprise.
The Landscape of Marketplaces
There are a number of online marketplaces ranging not only in scale, but also in their focus. Some, including familiar names like Amazon and Walmart, are built for scale, offering a wide variety of products from innumerable companies. Others are more specialized platforms, that offer only products with a sustainable or ethical manufacturing processes, or from companies with some sort of direct social impact, like employment social enterprises.
The diagram below highlights a number of popular e-commerce platforms and where they lie on this spectrum.
Depending on your business model and company size, you may find that certain marketplaces are a better fit than others for your social enterprise. Next, we explore some of the advantages in selling through third-party market places and some of the key considerations before you do so.
Why sell through third-party marketplaces?
Selling your social enterprise’s products on third-party marketplaces can be a great way for your social enterprise to increase brand visibility and access to customers, as well as a way to acquire new customers.
Third-party platforms provide access to a large number of consumers. Simply by listing your products on a new platform will give your products and brand greater visibility to new customers, and allows you to tell your story in a new place. These platforms are constantly driving traffic to their sites, growing their overall audience and, in turn, increasing the visibility of your brand and products. For social enterprises that rely on organic marketing and attempt to keep marketing expenses contained, selling through third party platforms can be an opportunity to reach a large audience with little up-front investment.
Access to customers
While greater visibility is important, the ultimate goal is greater sales. These platforms are working to build communities of customers around their platforms; this is particularly true of those platforms organized a social mission. Selling through platforms that develop communities that are organized around a social mission, allows your social enterprise to sell to a loyal audience that values the mission of your social enterprise.
While the primary goal when selling through third-party platforms is driving sales, there also exists the opportunity to convert new customers into a direct relationship with your social enterprise. Taking steps such as adding newly acquired customers to your mailing list, or including marketing materials in the packaging of shipped orders, allows you begin to build a direct relationship with these new customers.
How should social enterprises prepare?
For many social enterprises, selling through third-party marketplaces can be a great way to increase sales and grow their business. However, this does not mean it is appropriate for every social enterprise. Moreover, every social enterprise should be thoughtful about entering into new marketplaces and should think strategically about the impact that doing so will have on operations, financials, and strategic objectives.
Below, we outline some key areas your social enterprise should consider.
Before embarking on selling your products through these marketplaces, your social enterprise should be clear on what you are aiming to achieve by doing so. It may be tempting simply to want to get your products out there and to reach a wider audience, but if you haven’t thought through what your goals are, and what the outcome of selling on a given marketplace should be, you may not be successful.
Ask yourself: what specifically are you trying to achieve when selling through a given platform? Whether your goal is increased sales, revenue, or brand awareness – or some combination of the three – how will you know whether or not you are being successful? Set clear targets with the understanding that these goals may be different than those you have for other sales channels.
Choose the right platform
Next, you should determine which, if any, of the existing marketplaces will help you meet those goals. When choosing a platform, it is important to choose the marketplace that is going to fit your business model and your current capabilities.
You should consider:
- How does the brand of the platform align with your company values?
- Does the platform cultivate an audience that is likely to buy your products?
- What does the platform require in order to sell, and can your social enterprise meet these requirements?
- What are the costs associated with selling?
- What level of control does your social enterprise have over its branding on a given platform?
Your social enterprise doesn’t necessarily need to begin selling on all the platforms at once. Try starting with one and phase in others as you go. This will allow you to learn your own capabilities and what you may be ready for in terms of engaging with multiple or larger platforms.
Understand your costs
Different marketplaces have different business models: some have fees associated with each product listed, while others have a commission-based model or charge a membership fee to list products. You need to understand your cost of goods and your margins in order to make an educated decision about what is financially feasible to accomplish. This well help you understand the effect the platform’s selling fees will have on your margins and, ultimately, your established goals for selling on the platform.
Depending on the fees charged by the platforms, your social enterprise will likely have lower margins on these third-party sites compared with items sold through your own website. You will need to decide how to price your items on these sites – will you keep prices the same across platforms, or adjust to account for variations in costs? Will the volume in sales make up for lower margins on each?
Determine product mix
Even if you sell your entire product line on your own website, it might not make sense to sell every single product on one of these third-party sites. Again, consider your goals, budget, and bandwidth to determine what makes sense in terms of a product mix. You may want to refine your product mix and focus your efforts on limited range of products based on historical sales, revenue, and costs. Additionally, you may want to tailor your product offerings to match what people are shopping for on a given platform.
Know your capacity
Selling through third-party marketplaces will require additional efforts in inventory management, picking, packing, and fulfillment. Closely consider your existing internal infrastructure and determine whether you have the capacity to deliver. Ask yourself: will you need a specific inventory management system to be able to fulfill these orders? What are the resources that are going to be needed internally in order to manage the system?
Know what you’re getting into
As with any new partnership, it is essential to know what you’re getting into. Make sure that you have done your research and your due diligence on what these third-party platforms are requiring. If there are contracts involved, you may want to bring in legal advice before entering into any sort of agreement. While not common, be wary of any agreement with a platform that requires you to sell exclusively on their site.
As we mentioned above, be clear on the fees associated with selling on the platform, and whether or not that fee structure change with time or scale. There are also smaller requirements of which to be mindful: do your product photos have to be formatted in a certain way? Does your copy have to be written in a certain way? Know what these requirements are in advance, and understand how they impact your operations and your goals.
Be prepared to adapt
Larger, more-established platforms may have set processes in place, where smaller, newer platforms may still be in the process of developing theirs. For either, be aware that there might not be a set checklist of requirements, and that establishing and maintaining a relationship with them is a dialogue. As part of that dialogue, your social enterprise will need to be flexible to meet new demands as many requirements and processes evolve over time.
Challenges of selling through third-parties
Like with any new business relationship, selling through third-party platforms will come with new challenges. It is worth being mindful of what some of these common challenges are so you know what you’re getting into before you do.
If you sell products through your own website, you will likely be familiar with the sales cycle and be able to predict sales volume. On the third-party platforms, however, sales may be less predictable, especially as you’re starting out. This necessitates your social enterprise to be able to scale quickly and meet larger or unpredictable orders as needed.
Any new initiative will require an additional investment in staff time. Social enterprises, like many small businesses, have limited staff bandwidth so prioritization of efforts is important and should tie back to the goals you have established. Should the focus be on your own branded site first? Or should it be on selling through third-party platforms? For any time invested, you want to ensure that you are getting a proper return on your investment.
If your social enterprise is typically a direct-to-customer company, don’t forget that each platform you sell through is a new wholesaler with whom you are working. Be mindful of the time required to build and manage a relationship with them to keep these relationships strong and healthy. Whether it is updating and communicating new policies or new requirements, this workload can add up, and quicker than you might have expected.
In addition to the additional staff time required to fulfill orders, it is worth remembering that customer reviews on platforms often address not only the quality of the product, but also the timeliness of order fulfillment. For many platforms, especially the larger ones, there are strict requirements in terms of how fast you should fulfill orders and how much product you have in inventory at a given time. If your social enterprise operates only during Monday through Friday, and as a result are not able to fulfill orders over the weekend, are you at risk of not being able to fulfill orders with the speed that the customer expects or that the platform requires?
When selling through third-party platforms, know that you are giving up some control of how your brand is represented when it comes to customer service. It is worth considering how a given platform handles customer service: are they going to represent your brand in the way that you want them to?
As you are growing your business through third-party platforms, you will need to think about your storage needs. How are you storing all of the extra raw materials that you’ll need to make products? How will you manage inventory? How will you maintain enough inventory to meet sales?
Be mindful that the inventory management system you currently use for e-commerce through your own site may or may not speak well with the other third-party sites. This means you may find yourself updating inventory, not only on your own site that you manage, but also on each of the platforms you sell through.
Selling on third-party marketplaces can be an effective way for your social enterprise to increase its sales, grow its business, and ultimately be more impactful in delivering its mission. Social enterprises should pursue this opportunity deliberately and clearly, and hopefully this learning guide has provided an overview of some key considerations before doing so.
If you’d like to learn more on this topic, we encourage you to watch the recording of our webinar that features leaders from three social enterprises – Kelly Bell from Women’s Bean Project, Allie Sundet from Bright Endeavors, and Derek Sabori from Kozm – sharing their experiences selling through online marketplaces and offering their advice to fellow social enterprises. The webinar, like this learning guide, was created in partnership with Social Enterprise Alliance, who will be offering a number of follow-up webinars on this topic. We encourage you to check out their site to learn more about the Marketplace series and how to participate.