Marketplace versus ecommerce platforms
Marketplace versus ecommerce platforms

Ecommerce offers customers the luxury of purchasing almost everything under the sun at the click of a button. As more users take to online shopping, ecommerce doesn't seem to be slowing down anytime soon. For entrepreneurs, selling online is imperative. If you are already selling on ecommerce marketplaces such as Amazon and eBay, you have a head start.

However, the opportunity does not end there. Although marketplaces have been instrumental in connecting buyers with sellers, the rise of ecommerce websites has opened new frontiers for online shopping. While there are around 9.5 million sellers on Amazon, there are over 26 million ecommerce websites all over the world and this number is increasing.

How is an ecommerce website different from a marketplace?

You maybe well acquainted with online selling, but here's a brief explanation of the differences between selling through ecommerce sites and marketplaces for those of you who might want a little more information:

What is a marketplace? 

A marketplace is a third-party website that lists products provided by multiple vendors or sellers. You do not directly sell to a customer; there will be a marketplace administrator involved in the sales. Amazon, eBay, AliBaba, and Rakuten are popular marketplace websites.

What is an ecommerce website? 

An ecommerce website is a website run by an entrepreneur that lists and sells only their products. The buyer usually purchases the goods directly from the seller through their site. Well-reputed brands have their website with their names prominently a part of their website URL address and on their website pages.

While you're selling your products on marketplaces, it's worth considering starting an ecommerce store of your own, too. Here are some reasons why:

1. Product Authenticity

Of late, marketplaces are flooded with sellers listing imitations of products. The sellers peddling these products make a quick buck for themselves, but hurt the real brands in the medium term. Also, their own business usually fails when customers realise that the product quality does not match their expectations. Brands like Nike and Birkenstock stopped selling on Amazon because of the counterfeit problem on the marketplace.

As your own brand grows, you would not want counterfeits to sell right alongside your own products on the same platform. When you have your own website, you control the narrative of your brand, and avoid side by side listing of counterfeit products. Genuine products with consistent quality creates a positive brand reputation, which leads to a loyal and satisfied customer base.

2. Profit margins

Platforms like Amazon charge you exorbitant commission fees that are likely to eat into your profit margins. You will be saddled with multiple fees including seller fees, FBA fees, and CPA fees, among others. The payment cycle is usually long with a marketplace, too. For example, the payment cycle of Amazon is usually 7–14 days. This might pose problems for small businesses who cannot invest heavily into their operating capital.

With your ecommerce store, you run the show without paying third party fees or commissions. The transaction fees on ecommerce platforms are lower and the payment cycle is near instant, making this a great option to build your ecommerce business on.

3. Revenue Security

Marketplaces give you traffic and potentially thousands of visitors, but they also pit you against thousands of sellers selling the goods in the same category, sometimes selling their products as a loss leader.Marketplaces sometime also interfere with your pricing strategy, forcing you to lower prices to remain competitive.

On your website, no one is competing against you. No other products are vying for your customer's attention. With the right setup on an ecommerce platform, you can monitor customer reviews and ensure they're genuine before publishing them to make sure fake reviews remain at bay. You are free to woo your customers with discounts, coupons, or credits, too. In other words, you choose your pricing strategy and have control over your revenue.

4. Inventory and delivery management

Marketplaces prioritize customers over sellers. When a customer is not happy with a product, they can return it easliy, even if it is damaging to the seller. . As a result, sellers often bear the brunt of the 'customer-centricity' that marketplaces use to drive their own brand value. In addition, sellers sometimes need to take losses on the chin, and constantly manage their inventory to suit the whims and fancies of the marketplace. Often the worst case scenario is losing the "buy button", usually dropping product visibility (and consequently sales). A popular ecommerce seller and blogger noted, "Sellers are now using automated software that will keep buying your stock and then cancel in bulk. This software causes you to go out of stock quickly, which destroys your listing." Marketplaces can be a minefield for many businesses.

If your ecommerce solution has inventory management and shipping built into its solution, then inventory as well as delivery becomes a smooth and transparent process. Inventory management helps plug dead capital by making sure you are not overstocked or under stocked. It also keeps your customers happy by informing them about the availability of your product. You will also be in complete control of your store's return and refund policy.

5. Customer data

As a marketplace seller, you are not allowed access to customer data beyond the first time you ship the order.  The customer's data is completely owned by the marketplace, and this puts you at a disadvantage. Creating a long-lasting impression of the brand and building customer relationships is next to impossible when operating solely on a marketplace.

The contemporary idea that data is the new oil is not an overstatement. From helping businesses make informed decisions to maximizing the ROI, data plays a vital role in the success of an ecommerce business. With an ecommerce site, you maintain control over your customer data. You can automate your communication based on the buyer's journey and talk only when the buyer is willing to listen. You can choose to interact with your customers, and send them emails to mention offers, promotions, new launches, abandoned carts, and more. You can check what they like and what they don't, and also stock up accordingly. Starting from customers' browsing patterns, time spent on each page of the store, to their buying behavior, everything can be obtained easily on an ecommerce platform. This enables ecommerce merchants to optimize their stores for a great user experience, run targeted campaigns, and boost sales.

6. Building brand credibility

Either cheap ripoffs can steal your customers or there can be fake negative reviews that can malign your brand name when selling through a marketplace. Customers may not register your brand, or worse, they confuse your brand with another one imitating yours. But they will end up leaving a review for you, bringing down your brand credibility. Over time, your existing customers as well as new ones will not trust a poorly reviewed product, and will switch to alternatives. As mentioned earlier, the competition is high and you practically have no space to build a loyal customer base or a memorable brand.

Building a brand matters. We all purchase from brands we like and trust. An ecommerce store adds credibility to your business as opposed to a simple listing on marketplaces. Your storefront acts as a key touchpoint for your customers. It gives them a holistic view of all the products and categories and a sense of engaging with a real business. Your customers will be able to reach out to your support or sales teams for any query, too.

7. Staying online

Marketplaces can shut your business or delist your products anytime; this can happen even if you haven't violated any of their policies. There are various reasons why a marketplace can choose to suspend your account. An accumulation of negative reviews is one reason but the sad reality is there are services which, for a nominal fee, can leave phony bad seller feedback. If brands partner with Amazon to sell a specific product, any seller's product in the same category can be delisted. There are many other reasons this could happen too. In other words, they have complete control of the product listing.

When you sell your products through your ecommerce shop, you are not at the risk of having your account suspended overnight, for reasons known or unknown. If you're an entrepreneur with an ecommerce site, you can be reassured that you will stay online until you choose not to be. Your website and brand discoverability will be based on how well you optimize your website, promote and market your brand and products, and your social interaction. You are entirely in control of your online presence.

The final verdict: Marketplace vs your ecommerce website

Never place all your eggs in one basket. Experiment, explore, and assess what will work best for you. As a seller, you don't have to find yourself at the crossroads between a platform and marketplace while starting your ecommerce journey. Marketplaces and platforms cater to different needs and both can be useful in their own right. In fact, online businesses who are already using marketplaces can further boost their margins with ecommerce platforms. Overall, no matter what, having an ecommerce online store will always be helpful.


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