The Rise of Multichannel Ecommerce Selling
One of my favorite scenes from the movie Thank You For Smoking is when Nick Naylor, a lobbyist for big tobacco, discusses with his son, Joey, which ice cream is better: chocolate or vanilla. Their argument goes as follows:
Nick Naylor: OK, let’s say that you’re defending chocolate, and I’m defending vanilla. Now if I were to say to you: ‘Vanilla is the best flavour ice-cream’, you’d say…
Joey Naylor: No, chocolate is.
Nick Naylor: Exactly, but you can’t win that argument… so, I’ll ask you: “So you think chocolate is the end all and the be all of ice-cream, do you?”
Joey Naylor: It’s the best ice-cream, I wouldn’t order any other.
Nick Naylor: Oh! So it’s all chocolate for you is it?
Joey Naylor: Yes, chocolate is all I need.
Nick Naylor: Well, I need more than chocolate, and for that matter I need more than vanilla. I believe that we need freedom. And choice when it comes to our ice-cream, and that Joey Naylor, that is the definition of liberty.
Well, it helps shape the answers to the classic ecommerce debates of “Should I sell my products on eBay or Amazon?” or “Should I sell on a marketplace or open my own hosted store?”
My goal in this article is to show you that the debates themselves are flawed. The answer to these questions should be that you sell your products on eBay AND Amazon, and that you should sell on marketplaces AND a hosted store. As an ecommerce entrepreneur, you should be everywhere with your products, and build a multichannel ecommerce selling empire.
What is Multichannel Selling
Multichannel selling is having your products for sale on multiple platforms, including ecommerce platforms, various marketplaces, and offline. In years past, many would consider multichannel as just having a brick-and-mortar store and an online presence. This strategy has since evolved into not only offline and a hosted store, but to many different marketplace channels. Before we get into the nuts and bolts of how a one-man ecommerce company or a large ecommerce company can implement a multichannel selling strategy, let’s look at the different channels of online selling.
Channels of Multichannel Selling
Before we get into how to properly run your multichannel ecommerce business, let’s first clarify a few things about the different channels of multichannel selling. All of the following are ways to sell your physical products. There are benefits and drawbacks of the different ecommerce platforms, marketplaces and offline selling.
Ecommerce platforms are the online selling equivelant of your “retail shop.” This is your online real estate where you control the look and feel of your brand, share stories through your own blog, and take orders. Store owners can build out their customer list for email marketing, an option which is not always available through marketplace selling. The two types of ecommerce platforms are: hosted or self-hosted.
This is a software subscription service model where you pay a company to manage the technical side of your ecommerce store. They are cloud based solutions, where the company manages the server configuration, the bulk of the coding, and security of the site. The user can access their store from a web browser to design, launch, and run their online store. Two hosted ecommerce sites in the spotlight are Shopify and BigCommerce
- Shopify – Shopify is a platform that allows entrepreneurs to manage every aspect of their online business. You can choose from a number of free or paid templates to get started and change the design to fit your brand. In about an hour you can get your online business running and start taking orders. Shopify has a large developer partner program with apps that allow you to connect with other ecommerce software that can help fill in missing components of your management system.
- BigCommerce – Another popular hosted software is BigCommerce. This software contains similar functionality as Shopify in order to launch an ecommerce store. Built in ecommerce SEO helps your pages get more views and more sales. BigCommerce has a smaller “expert” base than Shopify if you need help with design or marketing, but it’s still a solid hosted ecommerce site solution.
This method requires the entrepreneur and his team to manage the server hosting and code of the website. This allows for more customization, but a knowledge base of coding by you or someone on your team is needed.
- Magento – Magento has an open-source or enterprise product. The open-source option allows you to download a code for you to host on your own server. This allows for maximum customization for your site. With appropriate programing knowledged, you’re are able to create a back-end workflow for specific commands. Many of the largest top ecommerce sites run on this platform because of their completely dynamic system. When you start adding extensions to Magento, you will likely need to hire a Magento developer due to the complex programming aspect.
- WooCommerce – WooCommerce is an extension for WordPress. Those familiar withthe WordPress platform will find this easy to navigate. Like Magento, it allows for more customization, but it doesn’t require the same coding experience. WooCommerce makes money by having you purchase plugins and addons, which would not require much development know-how.
Marketplaces are sites with information about third party sellers and products. The marketplace handles the processing of the sales. They make money by driving traffic to their site and charging for services to third party sellers. The top marketplaces for online sellers are Amazon.com, eBay, Etsy, Rakuten, and Jet.
- Amazon.com – Amazon.com is the world’s largest ecommerce marketplace, drawing in hundreds of millions of customers to its site. Not only does Amazon.com draw in a large customer base, but it provides the incredible service of Fulfillment by Amazon (FBA). The FBA program allows entrepreneurs to send in their products to Amazon’s fulfillment centers to fulfill their orders and manages customer service inquiries.
- eBay – eBay is an auction style marketplace, where you can list a product and customers will bid on it. When the time you designate is up, the customer that has the highest bid wins the auction. It is a great tool for testing the demand and possible price for products if you are unsure about what you are going to sell them for.
- Etsy – Etsy is a marketplace for “hand-made” products. Customers will often pay a premium for these products because of the added value of the personal touch. Etsy has low entrance fees and a strong communication dashboard to interact with customers, which makes it a perfect online marketplace for certain sellers.
- Rakuten – Formerly buy.com, Rakuten ranks as one of the top 3 ecommerce companies in the world. Their professional seller program is $33/mo with referral fees for certain categories.
- Jet – Jet.com is a newcomer to the ecommerce Marketplace.They use a sophisticated software and algorithms to get the customer the cheapest price. In order for the Jet.com business model to work, they need a large customer base, which forces them to do a lot of marketing. This is great news for sellers that will reap the benefits of added marketplace traffic without the cost of advertising.
You often hear that online sales and ecommerce in the US has been growing about 17% every year. What you don’t hear is that about 90% of total retail sales still occur offline and in person, while only 10% of the total retail sales come from online. This can come from trade shows, brick and mortar stores, and local markets.
Multichannel Selling in Practice
Now that we know the different channels that go into a multichannel selling strategy, let me show you, step by step, how to run and manage your business. The essence of this business model is getting in front of the most number of potential customers by utilizing the core competencies of each platform your business will operate on. It will use Amazon FBA for order fulfillment, Stitch Labs for inventory management, marketplace integrations (Amazon.com, eBay, and Etsy) for sales traffic, and your own branded ecommerce platform (Shopify) for marketing, branding, and sales.
Step 1. Sign up and list all of your products on Amazon FBA
Amazon FBA will be the backbone of your order fulfillment (i.e. how the customer will receive the product).
Step 2. Open up accounts and list all of your products on all applicable marketplaces
In order to get in front of the most number of customers and have the highest chance of getting sales, your products must be where your customers are.
Certain customers shop exclusively on certain channels:
- A given customer may simply prefer eBay’s bidding platform.
- Prime members might now only use Amazon to purchase their products because they paid for a membership there and need to justify it.
Step 3. Start an ecommerce store on an ecommerce platform
I recommend using Shopify because of the ease of getting a site up and running quickly, and their strong, free design themes.
Having your own ecommerce platform will allow you to make a higher margin per product than you would on a marketplace.
Step 4. Use an inventory management system to integrate inventory data, and order fulfillment
Keeping inventory data consistent for your business across multiple stores and marketplaces will help prevent out of stock items and allow you to make better business decisions based on sales trends.
I recommend using Stitch Labs for several reasons:
- They have the greatest number of platform integrations
- You can keep track of all of your customer and supplier data in one place
- They sync with Amazon FBA
Step 5. Manage inventory and orders
Your Amazon orders will be fulfilled automatically, but sales from your other platforms need to be fulfilled.
Stitch offers a Fulfillment with Amazon button that allows you to ship orders from other marketplaces by way of your Amazon FBA inventory.
Step 6. Integrate accounting and tax software to track sales
Stitch has a function to integrate your Xero accounting software to track your sales and assess financial performance.
The Future of Multichannel Selling
Now that we have covered the channels of multichannel selling, and how to do it in practice, what does the future hold for multichannel selling? Based on current trends, it is safe to say that there will be:
- Greater integration of partner software focusing on core competency
- Higher revenue for multichannel sellers
- More ecommerce entrepreneurs employing a multichannel selling strategy
Greater Integration of Partner Software Focusing on Core Competency
In the past, monolithic companies like Microsoft and Oracle would sell you the entire suite to run your company. The trend now, specifically in the ecommerce space, is to run several different softwares that communicate with one another using APIs.
For example, utilizing Amazon FBA for order fulfillment, Taxjar for sales tax management, Xero for accounting and Stitch Labs for inventory management.
When used together, these separate ecommerce software companies create a web of interconnected services and processes to run a successful business. As more companies come out with software focused on small niche aspects of ecommerce, you will be able to integrate them with your overall system.
Higher Revenue for Multichannel Sellers
Using the data of all the store owners using the Stitch Labs software, Stitch analysts concluded that retailers who sell on two marketplaces see 190% more in revenue than those who only sell only on a single marketplace. This trend will continue due to the growth in ecommerce. As traffic across marketplaces increases, the tide of sales will rise for all sellers on every platform.
More Ecommerce Entrepreneurs Employing a Multichannel Selling Strategy
In order to stay competitive, ecommerce entrepreneurs need to grow their revenue and profits. As mentioned before, being on multiple sales channels gets your product seen by more potential customers, and increases awareness of your brand. Those that do not employ a multichannel strategy are at high risk as well. What if Amazon.com decides they will no longer support third party merchants? or your account gets suspended on eBay? or your brick and mortar store loses the amount of traffic it once had? Having a multichannel sales strategy diversifies your sales to protect you from these risks.
Are You In On Multichannel Selling?
When you’re arguing with your friends and business partners about what the best ecommerce channel is, and one of them tells you that it’s Amazon, simply say: “I need more than Amazon FBA, and for that matter, I need more than a Shopify store, I believe we need freedom and choice for our customers when it comes to which sales channel they can purchase from.”
And that folks, is the definition of liberty.
About the author:
Reed Thompson (@reedmthompson) is a partner at AMZHelp.com. He has built a 6-figure multichannel ecommerce company utilizing the tools and strategies above. Reed loves to answer Amazon FBA and ecommerce questions, you can find him on Twitter @ReedMThompson.