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Online Marketplaces vs. Own E-commerce Website: What’s the best match?

Online shopping has grown to be an essential part of retail, so much so that businesses can no longer overlook it. With 2.14 billion consumers buying products online, e-commerce will help put brands and sellers in the middle of all that action.[1] However, there are a few things to consider before starting to sell online. One of the most important strategic considerations is: should you use an e-commerce marketplace or your own website?

More often than not, new retailers presume that they mean the same thing. Or they know the definitions but think that they have essentially the same function. In reality, marketplaces and websites are different types of channels that have their own unique characteristics. Some sellers opt for an omnichannel approach and go for both. But that may not be the wisest decision, especially if your store lacks resources such as workforce, inventory, or time. Juggling both sale channels could stretch beginners a bit thin and end up being a counterproductive experience. Now, that raises the question about which is the best-fit solution for your business and specific purpose. 

In this article, we dive into the main differences and benefits of e-commerce marketplaces and websites.

First, let’s take a look at the definitions of each.

What is an e-commerce marketplace?

E-commerce marketplaces are online platforms where multiple sellers gather to sell and often promote their products. The customers will pay directly to the seller, and the marketplace owner does not own inventory. Think Amazon, eBay, and AliExpress. Multiple sellers often offer similar products at different prices on marketplaces, and buyers can pick their preferences.

What is an e-commerce website?

On the other hand, an e-commerce website belongs entirely to the business owner. The website owner is in charge of invoicing, shipping and inventory. Thus, it is essentially a single vendor platform.

Marketplace vs. Website: Which is better?

It’s important to remember that each retailer differs from the next. Every brand or seller has a different objective, approach, style, and preference. Even consumer needs are unique to each business. Thus, it isn’t a matter of whether marketplaces are better than websites or vice versa. Instead, it’s about which option best suits your needs and market. 

We take a look at the different aspects and how it differs on each platform.

Development and getting started

Because the e-commerce industry is so saturated right now, the online selling craze doesn’t appear to be stopping anytime soon. However, right now, there are several ways and tools that e-retailers can leverage to get started. 

When building an e-commerce website, most business owners can turn to website builders like Wix, SquareSpace, and Magneto. These tools provide the necessary support to website developers to create unique and working websites for their online stores. However, it will still require a bit of elbow grease to get the technical aspects right and running. Website owners will also have to consider the time and effort to maintain and update their sites. However, once that is all settled, you will have your business’s designs, functions, integrations, and unique features.

On the other hand, marketplaces allow sellers to sign up and register to begin. Furthermore, marketplace solutions are more specific to e-commerce needs, such as having built-in features to list, price, and communicate with shoppers. In addition, marketplaces can integrate with other tools that are cloud-hosted and tailored for retail use. In a nutshell, marketplaces are a one-stop solution for buyers to browse and purchase products and sellers for catering to the market. A shorter time and resources spent on getting started will also mean a quicker go-to-market and increased profit margins.

Building consumer trust

Brand awareness is one of the fundamentals of marketing that will set a precedent for many sale opportunities. When it comes to e-commerce, consumers want to buy from a brand they most likely know and trust. On the other hand, a lack of trust can cause a significant loss of revenue. Consumer trust can be built through customer reviews or marketing campaigns. Studies have revealed that 81% of online shoppers are worried about shopping on platforms that they are not familiar with.[2] It’s crucial to develop long-term trust with online shoppers through brand recognition. 

The great thing about marketplaces, especially the big ones, is that users are familiar with the landscape and processes of the platform. Furthermore, they will also be aware of their level of protection surrounding payment, refunds, shipping, and returns, which will further assure them of their purchase. Retailers can piggyback on the well-established brand awareness and trust of popular marketplaces like Amazon and eBay.

Once you’ve built an e-commerce website, you have to consider the time it takes to gather traffic, acquire new customers and boost credibility. Do shoppers feel safe about entering their credit card information? What are your return and refund policies? Will you ship products on time and ensure that they are in suitable condition? These are some questions that go into a purchase decision. Bear in mind that building consumer trust takes time for new brands.

Marketing

Marketing is essential to create brand awareness, retain customers and acquire new ones. Therefore, businesses ought to have a solid marketing strategy that focuses on increasing their brand profile online.

On marketplaces, it is common to find various sellers offering the same products. Except for scoring the coveted Buy Box, there is little to almost no differentiation for these products. Hence, many buyers will rely on reading customer reviews or pricing to make a decision. Unless your product is particularly niche and has low competition, there may be fewer chances to stand out from the rest. Even then, sellers have to consider the amount of traffic that comes from specialized products searches.

E-commerce websites have a better reign on product and brand differentiation since they are standalone vendors. Businesses can promote their brands on social media or other digital channels such as SEO to direct consumers to their site. Moreover, websites allow for more customization and tailored user experiences. Hence, there is ample opportunity to build closer customer relationships and unique interactions on a single-brand platform.

Cost

Especially when starting up, it is essential to consider the cost of setting up and maintaining your business. 

Marketplaces usually work on a business model that charges their vendors a commission per sale or a membership fee. However, because of the volume of sellers they have, they’re able to charge lower prices. Additionally, there is a minimal budget for marketing and other activities since they ride on marketplace traffic.

Website owners do not have to pay a commission per sale or a monthly membership. Rather, the cost of maintaining a website considers the domain name purchase, website builder, and regular maintenance. As a result, businesses can increase their profit margins by driving up sales numbers. However, note that website owners are also entirely in charge of their own lead generation and marketing efforts.

Analytics

Analytics are vital to understanding customers’ behaviors, search preferences, and more. Unfortunately, marketplaces sometimes offer very little information to their sellers about customer analytics. Thus, it can be challenging to know how your customers or competitors are behaving on the platform. There is also very little direct access to customers since all communication is solely conducted through the marketplace. As a result, sellers may find past customer information very limited, although tools like E-Tailize can make your life easier when you need extensive data analytics for your marketplaces.

You can perform targeted campaigns and communication to your existing customer base when you have full access to customer information and analytics. An e-commerce website allows sellers to do so. Brands that know exactly who their customers are can build up valuable contact lists and tailor their customer service by analyzing past behaviors and issues to suit the market.

Competition

That isn’t to say that marketplaces offer zero analytics, however. Sellers can check out how specific products are doing and how their competitors are selling. For instance, retailers may realize that their competing brands are suddenly lowering their prices. This often happens when they’re trying to push more products or beat their competition. Hence, being a seller on a marketplace means constant monitoring of close competitors. Marketplace tools can help to monitor competitor activity to recommend the appropriate price strategy. 

On an e-commerce website, sellers are only competing with other brands on other websites. Therefore, there is no internal competition. Instead, all their promotional efforts have to act on a larger scale to acquire customers from across the market. E-commerce sites usually have a less active pricing strategy, unlike marketplace product prices that fluctuate according to the market. With less competition, businesses can also establish more vital branding and top-of-mind awareness. On marketplaces, customers may not remember or notice the brands they initially purchase from, lowering the chances of repeat purchases.

Start selling online with E-Tailize

We hope this article has helped highlight the main differences between e-commerce marketplaces and websites. The bottom line is that all retailers have their individual preferences and needs. Depending on the resources and capacity for development, setup, costs, and control, it might be worth taking a step back to ask which approach is the best for your brand’s needs. 

Selling on e-commerce marketplaces doesn’t have to be complicated. E-Tailize is an end-to-end solution for managing marketplaces. We provide the needed support to find success in the marketplace with a range of valuable features, such as our product information management system, extensive data analysis, and ad-building possibilities.

Sources

  1. https://www.oberlo.com/blog/online-shopping-statistics
  2. https://vwo.com/blog/trust-in-e-commerce/

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