Starting an online business? Know the key differences between an online marketplace and an e-commerce website
Gone are the days where we had to make a list and wait for some free time to go out to the market to shop. Today, online shopping has taken the world by storm; you just have to browse through virtual stores on an e-commerce website or online marketplace, add the products you need to your cart and pay online or via COD. You’re done shopping without even having to step out.
When it comes to shopping online or even selling something online, there are two concepts:
1. Online marketplace
2. E-commerce website
While the main objective of both the concepts might be the same, there are some key differences between the two. An online marketplace is a platform where the website owner allows different third-party sellers to register and sell on the platform and invoice the customers directly. The marketplace operator does not own the inventory. In fact, it is a platform for both the sellers and buyers, just like a physical market.
On the other hand, an e-commerce website is a single or multi-brand online store where a specific brand sells its own products on its website. The inventory is owned by the website owner only and they invoice the customer, too. As there’s no option to register as a seller, similar to what you see at a retail shop, we can say that it is business specific.
Before you make up your mind about the ideal platform to sell your products online, know about these following differences between a marketplace and an e-commerce website:
In case of an e-commerce website, you'll have to spend a considerable sum of money in getting the website and associated apps and payment gateway integrations ready for your business. Whereas, marketplaces simplify e-commerce, especially for new sellers as the infrastructure is already there, thus saving retailers time and hassle associated with building a website and apps from scratch.
Moreover, online marketplaces are not owned by any individual seller, so all the transactions and payments are managed and handled by the marketplace itself. You, as a seller only need to be engaged in adding and modifying product listings. So, overall, the cost involving selling your products on a marketplace website is lower than running a website to sell the same products.
2. Marketing approach
A clear concept about your marketing approach and targeting is very important in an online business. While you have to focus on targeting buyers in an e-commerce website, in a marketplace, you do not need to attract buyers as the traffic is already there and the buyers are looking out for your products. In fact, in e-commerce, the individual merchant has to spend more to drive traffic to their site.
Online marketplaces also reduce the burden of brand dependency as all the brands sell on the marketplace itself, so this allows start-ups and smaller businesses to not worry about their visibility online, but focus on improving their products instead.
Online marketplaces don’t buy any products themselves meaning considerably fewer financial risks as compared to e-commerce websites which have to constantly invest in the stock that may take time to sell or never sell at all.
Moreover, marketplaces, due to the combined promotions and efforts of the 3rd party stores that sell through them, gain quality traffic and scale more easily, and, therefore, allow them to expand faster than e-commerce websites.
4. Inventory size
The larger the inventory, the more likely it will be for the buyers to find what they are looking for. The Pareto principle (for many events, roughly 80% of the effects come from 20% of the causes), tends to apply for marketplaces, as fewer products by each seller usually amount for the majority of overall sales.
On the other hand, with e-commerce websites, the Pareto principle implies that you will have to get rid of the unsold products at some point, by lowering their prices, of course.
5. Size of the audience
It's no surprise that effective audience engagement is very important in every online business. It is often observed that marketplaces emphasize to match buyers and sellers, which definitely helps to create better long-term connections between them. In fact, marketplaces benefit from better networks: more buyers attract more sellers and vice versa.
On the other hand, if you are selling on your e-commerce website, your options are limited as you will have to focus on generating traffic first, then spend time on promotion and improving your brand’s credibility before you even start selling, so it becomes a tedious and exhausting process.
It’s always better to know the differences between an online marketplace and an e-commerce website before you start an online business. The success online marketplaces have been enjoying lately is due to the many above-mentioned factors and advantages that it offers over conventional e-commerce websites.
Apni Market is an online marketplace that provides an ideal platform to local businesses of all sizes and nature to help them bring their business online and sell to customers faster and securely, especially to the ones who are near them. So, why wait? List your business today on Apni Market and enjoy the benefits of both an online store and an e-commerce website on a single platform. Do reach us at [email protected] for more details.