E-commerce vs Online Marketplace: What Are the Benefits for SMBs?
October 28, 2020
What’s the difference between ecommerce and the online marketplace? How do you, as a retailer, choose between the two? Or do you even need to choose? Here’s what you need to know about setting up your online sales channel and how each option is strategically poised to help you grow – no matter what the future of retail holds.
It’s a common myth that online retailers have replaced in-person shopping experiences. The National Retail Federation reports that, of the top 50 online retailers, most also have their own brick-and-mortar shops.
Prior to the COVID-19 pandemic, online sales made up 10% of what we call “retail” sales. This acceptance of online purchases is widespread, but how retailers approach the issue of internet purchases has had mixed results. Specifically, there’s one group that favors ecommerce solutions, while others embrace online marketplaces. Let’s take a quick look at the differences.
What is ecommerce?
Ecommerce is the activity of buying or selling goods or services online through electronic data or currency. Over time, this definition has been modified to describe the more specific instance of buying and selling through online platforms such as Shopify, Magento, and BigCommerce. These pre-built platforms make it easy for retailers to get up and running with their own online stores.
What is an online marketplace?
Online marketplace activity happens on a third-party platform, such as Amazon, eBay, Walmart, or Etsy. It is an alternate way of taking part in that traditional “ecommerce” environment without your own website as a marketplace. You still sell your own goods or services, but you are part of a larger shopping ecosystem, owned and operated by the larger seller.
Ecommerce platform vs marketplace
If you’ve networked with other business owners, you’ve probably heard pros and cons for both options. How can you decide which is best for your unique situation? While each type of ecommerce sales platform offers perks, there are some very stark differences between ecommerce and marketplace tools. For the small business that wants to sell more products online, we’ve highlighted some of the benefits of each.
Benefits of ecommerce platforms
Ecommerce platforms like Shopify are taking over the world of online shopping. They come with many perks, including a large library of resources and tips for businesses who choose them. Here are some other benefits of selling on ecommerce websites.
1. Complete control over site functionality, design, and navigation
You’re managing your own website, with the ecommerce platform providing a suite of integrated tools to help you conduct business. If you want to update your logo or refresh the color palette to meet new branding guidelines, you can. You can even tweak elements like shopping cart functionality and payment methods as needed.
2. You’re allowed to collect customer data for future marketing
Unlike third-party marketplaces, which often don’t allow you to contact customers directly for any reason other than issue resolution, ecommerce providers don’t have data-collection restrictions. Your customers can sign up for your mailing list and follow you on social media. You can use their info for things like follow-up emails, promotion announcements, or customer satisfaction surveys.
3. There is no on-site competition
Your website only sells your goods, and you’ll never have to bid on advertising to rank higher on your own site or get your listings to appear prominently above other similar items sold by your competition. Third-party marketplaces, on the other hand, may make and sell their own white label products, which they could prioritize in the search listings. For those who want to be the most heavily promoted in an industry, an ecommerce solution is ideal.
4. You can build your own brand recognition
When shoppers type in your URL, they get to your site and can associate your products and services with that URL. You can create the shopper experience you want based on your company values. If you’re hoping to grow your company, there's no ignoring this website vs marketplace advantage.
5. You don’t rely on another company for fee structure and pricing
Your ecommerce tools will have a cost, but you can budget for these based on the service agreement. You won’t continually deal with fluctuating fees, commissions, and additional costs to participate in an online ecosystem. While fees may change, they are generally less arbitrary in nature than a third-party marketplace.
6. You’ll enjoy fewer sales restrictions and rules
While most ecommerce solutions do have restrictions on sales of illegal goods or highly-regulated items, you are pretty much free to sell what you like. If a customer doesn’t like something you sell, you can address it on your own terms without fear of a platform suspending or banning you.
Benefits of an online marketplace
Ecommerce solutions aren’t for everyone, and third-party marketplace giants like Amazon, Walmart, and eBay have capitalized on the ease of setup and brand recognition they have built in the online sales world. Here’s more about what these marketplace solutions bring to the table for small business sellers.
1. It’s easy to start right away
Do you have something to sell but don’t want to build your own website? You’re in luck! Online marketplaces are designed to be easy to use. You can set up a storefront in minutes and then enjoy the full benefits of payment processing, advertising, and even distribution and shipping channels in a fraction of the time of sourcing and registering for these tools on your own.
2. No tech experience or marketing resources required
Unlike hosting your own website, you won’t need much technical skill to get started selling on marketplaces. If you’re familiar with social media platforms, you’ll have what it takes to list products or services and get your accounts receivable information set up. Everything from marketing to customer service resolutions are handled on the same platform through a single dashboard.
3. No site or server maintenance is necessary
While third-party marketplace providers sometimes experience technical difficulties, most are hosted by large cloud providers that also serve other major corporations. As reliability goes, they are best-protected against hacks or outages, and you can rest assured that your store will be online when your customers need to shop. You also won’t have to worry about updating your WordPress plug-ins or handling server maintenance. All of this happens behind the scenes, which is a major upside of a marketplace.
4. You get access to a large customer base
Millions of people shop at Amazon and Walmart. In fact, these are often the first places people think of when it comes time to shop. If you have your store on one of these two sites, the odds that people will find you are better than if you bought an obscure domain that consumers don’t know about. You can piggyback on the built-in customer base that already exists for these large online retailers.
5. There is existing brand familiarity
Again, brand familiarity is a big perk for businesses. Like the example above, people are already familiar with major retailers and what they stand for. If your company aligns with these values and you want to market your business within the same customer-base, you can do so much more easily without spending large amounts of money to get people to hear about you. Even a brand-new company with no easily-recognizable name or logo can become known by association.
Which solution is right for you?
In the battle of marketplace vs ecommerce, there may not be a clear winner. That’s because they both offer some very attractive benefits for specific businesses. You’ll have to decide which attributes are most important to you. Consider this list of questions when making your final choice:
Do we value personalization and brand-building over ease of use and turn-key solutions?
Are our long-term goals to create a stand-alone website under our own business URL?
How do we want to handle advertising?
Will our marketing plan be based on the familiarity of an existing platform or the data and contact information of our customers?
Do we sell a product that’s edgy, controversial, or highly-regulated (or has the potential to be highly-regulated in the future?)
Do our company values already align with those of a third-party seller?
Do the customers we seek already shop on third-party seller sites?
Five years from now, would we be best served by an ecommerce solution or a marketplace offering?
When consumers purchase something online, they’re not usually concerned with the behind-the-scenes of how their money is collected or the orders are fulfilled. They want to order something and have it show up at their door.
What does matter is your plan for the future. While a marketplace tool may be the quickest way to start selling, it’s less flexible in terms of growth, permissions, and branding. If you aren’t overly concerned about making your online store “your own,” marketplaces can give you the quickest launch with the least investment in time and resources.
About the Author: Linsey Knerl is a contributing writer for HP® Tech@Work. Linsey is a Midwest-based author, public speaker, and member of the ASJA. She has a passion for helping consumers and small business owners do more with their resources via the latest tech solutions.
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