Getting Started with Marketplace vs Platform

eCommerce website and E-marketplace are the two most popular options for online merchants all around the world. Each solution leads you to a different set of customers. Therefore, it’s one of the fundamental aspects you need to decide on before going live.  In this article, we will cover everything you need to know about marketplace vs platform. Let’s dig deeper and find out:

  • What is an eCommerce platform and E-marketplace?
  • Quick comparison for each solution.
  • Pro and Cons of marketplace and platform.
  • Top 7 main key differences between marketplace vs platform?

Marketplace vs platform: The Very Basic

1. What is eCommerce platform definition?

First and foremost, eCommerce is purchasing and selling activities happening over the Internet. And, an eCommerce platform is an end-to-end software application where both parties, sellers, and consumers come and play their roles.

This type of service encompasses eCommerce website builders, accounting and inventory management systems, as well as customer service infrastructure. Most importantly, a consumer should be able to use an eCommerce platform to discover products, shop around using a cart, and then check out.

What is eCommerce platforms
eCommerce platforms example

For merchants, an eCommerce platform is a lifesaver if they decide to launch an online store from scratch or as an addition to a physical store.

Some of the most popular eCommerce platforms available in the market today are Shopify, BigCommerce, Magento, WooCommerce (including WooCommerce website builders, like Elementor), Wix, and so on.

Shopify, Squarespace, or WooCommerce are ideal for small businesses that need a platform quickly to set up. On the other hand, Magento and BigCommerce are better suited for larger firms with huge order volumes. Moreover, some website builders like Wix or Squarespace provide drag-and-drop functionality for store owners with little to no coding experience, while other platforms have more complex back ends.

Pros and Cons of selling on eCommerce website

Traffict and audience engagement
Selling on eCommerce website

Pros:

  • Easily collect customer data for your future marketing campaigns.
  • Complete control over the site’s functionality, design, and navigation.
  • No on-site competition.
  • Build your own brand awareness.
  • Enjoy fewer restrictions and rules.

Cons:

  • Take the hard effort to bring traffic & customer engagement.
  • Take moe time and money to build and maintain your website.
  • More financial risks in scalability.

Quick eCommerce platform comparison

Let’s take a quick tour through the top 5 best eCommerce platforms for your online business: Shopify, WooCommerce, Magento, Wix, and BigCommerce.

shopify_logo_black

Shopify is one of the best-hosted solutions in the market. Merchant all around the world prefers Shopify for its amazing eCommerce features along with an enormous amount of extension. Additionally, this solution is quite simple to use with an affordable price range.

WooCommerce is famous for its affordable price, powerful customization ability, and amazing eCommerce features. Also, WooCommerce offers users 1000+ themes and templates in their theme store. With just $20-$100, you can have a stunning and powerful WooCommerce store up and running.
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Magento has gained a well-deserved reputation for its strong scalability, high customizability, and powerful built-in features. This solution is more suitable for medium to large-scale businesses due to its complicated system. It will take from $15k-$100k for a decent Magento store.
wix logo

Wix is another amazing hosted solution on the list.  This SaaS is focusing on maximizing the ease of use for its user. With the drag and drop site builder tool from Wix, you can get your store up and running in just some simple steps. More than that, Wix’s themes are being known for their beautiful appearance.

BigCommerce is a fully hosted eCommerce platform that enables you to create an online shop and sell across a variety of platforms. It is perfect for high-revenue and developing enterprises that require a scalable sales platform because of its free transaction costs and scalable solutions. Its monthly rates begin at $29.95 per month.

2. Online marketplace definition

An online marketplace is an eCommerce site or app that facilitates shopping from many different sources. The marketplace’s operator does not own any inventory. Instead, their job is to show other people’s products to customers and enable transactions.

Online Marketplaces to Sell Your Products
Online marketplaces example

Nowadays, there are countless online marketplaces from sites like Amazon, eBay, Etsy, Walmart, Alibaba, and far more. Today’s marketplaces are expanding at a breakneck speed. According to analysts, global marketplaces will account for 40% of the global online retail market in 2020. Furthermore, 75% of marketing professionals in the United States admit that putting your business where your customers want to buy from can increase your revenue from selling on online marketplaces.

Pros and Cons of selling on online marketplace

selling on online marketplace
Selling on online marketplace

Pros:

  • Have more traffic and customer engagement.
  • Less financial risks.
  • No need to spend time running inventory.
  • Quick to set up.
  • Have low or no setup cost.

Cons:

  • Compete among many competitors.
  • Lack of brand awareness.
  • Can not build a customer list for marketing campaigns.

Quick marketplace comparison

Among thousands of E-marketplace in the market, some of them stand out in front as the top options when it comes to choosing a suitable platform to sell. We have sorted out the top 5 including Amazon, eBay, Walmart, Etsy, and Google Shopping.

amazon logo

Amazon is the biggest e-retailer in the United States.  This marketplace is famous for its excellent customer support and amazing shipping service. Even though it’s not that easy to open a new store, Amazon is still a promising investment with an enormous customer base.
ebay_logo

eBay is a worldwide E-marketplace that provides C2C online sales services. As a seller, you can literally sell anything on eBay with its auction platform. Excellent “Buy it now” shopping services, online classified adverts, and online event ticket trading are what make eBay so famous.

Etsy is an emerging online marketplace where customers can find unique and creative goods at an affordable price. That’s why Etsy attracts 2.7 million sellers and nearly 50 million active buyers in 2020. Because of the cheap price, you can open a new Etsy store without having to pay anything. 
walmart

Walmart operates a worldwide network of retail stores as well as an online marketplace. The company is known for its “everyday low prices” strategy and a wide range of products – you can find nearly anything on Walmart. This E-retail giant is considered the 2nd most famous marketplace in the US.
gg shopping logo

Google Shopping is an online shopping engine that lets people find, compare, and buy items from a range of stores. It’s a broad set of services and locations, all powered by an online platform. This E-marketplace is a good choice if you’re trying to increase your product exposure on Google.

 

 

Multi-selling Made Easy

Want to minimize manual efforts when selling multi-channel? Try out LitCommerce – The Multichannel Selling Tool! LitCommerce allows store owners to list products on marketplaces and integrates Etsy store with other selling channels.


What is the Difference Between Marketplace vs Platform?

eCommerce or online marketplace has the same goal in mind: to sell products to customers. We’ll help you analyze the pros and cons of marketplace vs platform to determine which option is right for your business.

platform vs marketplace - main key differences
Platform vs Marketplace – main key differences

1. Traffic and audience engagement

In every online business, whether it’s an eCommerce site or online marketplace, traffic and audience engagement are vital.Marketplace vs platform - Traffict and audience engagement Marketplaces have always been transactional-oriented, with the objective of bringing buyers and sellers together. Thanks to the marketplace nature, the target audience is bigger as it offers a huge choice of product categories, and thus, more traffic to the site.

Basically, online marketplaces are frequently focused solely on encouraging customers to make purchases, while urging store owners to add more products or services to their listings. Therefore, online marketplaces bring more opportunities in engaging customers to buy the products. Indeed, marketplaces benefit from network effects: more buyers attract more sellers and vice versa.

In the eCommerce business, on the other hand, engaging the audience is more difficult. It takes a long time and costs a lot of money to attract traffic to the website. Even if you have a lot of experience, you can still be focusing on the wrong target customers. However, a social media platform like Facebook can considerably aid in audience engagement.

2. Marketing and brand recognition

It is a big perk for businesses to have a clear concept about the marketing approach and targeting in the comparison of marketplace vs platform.

If you’re using E-marketplace

Unfortunately, sellers on marketplaces have limited to no access to their customers. Accordingly, it’s tough to sell your items or generate brand awareness and loyalty. If you can’t get in touch with your prior customers to let them know about sales or new product releases, you will have to rely on the fresh sales instead of leveraging the strength of previous purchases.

Also, a key disadvantage of marketplace platforms is the lack of direct access to customer analytics and communications. When it comes to brand competition, even if your products are unique, there are a lot of identical products out there vying for the attention of your potential customers. As a result, your product may or may not stand out in a competitive marketplace.

Additionally, many consumers who purchase on marketplaces assume they are buying from that marketplace, even though they are purchasing your products. Therefore, the buyers tend to remember the marketplace rather than the brand the next time they come back. In most marketplaces, the focus is not on the sellers, but rather the products. This makes it extremely difficult to develop brand awareness and recognition and ultimately differentiate your business.

If you’re using an eCommerce website

Meanwhile, eCommerce websites have complete access to all customer analytics and can reach out directly to customers to inform them about sales promotions, new releases. Also, direct access to your customers allows you to deliver better customer service, obtain more detailed information and input on product development. You can analyze customer behaviors for a better understanding and optimize your website’s user experience.Marketplace vs platform - website analysis Also, one of the greatest advantages of managing your own eCommerce website is that you can target people who visit your site with ads, market to those who have already purchased from you, and stay connected in the future.

Email list building helps you build awareness, bring in steady revenue, and run promotions to get rid of inventory. Luckily, your website will exclusively sell your products, and you’ll never have to pay for advertising to get your listings to show above identical items offered by your competitors or to rank higher on your own site.

3. Scalability

In fact, owners of marketplaces take less financial risk than eCommerce website owners. When selling on marketplaces, store owners don’t buy or sell anything which greatly increases the business’ scalability. As a result, marketplaces gain economies of scale more easily; and it allows them to expand faster than eCommerce websites.

When traffic even grows very fast, it may be necessary to seek new vendors to meet the demand, but you won’t need to worry about spending large sums of money on new inventory or storing facilities. Whereas, if an eCommerce website wants to scale up, it takes more time to do so.

In fact, they have to get more product stock and find more storage space for it. Therefore, you will need to hire extra staff to manage, classify, store and ship all of their new products which can extremely foot over your bill.

In fact, eCommerce websites should invest more time and resources into website and app development to improve the user experience, instead of spending time and money on employees.

4. Inventory management

Keep in mind that the larger the inventory is, the more likely buyers will find what they’re looking for in your online store. Even if your visitors are interested in the eCommerce or online marketplace, large inventory sometimes means the extra effort for marketing which can grab the customer’s attention.Marketplace vs platform - Inventory-Management Because online marketplaces are essentially a space for e-merchants to display their products and connect with buyers, they have no inventory. Also, there’s no risk if products don’t sell either. It’s actually the seller’s obligation when a product receives no traffic, and you do not have to suffer the financial burden of holding onto a product that is not selling and taking up storage space.

In contrast, if you use an eCommerce website, you may face problems when keeping inventory unless using drop shipping to meet the customer demand. Or else, you need to necessitate the acquisition or upgrades of warehouse space without affecting the profit margins. This way, you can keep products that are not selling.

Besides, there is more financial risk when you purchase and hold the inventory, as a store owner, which can bring damages, loss to your inventory. All of these scenarios could have a negative impact on the company’s profit margins.

5. Volume

In fact, online marketplaces have lower profit margins than eCommerce websites. Listing and commission fees are how marketplaces make money. These businesses require a huge amount of listings and transactions on their website in order to remain profitable.

On the other hand, eCommerce platforms have a higher profit margin on each individual sale. Therefore they don’t have to worry as much about volume as they do about quality sales. For instance, if your company sells high-priced items, one or two sales a month could generate a significant profit margin. Plus, commission fees on expensive products will undoubtedly bring in more money than on cheaper ones.

6. Time and money

In the comparison of eCommerce vs online marketplace, building an online store on the marketplace can save more time and money initially. For example, creating a seller profile and retailer shop on marketplace platforms like Amazon or Etsy will take a very little amount of time and technical skill. In addition, you can easily start selling and reach out to potential customers who already shopped on the online marketplace. Saving time on building your store allows you to focus on product development and sales which can quickly increase sales and profits.

Developing an eCommerce website, on the other hand, will almost certainly be more expensive upfront. To design and maintain your website, you’ll need to build on your own or hire a web developer. However, store owners can easily establish and set up eCommerce websites using some platforms like Shopify, Wix, or WooCommerce. From custom designs, functions to integrations, and features, on the other hand, will certainly require the service of a technical expert.

Also, other costs to think about while building an eCommerce website are domain name, HTTPS certificate, payment gateways, and so on. While creating an eCommerce website takes a long time and costs more money, the long-term profit margins will be higher.

When merchants advertise products on the marketplaces, they need to pay a commission on each sale, and depending on the platforms you choose, you also need to pay for other fees. Over time the commission and listing fees might add up to a significant amount. Therefore, in the long term, if your business model succeeds, eCommerce sales produce higher profit margins as there are fewer fees.


FAQs – Common Questions and Answers about Marketplace vs Platform

1. Is Ecommerce a marketplace?

eCommerce and marketplace are two different types of platforms. An eCommerce store is an independent website built with the help of eCommerce solutions such as Shopify, WooCommerce, or Magento.
On the other hand, a marketplace is a platform where customers find sellers, connecting, and purchase goods. For that reason,  a marketplace usually has its own customer base and also have many restrictions on its user.

2. Is Amazon a marketplace or eCommerce?

Amazon is a famous marketplace, not eCommerce. Currently, it’s one of the best E-marketplaces in the world.

3. What is marketplace based eCommerce?

Marketplace-based eCommerce is when you connect your E-marketplace with the eCommerce store and sell on both channels. This way, you can increase your customer base and get more opportunities to reach out to potential customers.

4. How can I integrate my eCommerce store with my E-marketplace?

You can easily integrate your eCommerce store with an online marketplace by connecting to a central platform and managing everything from just one place.

Final Thoughts on Marketplace vs Platform

Depending on the product niches, needs, and goals, the greatest place to sell online will differ from retailer to retailer. Online marketplaces are an excellent place to start for eCommerce beginners since they allow you to cut down on the costs, risks, and time to set up a business upfront.

Or else, if you’re already a well-known brand and don’t want to share your profits with a marketplace, or if you need a custom-made solution, setting up your own eCommerce website can be a way to go. eCommerce or online marketplace is a great place for selling, but it’s not the only option when you can use both to make your business thrive.

If you’re interested in multichannel selling, check out LitCommerce to prepare for your first step! The tool allows you to import products from your eCommerce website, then list and sell products on the world’s largest online marketplaces such as Amazon, Etsy, eBay,… and make the management work more efficient and simple than ever before.

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Contact me: phuongltk@oceansoftware.com.vn