What is the difference between an online marketplace and an e-commerce website?
If you are one of the many who find themselves caught in the jumble trying to figure out the difference between online marketplaces and e-commerce websites, then you have come to the right place! Here, we break down for you a thorough comparison of the two online platforms that are big in the e-market arena today, to help you decide which one is best for you and your business.
You are not alone. Most people assume that online marketplaces and e-commerce websites may be the same thing. These are a few basic differences.
A marketplace is an online platform that allows third-party sellers to operate, market and sell their products on their website. Sellers of different products, brands and categories gather here to run, promote and sell while only paying a minimal fee for operations on the platform, making this an exciting carnival for both sellers and buyers.
On the contrary, an e-commerce website is either a single brand or multi-brand store where a particular brand promotes and sells its own products on its website. Unlike the online marketplace, the inventory is owned, and operations are run by only the website owner. In addition, the website owner also charges their customers and accounts for the taxes. To summarize, an e-commerce website is also referred to as the single-vendor website, where only one store owner operates for selling goods.
Picture this: An online marketplace is similar to your local market or mall with a wide variety of shops and products while an e-commerce website is a stand-alone shop. They really are your neighborhood business hubs turned digital!
Although both have made their spot in the online business world, deciding the best online platform for your business actually depends heavily on your products, needs and priorities, and business goals.
Here are some significant differences between a marketplace and an e-commerce website that may help you in your venture.
Setting up your shop in a marketplace will just take you a day or less. In this platform, as everything remains ready on the site, all you have to do as the seller is register, list, and sell without spending much time and breaking the bank. In e-commerce, you are technically going to start off by setting up the entire site yourself before you can start listing your products and selling them. That process itself should entail time and effort upfront. This may include running the technical aspects of making ads and promotions of the site, running inventory, and finding the right partners to process payments and shipping.
A great advantage of having your own e-commerce site is that you have complete control over your preferred layout, graphics, images, videos, coding, and content. With your own site, you can choose the keywords essential to your business that will help enhance search engines. Similarly, you can also customize the layout of your wares and commodities for lead generation and conversions. Most e-commerce site providers allow you to buy your own domain name, which is a great way to build your brand.
However, it is important to keep in mind that all of these advantages come with a lot more responsibility and money. You have to either manage all of these yourself or pay people to do it for you.
With an online marketplace, you do not have all of the extra costs in order to run a website, but you also do not have complete control over your online shop platform. Here, you cannot customize modules or tailor forms specifically for your business.
Marketing to Target Audience
Attracting traffic and appealing to a bigger number of audience to your shop in an online marketplace is a walk in the park only because of the site’s wide array of choices when it comes to shops, products, services offered in different categories. If you have opened an online shop on a marketplace, the site itself has your back in terms of your marketing efforts by attracting, supporting and engaging leads on the site.
Contrary to this, marketing in e-commerce sites usually takes more time and effort as the seller not only has to be in charge of running the promotions to his already existing customers or viewers, but he/she also has to boost the advertisement and publicity of his site to capture new audiences. In many cases, e-commerce shop owners make use of platforms such as social media to get the word out about their business.
When it comes to competition, it is no doubt that online marketplaces have a more aggressive business environment given the fact that your online shop will be just one among hundreds of other shops on the platform, most probably selling if not similar, the same products and services like yours. This is a platform where merchants lock horns in catching the buyers’ attention by setting competitive prices, quantities or stepping up their advertisement game. This is why if you are new to the marketplace, you should know that positive feedback and pleasant reviews from your customers is essential to build trust and make good impressions in order to make your online shop stand out.
Compared to the clamorous marketplace, e-commerce website owners deal with significantly less competition once their target audience has reached their site, as the whole platform is solely dedicated to the company's products and services. Although there is a challenge getting the traffic to the site, once captured, the site monopolizes the audience's attention and interest as they go through the listings of products and services the company offers. E-commerce has the advantage of focusing on a single brand or business which is beneficial in promoting brand loyalty, which leads to high customer lifetime value. Whereas in a marketplace, all brands and businesses are presented together.
Financial Investments and Risks
Building your own e-commerce website can be complicated and may involve several technical issues and may require you to spend more money and time in developing your site. In deciding which platform to use for your business, it may be helpful to consider that since an e-commerce website entails more initial monetary investment, it may take longer to break-even unlike in the marketplace set up where all you have to do is pay a minimal fee for listing or commission to get started.
Marketplaces take considerably lower financial risks compared to e-commerce sites, which constantly need to secure stock that may take time to sell or even never at all. In a platform where traffic easily shoots up, there is no need for sellers in marketplaces to fuss about the demand, therefore lifting them off the burden of spending much for new inventory or storing facilities.
Operational Costs and Expenses
As discussed above, most marketplaces charge merchants for a commission or referral fee, usually ranging between 5-15%. There are some that charge a minimal fee for the listing and some that charge for membership to the site. They may usually vary from low to no-cost at all upon set up, depending on the marketplace of your choice. In this setup, with just a minimal fee to kick-start their business on the site; online marketplace sellers have better profit margins as their revenues are basically percentages from transactions made. While there is no commission for shop owners using the e-commerce platform, the seller allots a huge sum just for hosting and maintaining the site to run.
If you are just starting out in the online platform and would like to explore the possibilities while avoiding huge risks and investments, most especially when it comes to your stocks, then the marketplace is for you. This platform allows you to not initially splurge on a huge bulk or wide array of merchandise. Here, you may even start out with just one kind of product and just allow the site to take its course of helping your shop reach interested buyers.
E-commerce websites, on the other hand, are advised to be used by established companies that offer a wide variety of inventory under their brand. Imagine spending a huge sum of money in building and maintaining your own site only to be selling one type of product. Although that is not impossible, it may also not be the smartest move. In this platform, owners need to constantly invest in stock varieties that may take time to sell or never sell at all. Not to mention the challenge of getting traffic to the site.
Detecting trends in the market
It is vital for sellers to be aware of the trends in the market as this implies directly to the direction of your price movement. Thanks to trend indicators in the marketplace platform, sellers are able to further fast-track their sale more specifically by identifying which products are most in-demand in the market. This feature is particularly limited for the e-commerce platform since this site usually runs with no competition making it unable to track market trends on its own. E-commerce users usually have to rely on other online platforms like social media to know these movements.
Difference between an online marketplace and an e-commerce website
|Category||Online Marketplace||E-commerce Website|
|Time||Quick to set up by just registering to the site to start listing and selling.||You set up the entire site yourself.|
|Control||No complete control over your online shop platform. You cannot customize modules or forms specifically for your business.||Complete control over your preferred layout, graphics, images, videos, coding, and content.|
|Target Scope||The site backs up owners' ads and promotions,, making it easier to attract traffic and a larger scope of audience due to the variety of shops and products and services offered.||Challenge in attracting traffic since owners have to run their own promotions and ads. Limited and specific target audience and brand customers.|
|Competition||Higher competition due to many different shops offering if not similar, the same products and services.||No competition once the target audience enters the site.|
|Financial Investments and Risks||Very minimal fees as an initial investment. Due to heavy traffic, no need for sellers to worry about the demand therefore no need to worry about spending much for new inventory or stocks.||Require a bigger initial investment to create the site and more money to maintain it.|
|Operational Costs and Expenses||Marketplaces charge minimal fees: commissions, listing fees, registration fees upon set-up.||Seller, who is also the owner of the site, pays for hosting/maintaining the site online.|
|Inventory Variety||If you are just starting out and don’t want to invest in stock varieties, or you really just have one product to sell, this platform allows you to do business with just one or very limited inventory.||Owners need to constantly invest in stock varieties that may take time to sell or never sell at all.|
|Detecting trends in the market||Makes use of trend indicators to track movements in the market.||No trend indicators and have to rely on other platforms to know trends movements.|
If you are someone who is just starting out your business in the online platform and would like to test the waters, the marketplace is a great place to begin with. They allow you to lessen costs, risks, and the time needed to make your online shop while enjoying their low maintenance platform and integrated resource tools. In addition, getting traffic to your store is usually the hardest thing to build, and with marketplaces, rest assured that traffic will be at the least of your worries. This is why, for starters, we recommend that you get your footing in the marketplace.
However, if your business or brand has already made its name in the industry and you don’t want to share your gains with other brands in the marketplace, then getting an e-commerce website might just be your thing! In your own site, you can customize layout, designs, modules, forms, and solutions specifically to meet your brand needs.
It is common for online businesses to start utilizing one sales channel, but that doesn’t meet using both platforms for your store is not an option! If your resources allow you, it is also smart to do business in both marketplaces and e-commerce websites to guarantee that you are reaching as many potential customers as you can in the digital market.
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