eCommerce vs. Marketplace: Which is Better (2023)

For merchants looking to launch their online businesses, eCommerce websites and online marketplaces are the two most widely used options worldwide. However, each of these solutions caters to a distinct set of customers, making it a critical decision to make before going live. 

In this article, Shopboxo will cover everything about ecommerce websites vs. online marketplaces, helping you make an informed choice for your online business.

What is an ecommerce website/platform

Ecommerce refers to buying and selling activities conducted over the internet and an ecommerce platform facilitates these activities between sellers and buyers. A good ecommerce platform allows consumers to discover products, add items to their cart, and securely checkout.

For merchants, they can leverage ecommerce platforms to launch an online store from scratch by utilising predefined themes and an inventory and order management system. This makes it easier to upload products to sell online.

Some of the most popular ecommerce platforms in the market today include Shopify, BigCommerce, Magento, WooCommerce, Wix, and more.

For small businesses that need a quick and easy setup, platforms like Shopboxo that have drag-and-drop functionality, may be ideal for store owners with limited coding experience, while other website builder platforms tend to have a more complex backend system.

On the other hand, larger firms with high order volumes may prefer Magento or BigCommerce, which offer more advanced features and larger sales opportunities through their apps.

When weighing the advantages of ecommerce platforms and marketplaces, it’s crucial to consider the balance between investment and benefits.

Pros of using ecommerce platform

• Marketing Initiatives: Having your own website allows you to enhance your marketing efforts to improve customer satisfaction and loyalty. You can provide marketing initiatives like campaigns, customer’s discounts and promotions, initiate loyalty programs, referral schemes, and other initiatives that could benefit your customers and boost sales. 
• Accessibility to Customer Insights: The customer’s behaviour on your site is better monitored. You can record transactions, browsing history, average value of the order, time spent on each page of your website, conversion patterns history, and other aspects. In other words, right from the get-go, you are aware of how customers behave on your website. 
• Authority and Control: Compared to marketplaces, having your own ecommerce website gives you the authority to control everything about your store. From the tone of your branding, navigation, price, and even what your customers will see in your store. 

Your customer will perceive your image as an individual business and you have the power to build that image. That being the case, you manage your own website end to end.

Cons of using ecommerce platform

• Increased Effort: Full ownership equals full responsibility. Finding keywords, devising marketing campaigns, promotions, and every other thing that helps to drive business and make operations more efficient are part of your scope. It is likely you will need to hire staff as your business starts to grow. 
• Building Cost and Complexity: Takes time and money to build and maintain your website, which can be a financial risk in scaling your business if you do not have the necessary resources.

What is an online marketplace

An online marketplace is an ecommerce platform operated by a third-party where multiple sellers list their products or services for customers to purchase. One of the primary roles of a marketplace is to connect sellers with the right customers. To achieve this, sellers must ensure their products are clearly visible to potential customers.

Online marketplaces are plentiful, ranging from major players like Amazon, eBay, and Alibaba, to more localised platforms such as Carousell, Shopee, and Lazada. Typically, these marketplaces charge sellers a fee for each successful transaction, but the fee structure can differ from one marketplace to another, based on the terms of agreement between the marketplace and the seller.

Pros of using online marketplace

• Acquire Potential Customers: Online marketplaces attract a large volume of visitors, providing sellers with an opportunity to reach potential customers beyond their existing target market. By leveraging the exposure provided by marketplaces, sellers can expand their customer base and connect with buyers outside of their niche. 
• Reliability of Marketplace: Online marketplaces generate significant customer traffic, with many potential buyers scrolling and making purchases on these platforms. Even if your brand is not yet established, customers are likely to consider your store as they place greater trust in the reputation of the marketplace than in your individual business. 
• Low Commitment & Investment: Marketplace provides the necessary infrastructure for transactions so you require lesser commitment and investment as compared to setting up an online store from scratch.

Cons of using online marketplace

• High Commissions: Every marketplace imposes a fee on sellers for the privilege of listing and selling their products. For some, this fee can be prohibitively high, causing particular harm to fledgling businesses in the startup phase of development. 
• Customer Loyalty and Brand Identity are not Promised: As a seller, it’s challenging to cultivate a distinct brand identity within marketplaces since customers perceive your store and products as just one of many competing businesses and offerings available on the platform. 
• Aggressive Competition: Since there are a lot of businesses selling almost the same products, competition in the marketplace is inevitable. It can be a daunting task to differentiate your offerings and stand out from the sea of competitors vying for customer attention.

Key differences between ecommerce website & marketplace

Both ecommerce websites and online marketplaces have the same common goal, which is to sell products to customers online. And now that you know the pros and cons of each platform, it’s also important to understand their key distinctions to help you make an informed decision about which option best suits your business goals.

1. Traffic & Engagement

Online Marketplace

Marketplaces have traditionally been focused on transactions, aiming to connect buyers and sellers. And due to their expansive range of product categories, marketplaces attract a broad target audience, resulting in increased website traffic. 

Ecommerce Website

Conversely, in ecommerce, engaging with the audience can be a more challenging undertaking. It takes a long time and costs a lot of money to attract traffic to the website, especially if you are starting a new brand.

2. Customers Data & Brand Recognition

Online Marketplace

Marketplace sellers often have limited or no access to their customer base, making it difficult to promote their products or cultivate brand loyalty. The absence of direct access to customer analytics and communication is a significant drawback of online marketplaces. 

Consequently, buyers are more likely to recall the marketplace than the individual brand, leading to reduced customer retention rates.

Ecommerce Website

In contrast, ecommerce websites enjoy unrestricted access to customer analytics and can communicate with customers directly to promote sales, new product releases, and more.

By analysing customer behaviour, website owners can optimise their site’s user experience to provide a better shopping experience. One of the primary benefits of operating an ecommerce website is the ability to target site visitors with ads, engage with prior customers, and foster lasting relationships.

eCommerce or online marketplace has the same goal in mind: selling products to customers. After knowing the pros and cons of marketplace vs platform, you can now determine which option is right for your business.

3. Setting Up Fees

Online Marketplace

Setting up an online store on the marketplace can save more time and money since you do not need to start from scratch. All you need to do is to register an account and start uploading your products to the platform.

Ecommerce Website

On the other hand, building an online store requires more upfront investment due to additional expenses such as hiring a developer, paying for subscription fees to an online store builder, and more.

4. Transaction Fees

Online Marketplace

Online marketplaces have lower profit margins as the platform relies on listing and commission fees as its primary source of revenue. So you are required to pay a fee for every transaction. 

In order to sustain profitability, selling on marketplaces require a substantial number of listings and transactions on the platform

Ecommerce Website

Ecommerce platforms enjoy higher profit margins on each sale since there are no additional fees incurred.

Conclusion

As a business owner, it is important to assess your priorities, budget, and capabilities before deciding between an online marketplace or an eCommerce platform.

If you have a general product and want to reach a larger audience regardless of brand recognition, an online marketplace may be suitable. However, if you want full control over your brand and aim to maximise profits, an ecommerce website may be the better option. 

You can start by using Shopboxo, a free online store builder that allows you to create and manage your online store in just a few minutes. Download Shopboxo now to take your business to the next level.