Getting Started With Ecommerce

Business model – marketplace buy and sell

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The marketplace buy and sell business model is one of the most common entries into ecommerce selling. The main reason is that it does not require deep experience working with vendors or knowing supply chain best practices. To really work in this business model, you need to really just have access to physical big box stores and know how to create listings on marketplaces. Let me give a specific example of the marketplace buy and sell business model. We will create a fake person named George. George wants to sell on eBay but has no products to sell. George can go into a physical location for a Walmart and walks around. In the various shelves are clearance products marked significantly down. While at Walmart, George can look these products up on his phone to see what they sell for on eBay. If the price on eBay is high enough to cover his costs than go ahead and pick up the clearance items. If the item is not listed on eBay at all, again might be worth picking up the item. If the price is close to what he would pay cost, then he can skip it.

As you can see the marketplace buy and sell model really limits the risk an online seller has to get started as you really only spend your capital unless you identify an opportunity. You are not typically buying in bulk but instead buying a wide range of small quantity items. The benefit is that you can typically mitigate risk with a little research. The negative of this business model is that there is not a path for restocking an opportunity. Additionally you are getting a wide range of products so harder to put a brand around it. Often using the marketplace buy and sell to get into the ecommerce space is a great wide to manage cash flow and begin to grow your business with early wins. Over time you will find products that sell better. As a result you may choose to only focus on buying products in certain categories and cast a small net. You will also expand to not only eBay but try Walmart or Amazon to other channels to see which channel you can sell on with this model.

This type of business model is often called Retail Arbitrage. The good news about this model is that you are not limited to Walmart that I used in the example but often any and every box store like Target will also go through this process of clearance and discounting to move items. This creates more opportunities to add more stock on a normal basis. Another challenge however is that you are a little bound to seasons where stores stock up for various seasons such as back to school or holidays and then go on clearance after. You will need to really ensure you are stocking up during this windows.

Overall the marketplace buy and sell model works. It allows you to get a wide range of stock with fairly low risk and low capital to get started. You can continue to reinvest your profits to buy more stock each time growing your overall business. If you are looking to get started in ecommerce, this is a very low bar for entry and achievable for most.

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