In U.S., Amazon is the biggest marketplace which makes Jeff Bezos as the major shareholder, the richest person on planet as of 2020. It is either him or Elon Musk.
Online merchants earn a lot of benefits from selling goods on the Internet. For example, they can sell merchandise 24/7 and reach a wider target audience compared to physical stores.
There are, however, a range of options for online purchases. Some retailers are creating their own e-commerce websites, while others are using online marketplaces. Just in case you are in doubt as to whether to choose a marketplace vs. an e-commerce website for your company, this article will help you make the right choice.
Below we’ve compiled the pros and cons of selling products through the trading site and own online shop.
Difference between an online shop and two-sided marketplace
When you are ready to hit the e-commerce market with your goods, there are several choices to choose from. You can start selling on the current marketplace, or you can invest in building personal online stores. Continue reading to see the difference between these choices.
The online marketplace means that the website contains a wide number of vendors and shoppers. The most famous U.S markets include eBay, Amazon, Walmart, and Etsy. You can open a seller account and start selling your goods immediately.
Owning an e-commerce website ensures that an online store belongs to your unique company or brand. You may build such a site using SaaS or an open-source e-commerce platform. It also offers you the ability to participate in marketing campaigns and develop customer loyalty.
Even, it may be difficult to choose between these two methods of selling online. Why? Why? Since building your online shop needs substantial investment, while you can make free sales on the marketplace. However, there is a high degree of rivalry amongst sellers on the marketplaces. They also do not have the same branding and customization options as e-commerce websites do.
To make the best choice, let us highlight the pros and cons of owning an online store and selling items on the market.
Marketplaces, Amazon specifically, are very popular with online traders and shoppers. To be exact, Amazon revenues hit $3.03 billion in 2017.
Besides that, Shopee managed to grow their revenue year-on-year to US$510.6 million in Q2 2020. [Source]
Small and medium-sized enterprises drive the success of Amazon. They use this marketplace as a third party because of its good logistic capability.
Many online retailers like selling on a two-sided marketplace because it’s quite profitable. In addition, it simplifies the online sales process.
Unlike building an e-commerce website from scratch, establishing a vendor account does not require much time and investment.
Another advantage of online marketplaces is the high level of confidence of shoppers. The research revealed that Amazon is the first spot for U.S. shoppers to browse for items. Your future buyers are already there. Therefore, in order to make your first sale, it is not important to have a marketing budget.
If you have no experience with web creation, you can easily add new products to your product list or change prices. Moreover, when trading on the market, you don’t need to think about security problems and the payment gateway.
But this simplest option has its drawbacks. The first thing worth considering is a high degree of competition. Imagine hundreds of other stores offering the same items. It is therefore difficult to forecast the conversions and to achieve the anticipated level of profit.
Often these marketplaces charge for product listing, so you will have to pay some fees even before you make a single sale. There is also a commission for each purchase. Prices vary depending on the platform you use.
Another downside for online retailers is that you cannot stand out from the crowd when setting up your brand. Online marketplaces have no or limited space to configure the profile of the seller. So, while offering the same items, retailers fight for the attention of shoppers. Even if shoppers have bought your products, it doesn’t mean they’re going to be your loyal customers.
The key issue here is that shoppers are concentrating their attention on the items, not the sellers. To that end, it is impossible to grow your own brand and establish a loyal customer base. In addition, online markets do not encourage sellers to connect with shoppers. As a result of this prohibition, it is difficult to execute marketing promotions, notify consumers of exclusive deals or new stock deliveries. That way, you can focus only on new sales without taking advantage of previous purchases.
Advantages of an e-commerce website for entrepreneurs
Owning a personal e-commerce website has many advantages. Below, we share the reasons why online retailers should invest in building an online store.
The first advantage the e-commerce platform brings to your company is the absolute management of your business at any point. You can also build custom sales scenarios.
Another advantage is that you have the right to tailor your online store look and stand out from the crowd. You can use ready-made models for your upcoming webshop or employ an e-commerce team to design your unique design. This will help you to provide consumers with an excellent experience on your website.
Owning an online store ensures that you also manage the selection of features. Many e-commerce platforms allow the incorporation of new functionality using modules and extensions. If your business needs are not met by a ready-made solution, you can employ an e-commerce agency to create a custom module.
Another advantage of running an e-commerce website is that you have direct access to your customers. You will provide improved customer support and carry out marketing activities.
We can also see the disparity between these two distribution channels in the purchase of the consumer. When owning a personal e-commerce platform, you can evaluate consumer behavior and conduct related marketing activities, including abandoned shopping cart recovery and more.
E-commerce website disadvantages
Only a few companies can afford to build custom e-commerce websites because they are expensive. For this reason, small and medium-sized businesses use SaaS or open-source platforms to build an e-commerce website. However, in order to build an online shop, you will need time and resources. You will need to purchase a domain name and pay for a stable HTTPS certificate.
There will be no visitors after the launch of the online store, so your potential customers are unaware of your name. To get traffic to your e-commerce website, boost search engine ranking, and make sales, you need a detailed marketing and marketing strategy.
If your online store is up and running, you need to offer customer service to your shoppers. Your brand’s credibility depends on how quickly you respond when anything unexpected happens. It is a real challenge for small online companies to have the highest level of customer support. At the same time, the marketplaces have customer service departments that satisfy the purchaser’s requests.
As you can see, both choices have their distinct advantages and disadvantages. But don’t worry! Without offering the solution and the light of hope, we won’t leave you behind. You can still apply a hybrid approach to selling more when developing your brand awareness and customer loyalty.
The Hybrid approach – marketplace integration with your e-commerce website
It is not advisable to choose only one approach. You can use both strategies-enjoy the advantages of selling on the marketplace and control your respective e-commerce website. This will allow you to receive traffic from large markets to your e-commerce website and increase sales. The only thing to think about is the maintenance of the workforce, so there will be a lot of work.
Marketplace integration helps online retailers to sell goods on the marketplace and handle orders in their admin screen. This form of combination is popular among Shopify users.
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