Online marketplaces have undeniably captured the online shopping arena with millions of live products and successful service. It’s clear that platforms like Amazon have changed the face of online shopping by hosting multiple sellers on a single platform thus promoting a competitive pricing model. Through its large suite of products and services it has established itself as a home of product discovery and research. But does all this come at a cost? And if so is it always a better choice to sell and buy from a marketplace? Here we will discuss major points to keep in mind in deciding whether to sell on a marketplace or start your own ecommerce website.
Here are 10 things to consider:
If you have a favorite brand to shop from then you must have probably visited one of their showrooms. Often there’s a stark difference in the shopping experience when you buy from their official showroom vs when you buy from one of their outlets in a mall. While in the latter you would find the brand appeal strong and robust, the former keeps it subtle in order to comply with restricted mall policies. This is a similar scenario when compared with a marketplace and owning your own ecommerce website. Customer brand loyalty and other factors come into play here resulting in high customer lifetime value. Whereas in a marketplace, all brands and businesses are presented together which doesn’t let you highlight your brand story
2. Cost to start
Traditional ecommerce usually requires the seller to buy sufficient stock, otherwise customers face long lead times as goods are drop-shipped from the storefronts wholesaler. But on the flip side, the items that are sold are used exclusively by the buyer and they can be assured of infinite availability. A marketplace provides its users with slack assets to make use of. These are assets already owned but not entirely used, and that means marketplaces can create strong customer value.
Marketplaces spend heavily on targeted marketing too, but the cost is borne by all merchants operating on the site irrespective of whether you are making sales or not.
Ecommerce websites have the challenge of making consumers aware they exist. This is countered effectively by the story that an individual store tells. Even though individual merchants have to spend more to drive traffic to their site, once they have regular visitors, their profit margin increases significantly.
4. Dealing with technology
Modern marketplace solutions support multi-channels. There is very little that a seller needs to know technologically when starting on a marketplace.
Starting an e-commerce shop is challenging initially but with multiple software solutions like Abicart, this step becomes easy. Even though marketplace solutions have been tailored from the ground up to address specific marketplace shopper and operator needs, building your own ecommerce website for your product feels really good!
Because e-commerce websites need more initial investment they take longer to break even. Marketplaces on the other hand have better profit margins as their revenue is mostly made up of a percentage of transactions. Depending on the volume of transactions, the money earned is usually re-invested into product development to accelerate growth.
When traffic grows on an ecommerce website, it may be necessary to seek new suppliers to meet the demand. Once you are established and running, this becomes a routine and hence easy to manage. A marketplace doesn’t sell or buy any products. So it takes considerably less financial risks than e-commerce websites which have to constantly invest in stock that may take time to sell or never sell at all. Also, marketplaces gain economies of scale more easily. On the other hand, e-commerce if running well scales faster due to customer loyalty and brand outreach.
7. Targeting the right audience
The success of marketplaces have been growing regularly and the trend in the e-commerce website is also constantly evolving. This has presented an opportunity as well as with a challenge. Once a buyer finds their desired ecommerce website, the buying process is simpler, as they are selecting from the products offered by only one company. On the other hand, marketplaces benefit from various users operating on their site. The more the buyers are happy, transacting on the site, the more they help to spread the recognition of the marketplace
8. Riding the trending waves
There are trend indicators like Google trends which are used for detecting what’s selling hot in business markets. If researched properly you can also point to the price movement direction. With the help of trend indicators, an ecommerce store owner can track their sales more specifically. A marketplace like Amazon also provides these services in-house thus telling vendors which products are the best and how they can be more efficient. As a result, best and effective measures can be possible to take and promote content that truly matters to its users.
9. Audience engagement
Engaging audience in the e-commerce business is hard initially because there is less trust between your brand and the fresh traffic looking for what you sell. It’s time-consuming and expensive initially but also very rewarding in the long run. Once you create a loyal customer base, you can boast of regular traffic because your brand stands unique.
Audience engagement is very important in online business – whether it is a marketplace or an e-commerce website. Marketplaces have always been transaction-oriented and the goal is to match buyers and sellers. Marketplaces regularly focus completely on moving buyers towards purchases and sellers towards listing more products or services. In fact, marketplaces benefit from network effects: more buyers attract more sellers and vice versa.
10. Trust with customers
Building trust in both a marketplace and an e-commerce website is both difficult and important to survive and grow. Here market place takes a lead initially because it is usually already familiar to them. On the other hand, an online store is run or owned by a single individual so trust building might prove to be challenging. This does not mean that an ecommerce website can't build trust and there are many successful stores that prove this.
Having discussed the important factors to consider, let’s breakdown how they weigh in terms of sellers’ top concerns like website traffic, managing inventory, attracting potential customers, time to launch, and overall costs
Marketplace: Target audience is bigger as marketplaces offer a huge choice.
E-commerce: The store owner needs to attract traffic to the website.
Marketplace: Support sellers’ marketing efforts through attracting, nurturing, and engaging leads on the site.
E-commerce: The seller needs to take care of lead generation/nurturing him/herself.
Marketplace: Don’t run inventory.
E-commerce: Ecommerce sites run inventory.
Marketplace: Quick to set up. In most cases, you can do so in a day or less.
E-commerce: You set up the entire site yourself; it can be time-consuming upfront.
Marketplace: Charge commissions (usually between 5-15%); some charge for membership. Low or no costs upon setup.
E-commerce: No commission; seller pays for hosting/maintaining the site online.
Now that we have discussed the key differences between e-commerce and marketplaces, let’s see if we have a clear winner. Of course marketplaces like Amazon are a great starting point for e-commerce beginners; they allow you to cut down the costs, risks, and time needed upfront to create a store. However, if you have the budget, time and patience, or are in need of a custom-made solution that will perfectly respond to your needs, owning an online store is always the better bet. Also, if your store(physical or online) is already established and you don’t want to share your gains with a marketplace then creating your own e-commerce might just be your thing!