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Contributed on January 16, 2020

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7 Pain Points Sellers Face on E-commerce Marketplaces & Solutions

Blog: MattsenKumar Blog

From a jumbled repository of information to a well-organized exhibit, the Internet has come a long way. Internet was a geek’s playground until social media and e-commerce happened. From making the first transaction 2 decades ago to exponentially growing into an industry worth $3.53 Trillion, e-commerce has arrived in style.

Today, the e-commerce industry is in a commanding position from where it can influence policymakers and market trends. While e-commerce marketplaces continue to smoothen the life of common people, it is failing to provide sellers the same respite.

E-commerce platforms have certainly made it easier for sellers to reach more people and acquire more customers but there are certain areas that need immediate attention. The increasing number of seller pain points is persuading merchants to stop selling online.

Advantages of selling on marketplaces:

1. Established market
2. Instant gratification
3. Test your product’s acceptability among buyers
4. Well-developed IT infrastructure
5. Buyers pay with confidence

Also Read: Expert’s View: Biggest Challenge Faced by Today’s E-commerce Executive

Seller Pain Points

While millions of sellers are joining the e-commerce landscape every year, thousands of them are leaving online marketplaces too. Growing biasedness of marketplaces, customer-centric approach and frauds committed by customers are driving both small scale and well-established sellers away from online selling.

Seller pain can be best defined as circumstances and measures that are making it difficult for merchants to have a smooth online selling experience. Ambiguous policies, sanctions and heavy charges levied by marketplaces are some of the common seller pains. While a lack of clarity about laws and hefty commissions are part and parcel of selling online, other pains that are impacting online selling experience are:

1. Bracketing

A Narvar study reveals “41% of US online shoppers said that they “bracket” at least some online purchases”. Bracketing is a common practice where shoppers buy multiple versions of a product, try them at home and return the items that didn’t work.

Bracketing is very common in lifestyle and apparel categories, ambiguous data related to style, size and material often coax people into ordering multiple versions of the same product.

Every time a product is returned, sellers have to bear the double cost of shipping, which includes the cost of return shipment as well. Such additional pressure on sellers who are already on the back foot due to heavy discounts can drive them out of business.

The fact that sellers need to pay extra for return shipment is yet another seller pain points that need to be addressed. For example, if the cost of delivering a product is INR 50 then the cost of return shipment is INR 60 because with return the logistic company needs to go the extra mile and pick up the item.

How to control bracketing?

Marketplaces can control bracketing by improving the catalog and offering better insight into the product. Some of the common ways of improving catalog and offering a better understanding of products are:

Catalog Quality Check: Running catalog quality check on products with maximum return requests can prove to be a game-changer. The quality check can assist marketplaces to improve the quality of the catalog that offers correct information related to size, style, and material to shoppers. Such quality check ensures:

• Proper Classification of products
• Products are attributed correctly
• Images are compliant with Internal and Legal Guidelines

Catalog Enrichment: A shopper looking for a watch generally looks for terms like waterproof, kind of glass and material of glass. Through catalog enrichment, such attribute values can be placed correctly and highlighted to offer better exposure.

2.  Duplicate Listing & Brand Interference

While genuine sellers are struggling to get their listing approved and drive sales, some desperate sellers are resorting to illicit activities like creating a duplicate listing. Marketplaces urge sellers to list their products under the already created catalogs and not create a separate listing for every product.

When duplicate listings are created, genuine sellers suffer. Marketplace algorithms are designed to rank the sellers with best reviews, fast delivery and quality post-sale support at the top but fake sellers are stealing ranks by creating duplicate listings.

Brand Interference is perhaps the biggest side-effect of duplicate listings. With a duplicate listing, incompetent sellers can list fake products as genuine and acquire higher ranking. With wrong products ranking higher in search results, genuine products and sellers will be impacted. Duplicate listing not only deprives genuine sellers of a fair opportunity but also results in increasing return rates.

Also Read: Seller Management: Best Practices for Online Marketplaces

3.  Logistics & Pricing

Sellers often find themselves struggling with logistics and increasing operational costs. Initially, marketplaces offered a heavy discount on logistics but with increasing competition and dipping profits, stores are now charging sellers heavily for delivering products.

Since marketplaces build fulfillment centers in remote locations, sellers find it tough to get their products stored there. The increasing cost of transportation to the fulfillment center is one of the biggest e-commerce seller pain points.

Also, the lack of fulfillment centers in big cities is adding to the overall cost of selling online. With a huge percentage of orders coming from bigger cities, sellers have to dole out extra bucks to get their product delivered as soon as possible.

Since Amazon has different shipping charges for products being delivered to different areas, sellers have to spend differently to get their products delivered to varied locations within the country. Amazon India divides the geography into three regions namely local, regional and national and the charges vary accordingly.

With three different prices applicable on one product based on the region it is being delivered to, makes it tough for sellers to keep a tab on profits. Sellers face difficulties managing tax books and file returns.

4. Customer Focused & Lack of Communication between Seller and Buyer

One-click return, no questions asked return and instant refund are perhaps some of the lucrative offerings used by marketplaces. While these offerings have worked wonders and helped marketplaces acquire customers abundantly, they have impacted sellers negatively.

While the Fashion category accounts for $6 billion of the total gross merchandise value of online retail in India, it also accounts for maximum returns.

Spokesperson of Federation of E-commerce Sellers said “one-click return window leave sellers from fashion category vulnerable because 30 days is a long period and people tend to return products once they have found better products. The huge number of returns leads to the same product being tried by 4-5 persons. Lack of margins to wash and repack garment leaves us unshielded.”

With electronic gadgets the return rates are low but the cost of handling returns is way too high. Buyers often return gadgets because they fail to operate it, which impact sellers heavily. Sellers can easily assist buyers to run a gadget properly but lack of communication between seller and buyer often leads to a product being returned.

How marketplaces can make sellers feel valued?

Some companies have established Marketplace Protection Fund Team under Seller Experience verticals. These MPF Teams are responsible for acting on grievances raised by sellers. The team goes through the case intricately, weighing on every aspect of the order and decides whether the seller needs to be compensated or not.

Having one such team that looks into buyer and logistic abuses and help sellers receive compensation for financial losses can help marketplaces control seller churn.

5.  Lack of Store Customization & Prohibited Products

Organic and indigenous products are very popular among the masses but lack of store customization options and high commission fees is keeping sellers from onboarding. Marketplaces like Amazon and Flipkart are helping brands establish stores on their platform but the cost of customization is very high. Small scale businesses that deal with organic and indigenous products are unable to shell out such big money, which is keeping them from getting online.

Lack of funds and support from growing marketplaces is perhaps one of the biggest seller pain points. Apart from the excessive commission fees, marketplaces have also restricted sellers from selling some items. A huge number of products like sexual wellness and burial artifacts are banned due to government policies but then marketplaces have kept some verticals for their choice of partners. Such unfair ground is one of the many seller pain points that need to be addressed swiftly.

Must Read: Challenges of E-commerce Catalog Management

6.   Delayed Pay-outs

Small scale sellers function with very little cash in hand. They are dependent upon frequent payments to keep themselves in business but 30-day return and one-click exchange policies are making it difficult for them to sell online.

A Quartz article titled “E-tailers is struggling to cure Indians of Cash-on-delivery addiction” illustrates the dilemma with COD payments. Since countries like India and the Philippines are heavily dependent upon Cash on Delivery, seller pain increases.

The issue with cash on delivery orders are:

• It doesn’t reflect on the balance sheet immediately
• Accountability issues
• The additional cost of handling
• High risk of delivery rejection

Also, unlike online payments, money from cash on delivery takes up to a week to reach e-commerce companies, which takes its own time to process it further and pay sellers. The COD cycle is long and full of terrors.

7. Frauds by Customers

While the marketplaces continue to be extremely customer-centric and skewed toward sellers, abuse by buyers is also adding to the seller’s woes. The increasing number of cases, where fake or damaged products were returned has left sellers with no choice but to stop selling online.

Credit Card frauds and card not found frauds have kept sellers away from online selling for a long time now. Marketplaces have invested in developing a cyberinfrastructure that relies on machine learning, 3D secure paradigms for identifying and confiscating frauds before it impacts marketplaces.

Machine Learning and 3D secure authentication system can identify chargeback and card not frauds and help marketplaces function under a safer blanket. Sellers can now shed their worries related to online frauds and start selling online with confidence.

Conclusion

An excerpt from Praxisga insight suggests “A 1% churn in sellers leads to a cumulative value loss of anything between 2-3% over a 2 year period. That means, if your platform is doing $100M of annual sales, a 1% churn is causing you a value loss of $2-3M. Imagine the loss with 20% and above churn levels. But the bigger problem is that churn is also silently killing your business and eroding your value proposition to customers, which has an even bigger value impact.”

Amazon alone has 8 million sellers selling over 3 billion products worldwide. The e-commerce growth story has just begun and it is expected to take over retail transactions completely by 2040. In the process, millions of sellers and billions of buyers will join the e-commerce landscape. Marketplaces will have to function as a guarding angel for sellers and ensure they are compensated well because they form the backbone of a successful e-commerce system.

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