Excerpt from my book, Passive Income: Create Passive Income Streams with Little to No Investment
A discussion about passive income and making money online invites a more in-depth conversation about online marketplaces and freelancing sites. An online marketplace is a type of e-commerce site where multiple third parties provide products and services with transactions processed by the market operator. Marketplaces offer a wide selection of products and services compared with stand-alone sites. Examples of online marketplaces include:
- Apple App Store
- Creative Market
- Google Play Store
There are many advantages and disadvantages to using marketplaces, which we can review.
Advantages for Sellers (You and I)
- Marketplaces offer plenty of traffic and customers, so they are perfect for making money fast.
- They spend millions on brand awareness and marketing.
- They provide a template or layout, which sellers simply need to populate.
- They host your profile, products, services, and more.
- They take care of processing, financial transactions, and fulfillment.
- They are an excellent and quick way to expand your online footprint and profile.
- Leads and additional sales may occur through having a marketplace presence. For example, a customer finds you on Amazon then navigates to your site.
- It can be inexpensive or less expensive to operate a business on a marketplace compared to a stand-alone site.
- They take care of technical and web development activities.
Disadvantages for Sellers
- You must play by their rules and guidelines, which can constrain your activities.
- It is you against the marketplace since rules often change to benefit their bottom line, not yours.
- If their business goes down, you go down with it, so you must hope competent management is in place (a fifty-fifty chance).
- A significant change in their business model or shift in focus can significantly hurt your revenues.
- Marketplaces tend to give preferential marketing and promotional treatment to their best-selling partners, which can leave you to fend for yourself while still having to share revenue.
- Seller support is usually dismal if you are not a top provider.
- Marketplaces may set a pricing range for your products/services. This may not align with your revenue and profit goals.
- You typically must split/share revenues with them.
- A lack of transparency regarding internal corporate activities means you must hope/trust everything is working as it should.
- They can terminate your partnership for any number of reasons leaving you with little recourse.
- Your profits/payments are usually delayed anywhere from weeks to months while marketplaces and customers benefit from transactions long before you do.
- You do not gain access to customer data—for example, e-mail addresses—even if you are responsible for bringing those customers to the marketplace (customer data and analytics drive a business forward).
- Sales reporting can be inadequate and lack the information you need for effective analysis and decision-making.
- With so many rules and constraints, it can feel like you are working for the marketplace and not working for yourself.
- Search engine optimization parameters may be limited, which could result in fewer opportunities to influence your visibility and rankings.
- You are a tenant on their domain.
As you can see, the disadvantages of using marketplaces far outweigh the benefits. Also, if you must share more than 50 percent of your revenues with a marketplace, this will not work in your favor and equates to a master-slave model. However, if generating income fast is a top priority, or you are new to working online, then marketplaces can be very beneficial especially, in the short term. Over the long-term, however, putting yourself, brand, and assets first before marketplaces and social media networks is the way to build a thriving online business and presence. I prioritize my blog over Amazon, YouTube, and social media sites. I focus on, and develop, my online real estate before anyone else’s.
The most successful passive income earners do not focus exclusively on marketplaces. Rather, they work hard to build their brands one project and product at a time. This group is attracting rewards far greater than most marketplace-only sellers. Furthermore, they experience greater control, anonymity, and freedom.
Ultimately, it does not have to be an either-or decision. You can leverage marketplaces while developing your online platform for a holistic approach. Just make sure you do not let marketplaces get the better of you—but the opposite—so that you do not end up a marketplace puppet or bitch. Making sales is a wonderful feeling, but you need to remain steadfast in generating sufficient passive income independent of marketplaces.