small blocks displaying shopping carts on top of a laptop
Specialty online marketplaces allow newer, smaller brands to grow their audiences and make names for themselves. — Getty Images/William_Potter

Narrow and deep. Friendly and cheap. E-commerce marketplaces that cater to a specific product niche have an edge over industry behemoths in some regard — but there are trade-offs for brands to consider before selling on these specialty platforms.

The emergence of niche marketplaces is driven by consumers seeking an experience distinct from the market heavies, according to retailers and industry experts who spoke with CO—. While shoppers on Amazon, eBay and Walmart.com are typically in transactional mode, those visiting niche marketplaces tend to be in a discovery mindset, receptive to products and brands they have not encountered anywhere else.

Some 35% of consumers shop niche marketplaces today, with top destinations focused on one of three categories: apparel, sneakers or home, according to Internet Retailer’s 2019 report. Among the factors driving the surge in new niche marketplaces:

  • Community: Niche marketplaces cultivate interaction among like-minded buyers and sellers. While Houzz encourages consumers, designers and contractors to exchange home remodeling ideas and photos, menswear marketplace Grailed nurtures community via reddit discussion boards.
  • Expansive offering: Because they do not hold inventory, niche platforms feature deep selection in a narrowly defined product category, shining a spotlight on newcomer brands that might otherwise get lost on mega marketplaces.
  • Qualified buyers: Specialized marketplaces target enthusiasts in a particular category, attracting customers who are more engaged and motivated to buy, Sean Flannagan, founder of A Lively Experiment, told CO—. Be aware, said the former Wanelo and Etsy marketplace executive, “Customers you get through a marketplace are the marketplace’s customers and you often don't receive access to customers’ email addresses or permission to email them on your own.”
  • Customer acquisition: While Flannagan’s point is valid, 44% of consumers who discover a brand on a marketplace ultimately visit that brand’s website to make subsequent purchases, Internet Retailer reported. That enables a brand to market consumers directly to build loyalty.
  • Personalization: Some marketplaces (not all) leverage data to customize content. Shoprunner’s District fashion marketplace tailors the experience to individual consumers, said Shreena Amin, director of product at Shoprunner, at the June IRCE@RetailX conference.

The ability to cultivate a community of people with shared interests is a key advantage niche marketplaces enjoy, Amin said.“People are passionate about these niche spaces. They get information from influencers. They want to share what they are doing and mega marketplaces are not designed to deliver that community.”

Flannagan said, “The best niche marketplaces speak clearly and directly to their communities, and are very thoughtful and intentional in their presentation. They don't feel anything like Amazon and they don't try to compete with Amazon.”

The best niche marketplaces speak clearly and directly to their communities, and are very thoughtful and intentional in their presentation.

Sean Flannagan, founder, A Lively Experiment

Discovery is another big draw.

“That’s where niche marketplaces have an advantage,” said Fareeha Ali, director of research strategy at Internet Retailer. “They do a better job of replicating an in-store experience browsing and shopping around. For example, if you shop Orchard Mile, a luxury apparel marketplace, and go to the Bags section, you can browse around different purses as you might in a store. It’s more palatable for consumers because they’re browsing a very specific type of bag: high-end luxury.”

Steals.com is a niche marketplace targeting family-oriented women with daily deals. “Our customers range from first-time moms to first-time grandmothers who love to spoil their grandchildren and preserve family memories through scrapbooking,” Steals.com CEO Rett Clevenger told CO—.

He said customer orders moving through marketplaces equipped with the right technology are more efficient, involve fewer touches and lower cost than traditional e-commerce transactions. Steals.com does not accept counterfeit goods or items from outside North America; only sellers with experience shipping direct to customers are accepted.

Retailers said selling via niche platforms can be more profitable than larger marketplaces.

[Read: How to Sell Products and Services on Social Media.]

“Our margins are better on niche marketplaces,” Kelly Ennis, director, marketplace strategy, analytics, Jam Paper & Envelope, told CO—. Jam Paper sells on 20 marketplaces.

“We also see a larger percentage of customers buying first on the niche marketplace, followed by our website for the next orders compared to Amazon customers,” Ennis added. “Our Amazon customers typically continue ordering on Amazon.”

About 50% of consumers who discover Tech Armor on niche marketplaces eventually buy directly from the phone accessories retailer, Director of Operations Peter Marlenga told CO—.

However, both Marlenga and Jam Paper’s Ennis emphasized there are challenges selling on specialty marketplaces. Updating product listings can be an arduous process, for example, and niche marketplaces seldom offer analytical tools or data available from the bigger marketplaces.

Marlenga said it’s essential to evaluate automation capabilities. “The first thing to think about is, ‘Will my multichannel tool connect to the marketplace?’ If it doesn’t, then you have to say to yourself, ‘How much time and energy is my team going to spend getting all the listings in there?’” One marketplace sent Tech Armor customer orders via spreadsheet, requiring manual steps that did not justify the revenue generated.

“Engaging with any new marketplace has a cost in terms of time and energy spent, no matter what software or services you may be using to streamline your efforts,” Flannagan said. “Make sure you regularly evaluate your performance and return on each channel, and adjust accordingly.”

Still, Marlenga, added, “I think it is worth trying it, for just a little bit, just to see what happens, because you never know what’s going to hit.”

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Published July 24, 2019