E-Commerce vs. Online Marketplace: Detailed Comparison

We’re offering top-level guidance for new online retailers who are trying to decide between eCommerce vs. Online Marketplace.

E-Commerce vs. Online Marketplace: Detailed Comparison

Should you start your eCommerce business using your own and branded website, or should you opt for an online marketplace? What’s the difference between these two, and how can you decide which is the perfect fit for your plans and ambitions? If you’re wandering around trying to find answers to these questions and get familiar with the eCommerce terminology, look no further. We’re going to discuss your options’ essential pros and cons and offer you a detailed comparison to help you find the perfect fit.

One of the first choices you ought to make as an online retailer is to decide where you’re going to sell your products. This decision can highly impact your business and eventually increase eCommerce revenue. That’s why we’re breaking down the subject: eCommerce vs. online marketplace.

E-commerce platforms

As you probably know, eCommerce refers to any activity of selling or buying different goods and services on the internet. Retailers can find a suitable eCommerce platform and get their online stores up and running. If you own a website, you have complete control of it. This, however, comes with some breakthrough difficulties and certain additional costs. Let’s see what the key benefits of building an online store using an eCommerce platform are:

  1. You’ll have complete control of your site’s design, navigation, and functionality. Almost every eCommerce platform offers an integrated set of tools that will help you manage your website. You can design it the way you like and change it at any given point (if necessary).
  2. You’ll be able to collect and use customer data. Collecting customer data will help you get to know your audience, especially if you’re new to the business world. Once your customers follow you on social media and sign up for your newsletter, you’ll be able to collect data and use it to improve your marketing strategy and the customer experience.
  3. You can build brand recognition. Your online store will have its URL, and your customers will quickly associate it with your brand. If you’re looking to grow your business eventually, this eCommerce vs. online marketplace advantage is not negotiable for you.
  4. You won’t have an on-site competition. Your website will only highlight your products, and you won’t have to fight for your place on it. On the other hand, marketplaces involve many different brands, and they sometimes sell their own white-label products. You’ll enjoy more freedom. Owning a website means you’re the one responsible for the pricing and fee-charging. Additionally, you’re able to sell pretty much anything (as long as it’s legal).

Apart from the benefits of an eCommerce store we listed above, there are also some challenges that new retailers might witness. Those challenges include: attracting your audience, costs of hosting and maintaining your site online, the costs of marketing campaigns, initial investments, etc.

Online Marketplaces

An online marketplace is essentially a third-party platform that you can use to sell your goods and services. This platform is owned and operated by someone else, so you’re a part of a large shopping ecosystem that involves other entrepreneurs and sellers as well. Well-known platforms, such as Amazon or Etsy, can offer you an already existing customer base (a nice boost for new retailers). However, they won’t put additional effort or resources into highlighting your brand. Let’s see what the key benefits of selling through online marketplaces are:

  1. A quick and easy start. Setting up a storefront takes minutes, and you’re immediately able to enjoy the benefits of advertising, payment processing, and shipping and distribution channels.
  2. No technical experience is required. Since you’re not hosting your website, you don’t need any technical skills other than being able to list your products and provide the required information.
  3. No marketing resources are needed. Once again, the marketing is handled by the platform, so you don’t need to invest in it.
  4. Access to a large customer base. Those well-known marketplaces we mentioned above are among the first things people think of when it’s time to do some shopping. You’ll have access to a worldwide spread audience who will be happy to buy your products since they come from a well-known and trustworthy marketplace.
  5. You won’t need site or server maintenance. Third-party marketplaces are usually hosted by large cloud providers that resolve any technical issues in the shortest time possible. They are also well protected from hacks and outages, so you can be sure that your products are available to the customers at any point of the day.

With all the benefits a marketplace has to offer, you might also face certain obstacles if you opt for it. These include product restrictions, no inventory running, less control over your sales platform, etc.

E-commerce vs. Online Marketplace: Key differences

You can already see some differences between an eCommerce website and an online marketplace regarding what we stated above. To complete the comparison, let’s go through the most critical checkpoints of starting an eCommerce vs. online marketplace business:

  1. Traffic - While online marketplaces have an existing customer base, online store owners need to attract the audience from scratch to increase the traffic that comes to their website.
  2. Marketing - Marketplaces can support sellers by driving traffic to their websites. On the other hand, an eCommerce seller needs to develop a strong marketing strategy for himself and invest more.
  3. Inventory - E-commerce sellers’ sites can run inventory, which is beneficial for the sellers. On the other hand, marketplaces can’t offer this to their sellers.
  4. Time to launch - As we mentioned earlier, launching a business on a marketplace is easy to set up, and it’s usually done in less than a day. On the other hand, an eCommerce store requires more steps and dedication.
  5. Costs - Marketplaces charge their sellers commissions (usually between 5%-15%) or charge for memberships, while eCommerce owners don’t have to pay commissions.

Which solution is right for you?

Generally speaking, there may not be a clear winner in the battle of the eCommerce vs. online marketplace. That’s because they both come with some fantastic benefits for certain businesses. Therefore, your final decision should also be based on your ideas and ambitions for your future business. Answering the following few questions can point you in the right direction:

  1. Is my long-term goal to create a stand-alone website under my business URL?
  2. Are brand-building and personalization more vital to me than the turn-key solutions and ease of use?
  3. How do I want to handle advertising? Will my marketing strategy be based on recognizing an existing platform or the contact information and the data from my customers?
  4. Am I selling something controversial, edgy, or highly regulated?
  5. Does the audience we seek already shop on third-party sites?

Final thoughts

Customers are not quite interested in what happens behind the scenes when they order a product. However, suppose you’re looking to become an online retailer. In that case, it’s essential to consider the amount of money you can initially invest, the amount and the type of products you’re going to sell, and the short-term and long-term goals for your business.

Typical eCommerce stores and marketplaces we explained above do have one crucial flaw; they’re fully centralized, which is why we advise you to use a blockchain-based eCommerce platform when starting your business. A good example is Safex Market powered by Safex blockchain, which offers plenty of benefits, including guaranteed personal data privacy, lower costs for merchants and customers, decentralization of cross-border trade, and lower transaction fees. By using Safex Market to list your products there and sell them online, you will attract your ''regular'' users as well as cryptocurrency neophiliacs. Have in mind how the crypto market is growing and that people would rather buy something for crypto they have, they earned, they mined than sell it for fiat and sometimes pay high fees and taxes!