Ecommerce vs marketplace – Own website or selling platform? What sells better?

With the year 2020 just around the corner, shopping and selling online is now nothing short of a commodity. Amazon, eBay, AliExpress, and Walmart…It’s hard to remember what it was like before these and other online sales giants made it possible to get any item shipped straight to our doorstep!
  • We will introduce the definition of the marketplace.
  • We will also tell you what is an e-commerce website.
  • Ecommerce vs marketplace: take a look at how these two solutions compare against vendors’ top concerns.

From the seller’s perspective, there are a whole plethora of eCommerce and marketplace options to choose from. This choice can, however, seem equally empowering as overwhelming. Especially to those entrepreneurs who have no previous experience with selling online. 

In the following post, we’ll discuss one of the most common dilemmas vendors face when they want to take their products online – namely, whether it’s worth selling your products via an e-commerce vs marketplace.

While there’s no one-size-fits-all answer to this question, we’ll do our best to give you a helping hand! We’ll discuss what each option is like, their pros and cons, how they work, and – importantly – how they compare to one another in key areas such as time-to-launch and profitability. 

We’re confident that by the end of this post you’ll know what works best for you!

Let’s start with…

 

What is the marketplace?

In the most simple terms, a marketplace is a website where the products offered come from multiple sellers. The variety of assortment a marketplace offers is exactly what attracts customers – just like a shopping mall does in real-life.

Setting up your store on most marketplaces is disarmingly simple – some even let you sign up with your Facebook account. 

What about the process of selling on a marketplace?

There are three parties involved – the vendor, the customer, and the marketplace administrator.

Let’s take the popular arts and crafts marketplace Etsy as an example.

ecommerce-marketplace-1

The company takes care of maintaining the website, invests time and money in attracting potential clients, and offers a safe shopping and payment process. However, once the sale is finalized, the products aren’t shipped by the marketplace – all items are stored and sent by the seller.

Now, how do marketplaces make money? As you’ve likely guessed it, they either charge a commission for each transaction, a flat membership fee, or offer a combination of the two. 

An exception to the rule is the British marketplace Flubit, which doesn’t charge any of the above, but earns money if they’re able to sell the product for a higher price than what was requested by the seller.

flubitlogo

The size of the commission greatly varies from marketplace to marketplace and can be anywhere between 0% (Flubit) and a whopping 50% (Germany’s second-biggest e-commerce Otto). However, in the case of eBay, Amazon, or Etsy, the commissions span between 5-15%.

otto-logo

The benefits of selling on marketplaces speak especially strongly to sellers who are taking their first steps in sales and those who love the convenience of never having to worry about website performance, maintenance, and on-site shopping experience. They are also the first choice for those whose sales aren’t big enough to make building their own online store an appealing perspective.

So, when does it actually make sense to set up your own e-commerce website?

Let’s take a look.

What is an e-commerce website?

E-Commerce is a website where a single vendor sells his products/services to multiple customers. As the website belongs to the vendor, there are only two parties involved in the sale process – the seller and the buyer.

Unlike marketplaces, which make sure their sites are always robust and up-and-running, e-commerce websites need to be set up and maintained by the seller. 

Sounds like something extremely complicated? It doesn’t have to be! Setting up your own online store doesn’t mean you have to code it from scratch. There is much e-commerce platforms that offer multiple predefined features and templates to choose from (think of them as an equivalent of WordPress for websites). 

The top three e-commerce platforms we recommend that you look into are WooCommerce, Magento, and Shopify. While comparing them against one another is well beyond the scope of this post, here’s a comprehensive breakdown of what each platform does.

So how do you know if it’s worth selling on your own e-commerce website?

We recommend that you consider the specificity of the industry and business you operate in. Do you work in a niche that could potentially require you to create a website with custom features? 

Also, what is the expected volume of sales you’re looking to handle?

Ecommerce websites are built to keep track of inventory, which could get incredibly confusing if you were to handle multiple sales from a marketplace.

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Ecommerce vs marketplace – key differences to consider

Now that we’ve explained how marketplaces and e-commerce websites work, its time we take a look at how these two solutions compare against vendors’ top concerns.

Here’s a breakdown of how they function in terms of website traffic, managing inventory, attracting potential customers, as well as time to launch, and overall costs:

Marketplaces Ecommerce
Traffic

Target audience is bigger as marketplaces offer a huge choice.

The store owner needs to attract traffic to the website.

Marketing

Support sellers’ marketing efforts through attracting, nurturing, and engaging leads on the site.

The seller needs to take care of lead generation/nurturing him/herself.

Inventory

Don’t run inventory.

Ecommerce sites run inventory.

Time-to-launch

Quick to set up. In most cases, you can do so in a day or less.

You set up the entire site yourself; it can be time-consuming upfront.

Costs

Charge commissions (usually between 5-15%); some charge for membership. Low or no costs upon setup.

No commission; seller pays for hosting/maintaining the site online.

Conclusion

As we’ve singled out the key differences between e-commerce and marketplaces and discussed their features, it is now time to summarize our findings.

Marketplaces are a great starting point for e-commerce beginners; they allow you to cut down the costs, risk, and time needed upfront to create a store. However, if you’re already an established brand and don’t want to share your gains with a marketplace, or are in need of a tailor-made solution that will perfectly respond to your needs, then creating your own e-commerce might just be your thing!

 

Call to action

Have you decided on the best fit for your online business? If you’d like to discuss the options further, let us know if the comments and we’ll be happy to advise!

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