Are Marketplaces Right for Your Business?

The emergence of prominent marketplaces in Asia Pacific (APAC) has made them a key feature in the regional eCommerce landscape. While the marketplace seems to promise easy revenue growth at low operational costs, retailers need to weigh the costs and benefits of selling on the platform. This article gives an overview of the marketplaces in APAC’s eCommerce landscape and highlights some key factors for consideration before launching on a marketplace.

An Overview of Asia Pacific’s Marketplaces


As the world’s leading eCommerce market with an estimated USD $1.5 trillion in B2C sales in 2014[1], APAC is home to many rapidly growing online marketplaces. The prevalence of marketplaces can also be attributed to online customers’ increasing openness to shopping on multiple platforms. Marketplaces’ wide-ranging offerings across different brands and product categories also help attract and retain consumers who are looking for more variety. With a wide customer reach, these selling platforms have proved appealing to retailers looking to explore more revenue channels and gain greater exposure in foreign markets. Marketplaces are also innovating regularly to allow customers to connect with brands at various touch points. On some of the most popular marketplace sites in APAC, up to 50% of customer traffic comes from mobile devices[2], with a significant proportion of sales derived from mobile applications[3]. In fact, marketplaces such as Zalora are preparing for a ‘mobile-only’ market by opening shopping channels on chat apps like Line or Viber[4]. Others are leveraging social commerce initiatives to widen customer reach – Alibaba’s social media channel, Weitao, offers customers easy buying options directly from Tmall or Taobao stores[5].

While global marketplaces continue to have a presence in APAC, local marketplaces have a significant foothold. Alibaba’s Taobao and Tmall marketplaces dominate China, with Gross Merchandise Volume (GMV) growth of 38% and 78% respectively in 2014[6]. The leading marketplace in Japan, Rakuten, has 85 million users nationwide [7] and is known to be highly innovative with a culture of personalized customer service[8]. In South Korea, Coupang takes the lead with more than 20 million local subscribers[9]. In India, where Amazon, Flipkart and Snapdeal are key players, Flipkart led the pack with 22 million registered users, accounting for almost half of the combined sales from these three marketplaces in 2014[10]. In Southeast Asia, prominent online marketplaces Lazada and Zalora have several localized stores across the region[11] and have attracted numerous small-scale retailers looking to grow their businesses in the online space[12]. Lazada’s marketplace site has been experiencing rapid growth, accounting for 65% of its sales revenue in 2014[13]. Its site also had more than 967,000 active customers, while Zalora drew more than 1.6 million registered users as of 2014[14]. With these rapidly expanding consumer bases, marketplaces are quickly becoming a key feature in the regional eCommerce landscape.

On the flip side, not all marketplace platforms can cope with the customers they amass. Reports of infrastructural problems, site crashes during online sale events[15] and poor customer service experiences[16] have been cited frequently. As such, retailers hoping to launch their brands on marketplaces must have an adequate understanding of the shopping platform and consider the potential impact of selling on a marketplace.

Pros and Cons of Selling on Marketplaces



  1. Low Cost of Entry

For retailers with limited resources, starting out on a marketplace is a good way to grow steadily as they can leverage the existing infrastructure and built-in services which marketplaces provide. Retailers may also save on marketing spend to promote their products and drive customer traffic to the site as marketplaces often spend significantly to ensure high visibility of their product offerings, with some marketplaces even advertising products for their participating merchants[17].

  1. Reduced Risk

With the low cost of entry come significantly lower risks. Retailers who are just starting out in eCommerce may find the marketplace platform an easier, more cost-effective strategy in entering the market, without the significant investments. Given the extensive geographical reach of marketplaces, the platform also serves as a good test bed to determine which products sell best in specific markets.

  1. Customer Acquisition

As a one-stop-shop online mall, marketplaces attract millions of shoppers, making them great platforms for merchants to leverage existing customer reach. Forrester also reported that a growing number of shoppers are starting their product searches on marketplaces such as Amazon, instead of search engines. In 2009, only 18% started product searches on Amazon, compared to 24% originating on Google and other search engines. However in 2014, these figures showed a dramatic reversal: almost 39% of US online shoppers initiated product searches on Amazon versus 11% through search engines[18]. For retailers selling through marketplaces, this translates to a massive customer base that is looking to marketplaces for product research, which is why many retailers now consider online marketplaces as an effective customer acquisition tool. Retailers allocate 16% of their digital marketing budgets to online marketplace initiatives and operations[19]. Retailers also have more opportunities to reach customers across multiple geographies, expanding their customer base beyond local markets via cross border commerce.

  1. Localized Sites

Marketplaces thrive in local environments because of their deep insights into local customers’ shopping behaviors and preferences. This gives them the capability of offering services such as localized payment options and customer service. Marketplaces also select their third-party providers based on their ability to meet local demands, which allows retailers to deliver services tailored for their local online customers.


  1. Commission/Marketplace Fees

In order to enjoy the benefits of a marketplace, most marketplaces charge a percentage on each sale and in some cases, a regular fee for participating merchants. This fee amount varies from site to site and country to country. On Tmall Global, merchants pay 3 percent to 6 percent commissions on each sale, while on Rakuten, commission ranges from 8 to 15 percent depending on the product category[20].

  1. Inventory and Operations Management

Merchants selling on marketplaces often face the challenge of dealing with multiple fulfillment partners. Similarly, having a clear overview of inventory levels across platforms and in storage also becomes challenging. Hence, working with a partner that can provide a consolidated view of inventory levels and can streamline fulfillment is very important for efficiency and scalability.

  1. Low Visibility of Customer Data

Collecting and analyzing customer information is essential in providing businesses with insights on the target market and in improving brand experiences[21]. Unfortunately, retailers are faced with limited access and visibility of customer data[22] when selling via marketplaces. As a merchant, you would not own your customer data and thus, would not be able to derive key insights such as how your customers are searching for products, duration on site and popular categories or products. All this information would be critical to better analyze and understand your customers’ shopping behavior, needs and preferences.

  1. Potential Brand Dilution

The perceived image of a marketplace could have a halo effect on branding. With the prevalence of price promotions on these sites, brands tend to find them unappealing due to the potential risk of undervaluing or overshadowing their branding[23]. More importantly, marketplaces tend to offer limited levels of customization, which can impact branding in the long run[24]. For brands with existing online channels, the customer’s experience on marketplaces might become inconsistent with their overall digital ecosystem[25]. Retailers focused on brand building would be often more suited for monobrand sites that allow greater freedom to curate desired customer experiences[26]. This is especially important for premium brands as their key point of difference lies in their ability to create a meaningful, distinctive and memorable experience through their physical stores and their individual branded websites[27].

  1. The Counterfeit Challenge

Marketplaces are also more limited in terms of control over authenticity of products sold on their platform, as illustrated on several marketplaces that sell counterfeit goods despite policies of highlighting zero tolerance for fake goods[28]. This could compromise original products purely by association. To counter these incidents, some marketplaces such as Tmall are developing visual markers similar to QR codes that can be scanned to prove a product’s authenticity[29]. Monobrand sites, on the other hand, usually entail greater assurance to consumers with regards to product authenticity.

  1. Loss of Price Control

Retailers selling on marketplaces have little control over final product prices. When marketplaces implement price promotions to drive sales, there is a possibility that price points may be counter-intuitive to pricing and promotion plans of retailers themselves. This could significantly affect profit margins, as well as compromise the overall brand image and positioning. Retailers who desire full autonomy in price control and greater alignment with overall pricing strategies may consider selling on their own site instead.

Making Marketplaces Work for You


Marketplaces are great platforms to reach to a large customer base and also serve as a community for the end customer who is doing product research or comparing prices across sites. The review function that is often found inbuilt on marketplaces also serves as a way for customers to share feedback and recommendations, making marketplaces a great place to start the purchase journey. For any retailer, a key question is what role the marketplace should have in the overall business, be it an SME or large retailer. For some it may only be a channel for promotion, for others it could be their main eCommerce channel. Retailers must also consider geographic nuances as each market is different. However, for retailers looking to establish long-term branding and a more seamless customer experience, retailers should consider the importance of having a monobrand site. Thus, as marketplaces point to new avenues of growth, retailers can only gain its full benefits by minimizing the potential costs and by ensuring they work with a partner that can provide a seamless experience for their online customers.




[3],,, December 2014
[4], March 2015
[5], June 2014
[7], page 9, June 2014
[10], October 2014
[11], November 2014
[14], August 2014
[18], July 2015
[19], June 2015
[20], June 2015
[22], May 2014
[25], June 2014
[26], February 2015
[27], February 2015
[28], December 2014
[29], May 2015