Marketplace platforms and online stores have both become powerful e-commerce business models within the digital economy. With the right strategy and niche market, your online store or marketplace site can generate powerful revenue streams. If your business is interested in serving niche markets and generating low costs, then e-commerce marketing is ideal for you. Third-party platforms don’t require total loyalty where you are free to use multiple platforms to cast your net even further as opposed to e-commerce marketing. Both options have pros and cons, so how do you decide which model is right for your business idea? If you are in doubt then this blog will help you to make the right decision.
What is an eCommerce platform?
An e-commerce platform is a software application that lets online brands manage their website, operations, marketing and sales in one location like Shopify, BigCommerce, WooCommerce, Magneto, and many more.
What is a third-party marketplace?
A third-party site that includes product listings from many sellers across product categories. Examples include Amazon, eBay, Walmart, and Etsy.
What are the differences between eCommerce platforms and third-party marketplace?
1.Small investment in a big platform
E-commerce website: In order to start an eCommerce website, it is often required to invest a good amount of money beforehand to generate online sales with a large offering.
Marketplace: When it comes to marketplaces, you have the advantage of allowing the vendors to handle their stock on their own, which remarkably reduces your initial investment.
2. A much larger inventory
E-commerce: You need to get rid of some unsold products or lower down their prices at some point in time, as keeping them in stock would keep you from stocking something that is sold more.
Marketplace: With a large inventory in a marketplace the customers can easily find the product they are looking for. However, a large catalog would require more effort into merchandising.
3. A scalable model
E-commerce: Your eCommerce branding needs to be able to change and grow in order to meet demands. Since the website database is a central part of your eCommerce platform, its own ability to scale will impact how well your eCommerce site is able to expand.
Marketplace: As a Marketplace doesn’t buy any products, it takes less financial risks than eCommerce websites that have to constantly invest in stock that may never sell. Marketplaces achieve economies of scale more easily, which allows them to expand faster.
4. Positive Cashflow
E-commerce: The e-commerce websites which have made larger investments initially, its revenues and resources will take longer to break up.
Marketplace: Marketplaces enjoy better profit margins since the revenue generated is made up from the percentage of transactions.
5. Different technology approach
E-commerce: The storefronts exist to provide an online business presence and thus have been designed for that. They are streamlined for that purpose.
Marketplace: Marketplace platforms give buyers a one-stop-shop to buy everything they need. The appropriate technology to run a marketplace platform is more complicated.
E-commerce platform or third-party marketplace: Which is better for your business?
- Cost of development: Both formats require investment in design and development. A basic e-commerce site is fairly cheap to get up and running due to the simpler transaction structure. It has a plethora of online store builders like Shopify, WooCommerce, and Prestashop to get started with online shopping. Setting up a marketplace initially incurs higher costs as its more complex user flow requires custom solutions and multiple iterations to ensure the right product-market fit.
- User interfaces: To attract customers to your marketplace, you need an intuitive user experience that smoothly on boards both buyers and sellers. E-commerce sites tend to have far simpler navigation structures than marketplaces which have to cater for a wider variety of products and additional vendor variables such as location.
- Revenue stream: Third-party platforms don’t require total loyalty where you can use multiple platforms to cast your net even further. Whilst one emarketplace will be suited to a particular market, if you wish to sell abroad you might need to rely on a native marketplace that has the customer base you’re trying to reach. Doing this allows your business to have multiple sources of online sales revenue, mitigating against any risks involved.
- Marketing efforts: In e-commerce, the individual merchant has to spend more in social media marketing to drive traffic. Once a buyer finds his selection, the selection process is simpler as they are selecting from the products offered by one company. Marketplaces benefit from various users operating on their site. As there are many merchants, they individually advertise the existence of the marketplace causing a viral spread of awareness.
- Security: Both formats facilitate online transactions which means that fraud becomes a risk that needs to be mitigated. The bottomline is that inadequately secured e-commerce platforms are open to transactional fraud. Marketplaces introduce additional complexity – multiple vendors and buyers on one site mean that there is a threat of fraud on multiple transaction levels.
The best place to sell online will differ from retailer to retailer depending on their products, needs, and goals. Each individual marketplace and e-commerce platform has its own unique differentiators and drawbacks.
If you’re thinking of starting an e-commerce business, now is the time to start. When it comes to website and app development, you can rely on Let’s Goo Social. As a digital marketing agency, we can help you develop an impactful e-commerce website that can market your business online and boost your sales. Talk to us today to drive your business towards successful ventures. Reach out to us at IN: +91 9087706000 | SG: +65 8008526877 and our digital team will get back to you soon!
