While everyone is trying to get their products listed on Lazada and Shopee, here I am telling you why selling your products on Lazada or Shopee alone is NOT good enough.
Before that, let’s try to understand what makes marketplaces like Lazada and Shopee so attractive to both sellers and buyers.
Lazada and Shopee are great marketplaces
One thing I must clarify is, neither Lazada or Shopee are online shops. They are actually called marketplaces. I’ve noticed this error in many blogs. Marketplaces function as a common place for sellers to list their products and buyers to buy them. Marketplaces are more like ‘middlemen’.
In fact, to come and think of it, Lazada and Shopee are probably one of the largest eCommerce marketplaces in South East Asia (SEA) with the biggest market share right now. There is no surprise why many are selling products on Lazada or Shopee. There are other marketplaces too such as 11st, Zalora, Mudah, Lelong etc but none of these come close to Lazada and Shopee’s daily web traffic or online visits.
If examined closely, both of these marketplaces (Lazada and Shopee) helps sellers gain tremendous exposure for their products and shoppers get a whole load of product variety too which they could never have found or probably took forever, if they visited individual brand stores.
Having said that, unfortunately marketplaces have its advantages and disadvantages too. Let’s see what are the advantages first.
Advantages of online marketplaces
1. Exposure to millions of consumers
The most significant advantage of an online marketplace like Lazada is sellers can gain outright exposure to millions of online consumers who are actively searching for products to buy.
For example, if you typed “gucci handbags” in the search bar, Lazada will probably show your store on the first page of the search results along side other vendors (sellers). But unfortunately, this is not the case. There are too many sellers selling “gucci handbags” and therefore only so many seller’s products can be displayed at a time on the first page of Lazada search results.
Usually sellers compete to list and show their products on the first page of marketplaces to attract the most number of viewers and hopefully buyers but there are various factors and touch points on the criteria Lazada puts forth to determine whose product gets listed on the top of Lazada’s first page listings.
Apparently it has to mainly do with the way one writes their product titles, descriptions, selection of images, keywords insertion, product reviews and ratings and of course, price. The lower your price for the same product being listed compared to other sellers, the higher the chances of your product being displayed on the first page.
2. Trust and reliability
The 2nd advantage of online marketplaces is, companies like Lazada seems to have created a sense of trust and reliability among consumers. Probably because they’re setup in Singapore and they’ve been around since 2012. Or perhaps because they’re owned by AliBaba group from China. Consumers go and shop from whom they trust.
Well, I’m not saying all the sellers in Lazada or Shopee are trustworthy but the online marketplaces themselves have commanded a certain level of trust among consumers.
3. Logistics and shipping
Sellers want to be able to focus their efforts on selling their products. Marketplaces like Lazada and Shopee provide one of the best and sometimes cheapest logistics and shipping rates we’ve seen in recent years.
With so many advantages, you must be wondering can marketplaces have any disadvantages?!
Well, all business models have pros and cons. Lets look at what are some of the disadvantages of marketplaces and why you should not only focus on selling products on Lazada or Shopee.
Disadvantages of online marketplaces
1. High marketplace fees
As I mentioned earlier, marketplaces are like middlemen, connecting buyers and sellers. They are not doing this for charity or for free. In order for a marketplace to survive and be able to pay their rentals and bills, they need to earn too. So, they have to charge a certain fee.
As a seller, you need to be mindful about this because the fees can eat up into your profits if you’re not careful. For example, Lazada charges a commission fee for every successful transaction or completed order. The commission rate varies across categories.
Here is the formula Lazada Malaysia uses to calculate commission:
Commission = Y * X + 6% sst * commission rate for specified category
– Y=LazMall commission rate
– X=Item’s listed price minus promotional voucher(s)
If you’d like to know more on how Lazada calculates their fees, head over to their page here.
Shopee on the other hand charges multiple fees to sellers. They have something called “Commission Fees” and “Transaction Fees”. For example, if a seller in Shopee were to sell his product at MYR100, by the time all the discounts and fees kick in, he will only be able to take back a profit of MYR62.89.
You can view how fees is calculated for Shopee sellers here.
2. Restricted access
Online marketplaces exist for one sole purpose, to provide a platform for sellers and buyers to connect. To achieve this, marketplaces tend to limit the access to certain functions of the stores listed on their platforms.
For example, if I wanted to have a sales notification pop-up to appear at the bottom of my store in Lazada, there is no way I could do that. Or if I wanted to create an exit popup (to capture my store visitor’s email, there is no way I could do that either. How about placing a Google Analytics code to study your visitors? No way!
You get my point?
Marketplaces deliberately restrict access to various marketing functionalities to control what the seller can and cannot do on their platforms. Many marketplaces wouldn’t even allow the sellers to connect with their buyers directly and this I think is a major drawback not only for the seller but also for the marketplace itself.
3. Unfair advantage
As you may be aware, Lazada is almost fully owned by AliBaba Group. Being a subsidiary of one of the planets richest companies based in China, AliBaba seems to favor Chinese brands and manufacturers more and hence, they will usually list sellers from China first automatically in their search listings.
Take for example the same “gucci handbags” example. If you notice properly, you will realize every shop being displayed in Lazada is showing Chinese sellers. Regardless if you’re doing the search from Malaysia or anywhere else, you will always see sellers from China being listed at top of every page.
Why is this so? Aren’t there any sellers selling Gucci handbags here in Malaysia? Of course there are, right?
But in order to view the local outlets selling “gucci handbags”, you’ll need to manually scroll down and on the left hand side, click on “Local”. Only then you are able to view the local sellers, in this case Malaysian sellers.
But by doing this, it wouldn’t benefit the Chinese sellers now, would it. Something to ponder on!
4. Heavy competition and price wars
According to a resource, Lazada claims to host more than 155,000 local and international sellers as well as more than 3,000 brands reaching out to approx. 560 million consumers in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
This info may not be 100% accurate but its the best I found so far in Google.
Going back to the same example of “gucci handbags”, you’ll notice there are close to 1836 items (at the time of writing this article) that match that exact keyword in Lazada.
Assuming we take 10% of this number as a indicator of the number of stores selling “gucci handbags”, you’re going to be competing with close to 183 other sellers. For me, that’s quite a lot of competition for a small niche like ‘handbags’.
How else can you sell online?
As there are countless ways you can promote your products on the internet besides signing up with marketplaces like Lazada or Shopee, here are 3-ways you can promote your products without breaking the bank:
- Facebook groups (Free but less effective)
- WhatsApp (Free)
- Google and Facebook Ads (Not free, but very effective)
1. Selling on Facebook groups
Registering and promoting your products on Facebook groups is one method you can use to get eyeballs for your products but I must caution you, this method has been touted as “less effective”.
Why? Probably because there are so many sellers already trying to get eyeballs for their individual products. Its ok if you want to gain some sort of exposure but unless you’re zooming into your target buyers directly, you’re not going to get much results with this strategy.
The other setback with Facebook groups is, as soon as you publish your post, you’ll have to either wait for the group admin to approve your post first before its displayed in their feed. Sometimes, the admins don’t even bother approving it and many will just delete it.
2. Selling on WhatsApp
This technique is considered a direct marketing strategy whereby you solicit or invest in a software and generate mobile numbers which are linked to users WhatsApp accounts. Then once you’ve signed up and registered a WhatsApp phone number, you’re able to create a WhatsApp group and place everyone in there and start publishing posts.
In some countries, this technique is considered illegal and companies that get caught using this marketing strategy can end up getting blacklisted by the ISPs (Internet Service Providers) or probably even getting sued by the authorities. BECAREFUL WHEN USING WHATSAPP TO PROMOTE YOUR BUSINESS.
3. Google and Facebook Ads
For me, this is the BEST marketing strategy.
Yes! It is not free because you will need to assign a marketing budget and invest the money on ads. At first it might sound absurd, especially if you’re a new startup and trying to get some buzz about your products or company, but trust me when I say, social media advertising is totally worth it your while.
Gone are the days when one is able to publish a FB post in their feed to promote their products and get sales. Today, there are close to 1.82 billion users visiting Facebook daily. You can’t imagine how many photos are uploaded daily on Facebook. Its 350 million. That’s 4,000 photos uploaded on Facebook every second. Can you believe it?!
There are just too many posts on Facebook. Chances are no one is ever going to see your feed in their timelines.
So, despite I’m saying selling your products on Lazada or Shopee is not good enough, please go ahead and do whatever you think is necessary for your business.
In fact, we ourselves encourage all our clients to have a store in Lazada or Shopee to take advantage of the high user rate but the reality is, you’ll need to do more than just publish your products on marketplaces. Look at alternative ways to promote your products.
If you don’t have an idea on what to sell, why not consider getting into shapewear dropship business. The shapewear industry is booming and the number of consumers worldwide are increasing as well. We dedicated an entire article on how to get started with your own shapewear dropship business.
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In fact, if you wanted to do everything on your own, there are so many companies out there you can signup with and build an ecommerce store ie. WiX, WordPress, Magento or Shopify. But you’ll need to be a bit savvy to do this all by yourself.
If you don’t have the stomach for technical stuff, we can help you in that area. Since 2018, we’ve been helping hundreds of small business owners jump-start their own ecommerce dropship businesses from home.
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