E-Commerce vs Marketplace: Opposing Views

Trying to navigate the many avenues of digital sales? Read about the two fundamental choices you have: e-commerce or use of a marketplace, all while discovering how to decide which is right for you at this moment in your business.

What are they?

They are both digital solutions for achieving online sales. Both are ways to have a vendor to be able to receive digital orders and payments. They are also a necessity of your sales approach in one way or another. Online shopping has taken retail by storm and consumer interest for the safety and convenience benefits has cemented its role in the way we transact with one another.

Understanding that no business can refuse the digital appeal, it is good to review the different basic approaches that have so far been used successfully. An agency at this point, looking out at the coming crossroads, doesn’t need to fret: the choice can be simply made by understanding how the specific nature of your business would interact with a digital sale platform.

E-Commerce

Electronic commerce refers to any transaction, or sale, conducted online. It refers to any instances where buyers and sellers use digital channels to fulfill some part of the transaction. Not only did this concept allow consumers to access markets safely, but it was also the infrastructure needed by companies with peace of mind during the COVID-19 lockdown days.

E-commerce has endured many iterations in a short amount of time, making it a rapidly evolving area. There are two principal fundamentals:

1. a firm that constructs its own digital platform, or website;
2. one that externalizes the process of e-commerce software development.

Either path has pros and cons, but we can always help you when it comes to making software development decisions!

For ease of contrast, during the rest of the article, ‘e-commerce website’ will refered to the principal scaffolding that consists of an agency developing its own online sales platform. Although both principles fall into the category of e-commerce, it’s like apples and oranges.

E-commerce websites can be further differentiated into two additional categories: hosted and self-hosted platforms. Platforms that can host your website include Shopify and BigCommerce. Platforms that allow you to self-host are WooCommerce and OpenCart. Each of these categories is still your own website where you have full control, allowing a high level of flexibility that is especially realized in the long run.

Then what is a Marketplace?

An online marketplace refers to the externalization of e-commerce software development to a third party. This third party normally provides some combination of the following online functionalities, so you don’t have to worry about them:

• digital payment gateways,
• logistics and shipping options,
• building and maintenance of website,
• customer support.

Think about Amazon, Etsy and Ebay. The examples differ in terms of how exact functionalities are out staffed, but they are similar in their ability to accurately connect buyers and sellers. That is the true power of an online marketplace: connecting with customers has now become the most efficient way to go with the aid of algorithms and data, especially if you are not a marketing or e-commerce expert yourself. Well-targeted and contextual advertising generates dramatic rises in sales volumes. You essentially level-up the marketing of your company overnight if you’re not there already. These services are enlisted with 4 basic steps:

1. register an account with the online marketplace,
2. create your product listing,
3. add details pertaining to payment gateways,
4. set up shipping options.

And viola, after some Search Engine Optimization (SEO), you will be good-to-go. SEO is what websites do to get higher up in search results from search engines like Google and such. It means using ads, sponsors and optimized landing pages to harness the algorithms and get listed towards the top where more people will be clicking. Using online marketplaces greatly benefit from SEO as they are effectively search engines in and of themselves.

Noteworthy Differences

The first important difference comes down to the way your company will accumulate knowledge and the scalability on the two platforms. Building your own e-commerce website usually comes with a steep learning curve, rife with trials and errors. Although the difficulty can vary, with whether you self-host or not, like Shopify generally is easier than Magenta; it is rarely easier than signing up for a marketplace. It is also generally true that an individual e-commerce website is more scalable, but this is not to say that scaling on a marketplace is impossible. Generally, more scalability is achieved on your own website because you have complete control and is not beholden to another company.

This leads to the next notable difference: your organization’s adherence to policy. Plentiful and sometimes strict policies are a reality for buyers and sellers on marketplaces. Most vendors experience these policies as generally favoring the customer and say they can be incredibly frustrating. Oftentimes they can change at the drop of a hat, and the responsibility to keep up with a platform’s community engagement rules is entirely upon you. You have no choice but to abide by their rules.

Rule abidance is sometimes a small price to pay, however, for the handling of many technical aspects and, of course, a lot of the marketing. An online marketplace platform can be an attractive choice because every time they promote themselves, they are diffusely promoting you as well. This, coupled with the effect of targeted advertising and that SEO we were talking about, can make a marketing campaign for a whole new website seem like a daunting task in comparison. If you are perhaps not completely confident in the marketing of your firm or are a completely new e-commerce website, bringing in traffic and then converting that into paying customers can be difficult at first. When running an e-commerce website, you must do all the marketing. If it is not one of your strong suits, a marketplace has got you covered and can help you to secure repeat buyers.

The last important disparity is in the way costs accumulate. With your own e-commerce platform, there are a few things you must bankroll yourself:

• building an easy-to-use site;
• marketing campaigns to get people there;
• maintenance and updates;
• user support.

Marketplaces also have costs for the privilege of selling on their platform. These come in the form of fees for selling products. The name for the fee differs from platform to platform but they are sometimes called “final value fees”. It is a commission calculated from your revenue through the site. These percentages accumulate and can end up being quite expensive. In some cases, exceeding a certain rate of sales may require a monthly subscription. This subscription can carry advantages though, normally making more tools and options available to you.

Deciding: which is Right for you?

Hopefully you can now explain the difference between the two… but can you decide which one to employ? This is an unfair question as it always comes down to the individual business.

Some experience marketplaces as too restrictive; others don’t want the hassle of running their own website and find it easier to use an online marketplace.

E-commerce business normally follows a path that goes through both options at one point or another. A combination of both is probably the best option for new e-commerce businesses and is a great way of growing your enterprise. Marketplaces can generate sales quickly as you become an option available on their platform; a young e -commerce website often must go through periods of trials and errors to get traffic. If you have access to the marketing expertise required, like the ins and outs of arranging social media campaigns and paid ads with Google, then perhaps you could bypass this early help.

Often, companies use early profit made on marketplaces to invest in their e-commerce website, funding things like:

• site building;
• marketing research;
• test ads campaigns;
• social media campaigns.

Another way to harness marketplaces is to include marketing material in your product listings for your own website. These can include an incentive benefit for the customer when they use your website, perhaps a discount. This way, you can convert customers to buy from you directly and then buying from you repeatedly.

Now you can confidently make decisions as to which direction to take when navigating your agency through the maze of digital sales platforms. Please contact us if you would like to request any technical e-commerce services, including SEO; or if you would like to know more about your company’s options going forward with e-commerce.