The Pros and Cons of E-commerce and Marketplace Platforms

Learn about the pros & cons of e-commerce & marketplace platforms so you can decide which one is best for your business.

The Pros and Cons of E-commerce and Marketplace Platforms
E-commerce and marketplace platforms are two different types of online stores. An e-commerce store is an independent website created with the help of e-commerce solutions such as Shopify, WooCommerce or Magento. On the other hand, a marketplace is a platform where customers find sellers, connect and buy products. Market owners are taking less financial risks than trading website owners since they don't buy or sell anything. This makes their business much more scalable.

Marketing a marketplace platform is simpler and cheaper than an e-commerce website, which allows them to grow quickly. An online marketplace is a website where products from multiple sellers are sold in one place. The variety of products sold is one of the main attractions for customers, similar to a shopping mall but in an online space.

Having your own e-commerce website creates a unique focus on your business and only on your business. This helps build brand loyalty among your customers. Whereas in an online marketplace, all brands and businesses are grouped according to their categories, creating significant competition for retailers to rank higher than others. One of the immediate advantages of choosing to sell your products on an existing online marketplace is that you will save time and money at first. Online marketplaces are not owned by any individual seller, so the transaction and payment are handled by the marketplace itself.

The main difference between the marketplace and e-commerce is that a marketplace is a website that sells products from multiple sellers, while an e-commerce is a website that sells products from a single vendor to multiple customers. The size of the commission varies greatly from market to market and can range from 0% (Flubit) to a whopping 50% (Germany's second largest e-commerce Otto). On the other hand, in marketplaces, if there is a product that is not sold, you can choose to deactivate it with the push of a button.

The benefits of selling in the marketplaces speak especially of sellers who take their first steps in sales and those who love the convenience of never worrying about website performance, maintenance and the shopping experience on the site. While in e-commerce you have to focus on targeting buyers, in a marketplace you must attract not only buyers but also sellers who will be the heart of your platform.

Therefore, market solutions have been adapted from the ground up to address the specific requirements of buyers and market operators. Marketplace sellers take advantage of the consumer trust already created by the marketplace and access a large audience of potential buyers immediately. Creating a seller profile and a retail store on a marketplace platform such as Amazon or Etsy requires little time or technical knowledge.

To put it another way, a marketplace may be an e-commerce website, but not all e-commerce websites are marketplaces. There are hybrid approaches that allow retailers to have an e-commerce site and sell their products on a marketplace platform. On the other hand, markets have better profit margins, since their revenues are basically percentages of transactions.

Many people who shop in marketplaces assume that they are buying in that market (even though they are buying your products). Depending on your products and business model, it may make more sense to use an e-commerce solution rather than a marketplace platform.

When deciding between an e-commerce store or a marketplace platform for your business, it's important to consider both the pros and cons of each option. E-commerce stores offer more control over branding and customer experience but require more time and money for marketing efforts. Marketplace platforms offer more scalability but require more competition for visibility.