Marketplace vs. eCommerce: Which is the best?

61% of US online shoppers start their product searches on Amazon rather than a search engine.

For an online seller, this raises an important question:

Should you sell through an online marketplace, build your own ecommerce website, or use both?

While a marketplace gives you immediate access to an existing audience, an ecommerce store gives you more control over your brand, customers, and selling experience.

In this article, you'll learn what marketplaces and ecommerce stores are and compare them across various key factors to help you decide which approach makes sense for your business.

What is a marketplace?

An online marketplace is a platform where multiple sellers list and sell their products to a shared customer base.

The marketplace provides the infrastructure customers need to discover products, place orders, and make payments in return for regular payments and/or commissions.

Depending on the platform and fulfillment model, the marketplace may also provide services such as shipping, fulfillment, returns, and customer support.

How do marketplaces work?

Selling through a marketplace usually starts with creating a seller account and adding your products according to the platform's listing requirements.

Once your products are listed, customers can discover them through the marketplace's search and recommendation systems.

The marketplace can also handle parts of the transaction, such as payment processing, returns, customer support, and fulfillment depending on its policies and the services you use.

The biggest advantage of online marketplaces is that you do not have to build an audience from scratch. Instead, you can put your products in front of shoppers who are already visiting the marketplace.

However, the biggest challenge you need to face here is competition. Your products will appear along similar products from other sellers, and your visibility may depend on factors such as pricing, reviews, product rankings, advertising, and the marketplace's algorithm.

What are the different types of marketplaces?

Marketplaces can be broadly divided based on the products or customers they serve.

Horizontal marketplaces sell products across multiple categories. Amazon and eBay are examples of this. They give sellers access to a large and diverse audience, but competition can be high.

Vertical marketplaces focus on a particular product category or audience. Etsy, for example, focuses heavily on handmade, vintage, and creative products. While the audience may be smaller than that of a general marketplace, it can be more relevant to specific sellers.

B2B marketplaces connect businesses with other businesses. They may support requirements such as bulk ordering, account-specific pricing, and quote requests.

What are some examples of marketplaces?

Some popular online marketplaces include:

• Amazon

• Etsy

• Walmart Marketplace

• eBay

• Flipkart

What is an ecommerce store?

An ecommerce store is an online store that you operate under your own brand. You have your own storefront where customers can browse and purchase from your business.

You can use an ecommerce platform such as Zoho Commerce to create and manage your online store.

An ecommerce store gives you greater control over how your business is presented and how customers interact with your brand. However, unlike a marketplace, you are responsible for attracting customers to your store, managing operations, and building customer relationships.

How do ecommerce stores work?

An ecommerce store has two sides to it: the customer-facing storefront and the backend that you use to manage the business.

On the storefront side, you create the experience customers see when they visit by designing your website using themes, product pages, images and descriptions, category pages, and customized checkout experiences.

Customers can reach your store through search engines, social media, advertising, email campaigns, referrals, and other marketing channels.

Behind the storefront, you manage the operations that keep the store running. This includes adding and updating products, managing inventory, processing orders, configuring payments, and managing customer information.

Marketplace vs. eCommerce: A side-by-side comparison

Both marketplaces and ecommerce stores allow you to sell products online, but the way they work is fundamentally different.

A marketplace gives you a ready-made selling environment and access to an existing audience. Your own ecommerce store gives you control over the selling environment, but you have to build the audience yourself.

Fees and costs

Cost is one of the first things you need to consider when choosing between a marketplace and your own ecommerce store.

Cost of selling on a marketplace

Marketplaces charge sellers for using their platform and services.

Some common marketplace costs include:

• Subscription or membership fees

• Listing fees

• Referral fees

• Transaction fees

• Fulfillment fees

• Storage fees

• Shipping costs

• Advertising fees

• Promotional fees

It is important to note that marketplace fees can vary considerably between platforms and product categories.

Cost of selling through your own ecommerce store

With your own ecommerce store, you do not pay for access to a customer base. Instead, you take on the direct costs of running your store and acquiring customers.

Depending on the ecommerce platform, payment provider, order volume, and fulfillment setup, your costs may include:

• eCommerce platform fees

• Domain and hosting costs

• Payment processing fees

• Shipping and fulfillment costs

• Inventory and storage costs

• Marketing and advertising costs

• Store maintenance and app costs

• Returns and customer support costs

The major difference is that you have more control over how these costs are managed.

Profit margins

A marketplace can be a great option when you are in the beginning stages of your business because you can reach shoppers without first building a large audience of your own.

However, the fees associated with each sale can reduce your margin.

With your own ecommerce store, you may have to spend more on customer acquisition initially, but once you acquire a customer, you have more opportunities to encourage repeat purchases through channels such as email, loyalty programs, and remarketing.

Brand control

Your selling environment influences how customers experience your business.

On a marketplace, your product page has to follow the platform's format. You may have limited control over how information is presented, how your brand story is communicated, and how the overall shopping experience looks and feels.

Your products are also displayed alongside competing products.

An ecommerce store gives you more freedom to create a unique customer experience.

You can decide how your homepage looks, how the product pages are presented, what information customers see, how your navigation works, what content you publish, and how the checkout experience feels.

Customer data and ownership

Customer relationships are another major difference between the two models.

When customers purchase through a marketplace, the marketplace owns the primary customer relationship.

You may receive the necessary information to process and fulfill an order, but your access to customer information and communication opportunities varies according to the marketplace's policies.

This makes it harder to build a direct relationship with customers outside the marketplace.

With your own ecommerce store, you have greater opportunities to build and manage a first-party customer database.

You can use the customer information you are permitted to collect to support activities such as:

• Email marketing

• Loyalty programs

• Product recommendations

• Repeat-purchase campaigns

• Retargeting

• Customer segmentation

Marketing and customer acquisition

The two models require different approaches to marketing.

When you sell through a marketplace, your primary challenge is often winning visibility within the platform.

You may need to optimize product listings, compete for marketplace search rankings, collect reviews, run sponsored product campaigns, offer discounts, and work with the platform's recommendation system.

With your own ecommerce store, the challenge is different. You need to attract customers to your website in the first place.

This might need marketing activities like:

• Search engine optimization

• Content marketing

• Social media

• Email marketing

• Paid advertising

• Influencer marketing

• Referral marketing

• Loyalty programs

• Remarketing

Over time, the goal is to build multiple sources of traffic instead of depending on a single channel.

What are the risks of selling through a marketplace?

Marketplaces can make it easier to start selling online, but they also introduce platform dependency.

Your business can be affected by decisions made by a platform you do not control.

Some potential risks include:

• Changes to marketplace fees

• Changes to search algorithms

• Changes to seller policies

• Account restrictions or suspensions

• Increased competition

• Changes in advertising costs

• Changes to fulfillment requirements

This does not mean marketplaces are too risky or that you should avoid them. The bigger concern here is becoming overly dependent on them.

If most of your sales come from one marketplace, a change to its policies, fees, algorithm, or advertising environment can have a significant effect on your business.

What are the risks of running your own ecommerce store?

An ecommerce store gives you more control, but that control comes with responsibility.

Instead of relying on a marketplace to provide the infrastructure and audience, you are responsible for building and managing your own customer journey.

Some of the key risks include:

• High customer acquisition costs

• Low initial traffic

• Technology and security risks

• Data privacy and compliance

• Inventory and fulfillment risks

• Customer service responsibilities

• Dependence on marketing performance

• Operational costs

A store can be technically easy to launch but commercially difficult to grow.

Creating product pages and setting up checkout is only one part of running an ecommerce business.

You also need to attract visitors, convert them into customers, deliver a good experience, and encourage customers to return.

The advantage is that the assets you build, such as your brand, website, content, customer relationships, and customer database, can become long-term business assets.

Marketplace or eCommerce: Which should you choose?

The better option depends on what you want your business to achieve.

 Choose a marketplace if your priority is:   

• Reaching an existing audience

• Getting products in front of shoppers quickly

• Testing products before investing heavily in your own store

• Selling in categories with strong marketplace demand

• Reducing the initial effort required to generate traffic

A marketplace can be particularly useful when you are just starting out your business or when you want to validate demand for a product.

Choose an ecommerce store if your priority is:  

• Building your own brand

• Creating a differentiated shopping experience

• Developing direct customer relationships

• Building a first-party customer database

• Encouraging repeat purchases

• Investing in long-term SEO

• Having greater control over your customer journey

An ecommerce store can be particularly valuable when your goal is to build a recognizable brand and develop long-term customer relationships.

The best of both worlds

A hybrid approach allows you to use each model for what it does best.

You can use marketplaces to reach shoppers who are already looking for products and use your own ecommerce store to build your brand and develop direct customer relationships.

For example, a business could use a marketplace to introduce its products to new customers while using its own ecommerce store as the central destination for its brand, product education, content, loyalty programs, and repeat purchases.

This approach also reduces your dependence on a single sales channel.

However, managing multiple channels creates its own operational challenges. You need to keep product information, pricing, inventory, orders, and fulfillment coordinated across your channels.

As your business grows, having the right ecommerce and inventory systems in place becomes increasingly important. If you're looking for something to help you manage your online retail business or are simply interested in learning more about starting an ecommerce business, the Zoho Commerce team is ready to help you start your journey.