Differences Between Marketplace and E-commerce: Explained

HomeE-CommerceDifferences Between Marketplace and E-commerce: Explained

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Selling products online can be tricky at times. From opening an online shop to choosing an online website to start a business, many things need to be considered. Many large and small businesses choose to go to marketplaces or e-commerce websites to showcase their products online for sale. 

What is Marketplace?

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A marketplace is an online platform that allows buyers and sellers to trade goods, services and information. You can operate it as a single entity, or as a group of people. A marketplace allows sellers to list their products and services while buyers can browse and make purchases based upon their preferences and needs.

There are many types of marketplaces. These include online marketplaces such as Amazon, eBay and Alibaba where sellers and buyers transact online. Or physical marketplaces such as farmers’ markets where vendors sell their products in person. Some marketplaces cater to a niche. For example, Etsy is specialised in handmade and vintage products and Airbnb specialises in short-term rentals. Marketplaces can also be B2B (business-to-business) or B2C (business-to-consumer) in nature.

What is E-commerce?

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E-commerce, short for electronic commerce, is the online selling and buying of products or services. E-commerce is the online transaction of business, usually through an ecommerce website, mobile app, or other digital channels.

As more people gain access to the internet, e-commerce has grown in popularity over the last few decades. Online shopping is more secure and convenient. Technology has made it easier to do e-commerce, including digital wallets and mobile devices.

E-commerce transactions can include a variety of goods and services. These can include physical and digital products as well as services such online consultations, bookings, subscriptions, and other services. You can pay for your e-commerce orders using a variety of payment methods such as PayPal, credit cards, bank transfers, digital currencies, and PayPal.

E-commerce has changed the way people shop. It has also opened up new avenues for businesses to connect with customers and increase sales.

Advantages of Marketplaces

1. Greater reach:

Online marketplaces allow businesses to reach a wider audience than their local area, opening up new markets for growth and creating opportunities. This is especially useful for small businesses that have limited resources. Businesses can also access international markets through online marketplaces without having to be physically present in these countries.

2. Built-In Traffic:

Online marketplaces often have a customer base that is already established, which can give businesses a source of customers and traffic. Businesses can save time and money by not having to spend as much on driving traffic to their websites.

3. Lower costs

Many online marketplaces have lower costs and fees than e-commerce websites. Businesses can save money on web development, hosting, maintenance, and other costs. Because they are able to benefit from existing traffic, online marketplaces eliminate the need for companies to invest in marketing.

4. Credibility:

Businesses can build trust and credibility by being associated with an established online marketplace. Customers are more likely to trust businesses that are featured on well-respected online marketplaces, which can be particularly beneficial for unknown or new businesses.

5. Marketing Support

Many online marketplaces provide marketing tools and support to businesses in order to promote their products and reach new clients. This is a great advantage for small businesses that have limited marketing resources as they can use the market’s marketing capabilities in order to drive traffic and sales.

Disadvantages of Marketplaces

1. Limited Control

Online marketplaces offer limited control over branding, pricing, and customer experience. It can be difficult for businesses to distinguish themselves from their competitors and create a strong brand. Businesses must also adhere to strict policies and rules when selling online. This can hinder their ability to invent or try new ideas.

2. Competition:

Online marketplaces can be crowded with other sellers, making it hard for businesses to stand out from the crowd and gain customers. As a result, businesses may have to lower their prices in order to stay competitive.

3. Fees and commissions:

Many online marketplaces charge fees and commissions for every transaction. This can reduce profit margins and limit businesses’ growth potential. Before deciding whether to sell on a marketplace, businesses should carefully review the commissions and fees associated with that marketplace.

4. Reputation Management:

Online marketplaces can lead to negative reviews and feedback that can cause damage to a company’s reputation. Negative reviews and complaints can discourage potential customers from buying from the business. Businesses need to be proactive about managing their reputation.

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5. Dependency:

Online marketplaces are crucial for the success of businesses that rely on them for sales. This can be dangerous as any changes to the algorithms or policies of online marketplaces can have a major impact on sales and growth. To mitigate the risk and ensure long-term success, businesses must diversify their sales channels.

Advantages of E-commerce

1. Greater Convenience:

E-commerce allows customers to shop from any location at any time. This convenience can increase customer satisfaction and loyalty.

2. Greater reach:

E-commerce opens up new markets for businesses and allows them to reach more people than they are physically located. E-commerce can be particularly beneficial to small businesses that have limited resources.

3. Lower costs

E-commerce can reduce many of the expenses associated with owning a physical storefront such as rent, utilities and staff. This can result in significant cost savings for businesses. E-commerce can increase profits and enable businesses to invest in other areas.

4. Personalization:

E-commerce platforms enable businesses to personalise and tailor their offerings to customers’ preferences. This can increase customer loyalty and satisfaction. Businesses can differentiate themselves from their competitors by personalising their offerings.

5. Sales increase:

E-commerce can increase sales because of the ease of shopping, the ability to offer personalised recommendations to customers and the possibility to offer promotions and discounts. This can help businesses expand and grow their customer base.

Disadvantages of E-commerce

1. Inadequate personal interaction

E-commerce lacks the human touch of in-person interaction, which can cause customer dissatisfaction as well as decreased customer loyalty. Businesses that depend on personal relationships with customers may find this difficult.

2. Security concerns:

Customers may be reluctant to give sensitive financial and personal information online when they shop via e-commerce. This can create a barrier for customers to enter and could lead to lower sales.

3. Technical issues:

Website crashes and other technical problems can occur on e-commerce platforms. This can cause customers to lose sales and frustrate their customers. It can be expensive to resolve technical issues and could affect the company’s reputation.

4. Need Marketing Expertise

To succeed in e-commerce, businesses must have strong marketing skills. They need to be able to differentiate themselves from their competitors and drive traffic towards their site. Businesses that don’t have the funds to invest in marketing can face a significant challenge.

5. Shipping and Fulfilment Problems

E-commerce companies must be able to efficiently manage shipping and fulfilment to avoid customer complaints and ensure customer satisfaction. Businesses with limited resources may find it difficult to manage shipping and fulfilment processes.

6 Vital differences between a marketplace and an eCommerce platform

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Here are six key aspects that make eCommerce platforms different from a marketplace and vice versa. 

1. Traffic: 

In a marketplace, a wide range of businesses and sellers display their products for sale. As a result, there is massive traffic, and the target audience is enormous. As a small business, the marketplace is a great spot to display and gain traffic for your business. Whereas, in an e-commerce platform, the seller has to attract audience/ traffic to his/her store. It is challenging to attract an audience if you’re a small business and just starting. 

However, you can run Facebook Ads or check Facebook Analytics regularly to see how your promotional post performs. Examples of e-commerce platforms for your online business are Shopify, WooCommerce, Wix, and BigCommerce. Examples of marketplaces are—Amazon, eBay, Etsy, and Walmart.

2. Scalability:

In an online marketplace, there is zero financial risk involved for sellers or marketers. As a seller, you don’t have to worry about the backend operations (warehousing, logistics, and so on). Hence, there are no vast finances that you need to deal with. Therefore, marketplaces have the benefit of growing and expanding your business faster than e-commerce websites. 

Whereas scaling an e-commerce platform takes a lot of time and money. As a result, sellers need to take additional care & invest money for checking the product stock, managing staff, and shipping products and delivery charges. Additionally, website development and maintenance require additional employees, time, and money. 

3. Inventory Management: 

Having a large inventory grabs maximum eyeballs toward your online store. A large inventory is a much better marketing practice than paid advertisements. In an online marketplace, as sellers have their products for display, they do not have the option to show their inventory. Luckily, you don’t have to worry if your products don’t sell as you won’t have to pay any penny to showcase them in an online marketplace.

On the other hand, on an e-commerce website, you will face trouble if you keep inventory unless you drop shipping to meet the demands. Apart from this, you can always upgrade your inventory space on the website without hampering the profit margins and hold on to products that are not selling. If you purchase and hold inventory, it might cause a lot of damage and a hole in your pocket. Therefore, you should analyse this point, so it doesn’t negatively impact your business profits. 

4. Technicality: 

Regarding technical aspects, both marketplace and e-commerce websites have to be operated & coded differently. To build an e-commerce website, the various popularly known tools in the market are Salesforce, Magneto, and SAP Hybris. As marketplaces are a one-stop destination for all buyers, it has been tailored in a specific way to meet the requirements of marketplace operators and shoppers. Therefore, it must be unique. Modern marketplaces must offer solutions such as omni channel technology and have powerful APIs, scalable databases, and cloud-based software. 

It is a significant difference between a marketplace and an e-commerce platform, as they both require tailor-made software building and operation. E-commerce and online marketplaces have seen a massive growth in recent years. However, if you choose a marketplace or e-commerce platform to sell your products, you must select software to use and operate at all times. The software should be capable of adapting to the changing market needs. The e-commerce model today is made by keeping in mind the marketplace requirements that may arise in the mere future.

5. Customer Access: 

In an online marketplace, the sellers don’t get any access to their customer analytics. Hence, it becomes extremely difficult for them to market or increase brand loyalty for their products. 

As a result, you can’t reach your old customers and notify them about new products or sale offers through email or SMS marketing. This forces sellers to rely only on recent sales without taking advantage of past sales. Therefore, zero access to customer analytics is a considerable drawback of an online marketplace. 

You can access your customer analytics when you opt for an e-commerce website. As a result, you can reach out to customers weekly or monthly before launching a new product or notify them about upcoming or ongoing discounts plus sales. 

Not just this, direct access also helps you gain positive or negative feedback about your product, receive feedback on product development, analyse customer behavior to enhance your marketing practices, and work on optimising your website for a better user experience.

6. Product navigation: 

In the navigation process, there is a massive difference between both platforms. In a marketplace, the products are organised adequately with a product list from various sellers. Hence, the buyer can view all the products displayed by multiple sellers on a single page and make a purchase decision. 

On an e-commerce platform, the products are arranged and displayed in categories. There are various detailed filters from which users can refine their choice and get a much more accurate search result. 

Conclusion

Before launching an e-commerce website, you’ll have to register your domain and do product categorisation. Apart from that, you’ll have to decide your brand logo, terms and policies, payment gateway, and determine your shipping partner. Finally, upload your product categories, brand logo, and other required content. 

And you’re done!

To sell a product in an online marketplace, you have to enter your business details and product details while signing up, and then you can start displaying your products in the marketplace. Still, if the entire process sounds daunting and time-consuming, you can hire a reliable digital marketing agency or a web developer to make the process easy for you. A professional agency can help you find the right marketplace or e-commerce store for your business model and quickly complete the setup process. They can help you with the A-Z aspects of launching your business online.

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