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Online Marketplaces vs eCommerce Stores

Firstly, let’s make sure we’re on the same page re the terminology in case some readers are new to the ecommerce world! If so, welcome!

An online marketplace is a business conducted through a website or app, that facilitates shopping from many different vendors/merchants; that is, it’s a multi-vendor platform. We’re all familiar with some of the biggies, such as eBay, Amazon, ETSY, Alibaba/AliExpress.  As of 2020, online marketplaces accounted for the largest share of online purchases worldwide. Amazon leads the global ranking of online retail websites in terms of traffic, whilst the Alibaba Group is the leading online ecommerce provider in Asia. One of the major appeals of a large online marketplace is the broad range of products customers can peruse – much more than they can find from a single retailer with one store. A popular Aussie marketplace is Catch.com.au.

An eCommerce store is an independent ecommerce website that a business-owner/seller runs, where buyers purchase goods directly from the website or app belonging to the business. These businesses may be small to medium enterprises, such as florists, or large ones like JB HiFi or Woolies, or they may be small start-ups. They may or may not have physical stores.

They may or may not be utilising an eCommerce platform like Shopify.  Many merchants choose to create their online store via subscribing to a comprehensive eCommerce platform (like Shopify, Magento, BigCommerce, WooCommerce and many others). The goal is really to make life easier for both the business owner and the customer.  These platforms provide the means to carry out core business functions online, taking a lot of stress from setting up for eCommerce.

For example, Shopify’s core product – what you get on every Shopify plan – is a one-stop shop to run your business: you get a storefront, a payment processor, a shipping partner, a back office, and marketing headquarters, all in one. 

A streamlined, coordinated interface that’s relatively quick for you to establish and friendly and easy for customers to navigate and use. 

The Webyroo team has vast experience assisting business owners and entrepreneurs to either create (or improve) an eCommerce website of their own or start-up using the platform Shopify or similar. Whichever you choose, it will be painless with the help of the Webyroo team!

To achieve extra customer reach and brand recognition, many online store owners sell on both marketplaces and their own ecommerce website. Some choose just one option to start with, and then expand into others once they become more established and confident.

In this post we’ll provide more information about online marketplaces and online stores and list some advantages and disadvantages of both models.

Firstly, Online Marketplaces….

To continue with the bricks and mortar analogy, an online marketplace is more like renting space from a department store owner to present your goods or services to searching customers. So, in effect you have a corner of this huge department store!

The owner of the marketplace does not buy your inventory, but they may warehouse it if this is a fulfillment model that is offered, and you elect to go this way. Their main business is to present other people’s inventory to customers (and in the case of Amazon, sell their own products as well) and to facilitate and streamline the transactions. The big online marketplaces sell everything to everybody. eBay is the perfect example of that.

Forbes, the American business magazine, said earlier this year in an online article that there are two types of marketplaces. First, “Mass merchant” or hybrid marketplaces like Amazon, Walmart, Target and Kroger which recruit outside merchants to supplement their own offerings for an everything-store approach. Second, “pure” marketplaces like eBay, Etsy, OfferUp and others which host merchants without selling products of their own. Marketplaces can be further differentiated by whether they sell one type of product from many sources, e.g., just handbags, or many types of products with a characteristic in common e.g., camping goods. Then there’s the global marketplace selling everything as we’ve described.

As well as the usual traditional costs to run a business, using an existing marketplace like eBay or Amazon or Catch, will require you to pay seller fees, which may include any combination of listing fees, monthly seller fees, per-item fees, shipping fess, referral fees, and closing fees. It’s all part of the cost of doing business on an already built selling platform.

What are the benefits of selling on a marketplace?

There are many advantages when it comes to selling on a third-party marketplace.

  • It can be quick and convenient to get started and maintain your selling on an online marketplace.
  • An online marketplace can simplify eCommerce especially for new sellers. The infrastructure is already in place, thus saving business owners the stress and the time involved in creating a website from scratch, especially if it’s not really your forte.
  • There are already tons of visitors to these sites who are familiar with the marketplace, have already made purchases there, and are your ready-made potential customers!
  • The transactions and payments are handled by the marketplace itself. Less concern for you the seller!
  • Nowadays people are comfortable making purchases on the big online marketplaces which are household names.
  • Shipping by the marketplace can be part of the deal.

What are the downsides of selling on a marketplace?

  • There will be little opportunity for you to brand your products as your own; you don’t get to control your brand image. Unlike in your own ecommerce store, you don’t have a storefront to brand. If you don’t fulfill items yourself, shipping materials cannot be branded to your unique company. Instead, the marketplace’s branding is front and centre for customers.
  • You’ll be competing for attention with many other vendors just like you, on a large marketplace. Even if your product is unique, there are probably plenty of similar offerings out there vying for the attention of browsers. In a jam-packed marketplace, your special item might not in fact stand out.
  • There’s a distinct possibility that shoppers will pay little attention to the merchant who listed the product. (Unless there’s a problem. Then it’s highly likely that the marketplace will point the finger at you, the merchant).
  • Many people who shop on marketplaces assume they are just buying from that marketplace. How often have we asked a friend or family member “Where did you get it?” and their reply?  “Oh, I bought it on Amazon” (even though they have purchased a particular seller’s product, it’s Amazon that gets remembered, isn’t it?).
  • Shipping can be complicated. Amazon has many shipping options, and they change from time to time.

And now to Ecommerce Stores…..

There are plenty of reasons to set up your business online and sell your products (or services) on your own ecommerce website.

Again, traditional business costs will still apply (although running an online store costs far less to set up and operate than bricks-and-mortar locations).

In addition, there are the costs of developing a business website. Unless you’re particularly tech-savvy this is best out-sourced to a company like ours – Webyroo – to get ecommerce and technological expertise from the get-go.

To run a business online, you will also need to pay for website hosting, web domains, and digital marketing, as well as platform fees (if selling through a platform like Shopify, Wix eCommerce,  or  Squarespace for example). You may also need to outsource things like brand creation, marketing strategy, photography, and copywriting.

What are the benefits of selling on your own online store?

  • Probably the most major advantage that business owners would describe, is that you can maintain full control over your brand. With your own ecommerce website, you have total control over what it looks like, what it says, and how it works. If you don’t have the skills yourself to create your ecommerce website, it is well worth bringing your ideas or concerns to a company which specializes in all aspects of ecommerce set-up and design – such as Webyroo.
  • You decide on how you want the shopping experience to be for your customers.
  • One of the biggest advantages of managing your own independent store and website is that you have direct access to your customers. This will be highly beneficial for various marketing strategies such as emailing campaigns, re-targeting, and special promotions.

What are the downsides of selling on your own online store?

  • There are some pain points around building your own ecommerce website.
  • As mentioned, setup can be time-consuming and technical. Building your own site can be simple or it can be complicated. eCommerce platforms and do-it-yourself tools have certainly made it a lot easier to get an online site up and running. Nevertheless, you may still run into technical issues or at the very least, time constraints.
  • You need to consider website security and secure payment gateways for your customers, as well as delivery options, such as Australia Post.
  • There will be work involved to maintain the site.
  • You have to work to get shoppers to your site; once you launch your website, your work is not done. You need to get people there. This will involve marketing campaigns to spread the word. If you are a novice regarding marketing, you may need to pay for help, at least initially.

In summary...…

The broad choices to start selling online are:

  • You can set up a branded website of your own, which will be your online store, and you sell from here.
  • You can set up a branded online store through solutions like the Shopify platform, or similar.
  • You can choose to sell on existing marketplaces such as Amazon, eBay, or Catch. 

Already have a website but feel there’s room for improvement? Check out how Webyroo can help you, with custom web apps, website development, digital marketing, automated processes, the creation of a robust online store, and much much more!

Book a call with our friendly team now, we will help you! 

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