What is the difference between ecommerce and an online marketplace? Most people would presume that they are different names of the same thing. Although this may seem to be the case, there are some important differences between them.
Firstly, we all know how important an online sales channel is for businesses. According to Statista, it is forecasted that in 2021, over 2.14 billion people worldwide will be expected to buy goods and services online. This number is expected to grow as more customers turn to online purchases. However for retailers who are new to the digital commerce scene, the endless options to go online can be quite overwhelming. A common question that is asked: “Which is better for my business - an ecommerce or an online marketplace?”
Whether you are an interested observer or a retailer looking to choose the right online sales option for your business, here’s what you need to know about the differences between the two, and their advantages.
What is e-commerce?
Simply put, ecommerce is the purchase and sale of goods or services via the internet, accompanied by the transfer of money and data to complete the transaction. It is also known as electronic commerce and internet commerce. In practical situations, the term e-commerce has been used to describe a single seller website in which transactions involve two parties - the seller and the customer.
In recent times, ecommerce is commonly used to refer to online platforms like HCL Commerce, BigCommerce and Magento, which offer services to help businesses set up their online websites, equipped with sales functions and other value-added features.
What is an online marketplace?
An online marketplace is a platform where multiple retailers converge to sell their products. In this model, three entities are involved: the seller, the customer, and a third party who provides the facility (the marketplace and its services) to enable transactions between the customer and the seller. This third party is essentially the platform owner and administrator.
The marketplace is essentially a way for retailers to participate in the traditional ecommerce environment, without the need to spend time and resources to build their own website. Among the most well-known online marketplaces right now are Amazon, Alibaba, eBay and Etsy.
E-commerce Platform vs. Online Marketplace
From an end user standpoint, the difference between the two may not be so noticeable other than the fact that there is a greater variety of products and brands sold in a marketplace.
As a retailer, there are a several factors to consider that will ultimately help you determine if it is worth selling through your own website or through a marketplace:
- What kind of business/industry/niche are you in?
- How do you plan to scale your online business?
- How much are you able to invest in online marketing efforts?
- What online features do you need to serve your customers?
Below is a rundown of the different benefits that both an ecommerce platform and an online marketplace offer. Once you are able to fully ascertain your online business needs, it would be easier to identify which benefits would apply more to your business.
Benefits of an ecommerce platform
There are several advantages of having your own ecommerce website as opposed to selling in an online marketplace.
Control over site functionality and features
With your own ecommerce platform, the possibilities are endless. You can customize your e-commerce site exactly how you want it to be, everything from the front-end design, integrations with different payment methods, marketing tools, analytics, loyalty programs, and more.
No on-site competition / Greater brand recognition
Having your own ecommerce website creates a singular focus on your business and your business only. This helps foster brand loyalty among your customers. Whereas in an online marketplace, all brands and businesses are lumped together according to their categories, creating significant competition for retailers to have their products rank higher than others.
Fewer restrictions and rules
Retailers who belong to a marketplace ecosystem are bound by the rules set by the platform owner, such as fair pricing and sales restriction of certain products. Operating your own ecommerce site sets you free from such restrictions, so that you can sell on your own terms without the fear of being suspended or banned by the platform owner.
Benefits of an online marketplace
Here are some of the benefits that a marketplace solution offers to retailers.
Quick to set up
Building your own ecommerce site can be easy or complicated - it depends on what features and functionalities you require, and what development experience is needed. Setting up your store on marketplaces is often a much simpler affair, requiring less time and effort to register on the platform, list your products and start selling.
No site or server maintenance / minimal tech experience required
With an online marketplace, the platform owner has the responsibility to maintain the website and to offer a secure shopping and payment process for everyone. As a retailer, you would not have to worry about troubleshooting technical issues related to the functionality of the site.
Strength in numbers
The variety of products and retailers offered in an online marketplace is exactly what attracts customers – it is just like how a shopping mall functions in brick and mortar retail. This means that sellers registered to a marketplace platform can already leverage on the latter’s strength and volume of visitors, unlike ecommerce websites which have to build traffic from scratch.
The world of ecommerce and online marketplaces is vast and constantly evolving. All things considered, there is no right or wrong answer when it comes to choosing between the two. For retailers, a lot of the decision-making process is dependent on the needs of the business and the target customer base. It is also essential to understand the differences between the two options and what they both can offer to the retailer as well as to the final customer.
If you are still uncertain about your platform options as a retailer, don’t hesitate to get in touch with us at Orienteed. We will be glad to guide you through your digital transformation.