Third Party Marketplaces

Through third party marketplaces such as eBay and Amazon, buyers can purchase new and used goods sold directly by a third party company or individual.

Users can actually sell practically any item through websites such as eBay with no upfront cost at all, provided the item pricing is sufficiently low (eg £1 per listing). Although this may seem like a low figure, due to the auction format of eBay, the final sale price can increase dramatically if there is sufficient interest in the item and multiple bidders enter into what is known as a “bidding war”. Add to that the postage charge, chosen by the seller, and it is certainly viable for an individual or would-be entrepreneur to make significant profits whilst paying no upfront capitol.

For more expensive items, eBay would charge a listing fee. For example, if the starting price was listed at £50, eBay would charge the seller a small fee (£1) to put the item up for auction. They also take a cut if the item sells; this is referred to as the Final Value Fee. eBay would normally take 10% of the final selling price, not including postage fees. Money transfer companies like PayPal will also take a small portion of the incoming amount if the payment is made through them. However, this commission is relatively small and more or less negligible.

Paid competition

One of the main disadvantages for selling large amounts of goods through third party marketplaces is the competition from the parent site. For this reason, companies like Macy’s, Buy.com and Gap have pulled their items out of Amazon Marketplace. The problem exists where the third party merchants sell the same items as Amazon.com, this means that the third party vendor is in direct competition with Amazon, providing them with valuable market information and paying them for the privilege.

Tagged e-Business, Third Party Marketplaces