Online marketplaces and e-commerce stores have become powerful online business models within the digital and online market economy. With the right business strategy and niche market, your marketplace or online store can be successful and can generate powerful revenue. So, how do you decide which model suits your business idea? In this blog, we will discuss the key differences between building marketplaces and online stores so that you can easily decide what to choose.
Most people think that online marketplaces and e-commerce stores are the same things. Though both are used for online business purposes, there are some important differences between the two. Traditional e-commerce stores sell the products and services of one particular brand, but the online marketplace offers multiple brands on a single platform. Also, a marketplace can be an e-commerce store but not all e-commerce stores are marketplaces.
Here are some important differences between the marketplace and e-commerce store that you should know:
Marketing and targeting
The online marketplace supports sellers’ marketing efforts through attracting, nurturing, and engaging leads, whereas, in the case of e-commerce, the sellers need to take care of nurturing and leads. Unlike an e-commerce store, a marketplace should attract not only the buyers but also the sellers. Also, in a marketplace, the target audience is larger as they offer a huge choice. But in e-commerce, the owner needs to attract traffic to the website.
Marketplaces have larger inventory that makes it easier for the buyers to find what they are looking for. A big inventory means that extra effort should be put into marketing to attract visitors. But e-commerce stores run their own inventory. Sometimes large inventories in stock will stop you from stocking something else which sells better. On e-commerce sites, you’ll have to get rid of unsold products by massively lowering their prices. But when it comes to marketplaces, if there’s any product that doesn’t sell then you can easily deactivate it as you haven’t bought the products.
Time and money
You might be thinking of starting a marketplace so that you can invest less and earn more. And that’s true to some extent as being cheaper and easier to manage is the perks of an online marketplace.
For starting an e-commerce store, you’ve to invest a good amount of money to attract buyers. As you make larger investments initially, its revenues and resources will take longer to break even.
But when it comes to marketplaces, the sellers will handle their stock on their own and it reduces your initial investment. So the marketplace owners can enjoy better profit margins (right from the beginning) as the revenue is generated from the percentage of transactions made. The money earned through this is then re-invested to accelerate the growth.
You’ll have to set up a payment system whether you are building an e-commerce store or a marketplace. In the case of an e-commerce store, revenue flows directly from the buyer to you. But when it comes to a marketplace, the payment system needs to be more sophisticated as it splits sales between multiple sellers and withholds your commission.
As mentioned before, the marketplace doesn’t sell or buy any products. Therefore, there will be fewer financial risks than online stores which have to invest in a stock that may take time to sell. It also allows them to expand faster than e-commerce sites. When traffic grows really fast, it’s important to seek new sellers to meet the demand. But you don’t have to worry about investing large amounts of money into new inventory or storing facilities.
It’s important to ensure that your users trust your platform. About 67% of the customers trust shopping from marketplaces even though the sellers are unfamiliar to them. If customers had a satisfactory experience, then chances are that they’ll return to the same platform for further purchases. It’s easier to build trust in buyers on a marketplace because many famous merchants trust the platform. But in the case of an online store, it’s quite challenging as it’s owned by a single individual. When you focus more on this aspect then it can be made possible. Whenever we build a store, we should think about sellers like Amazon and Etsy. How they build trust, It’s a best-case study to understand user psychology
Wrapping things up…
So now, I guess you can answer the question: What kind of a business do I really want to build?
If you look at an e-commerce store or a marketplace as a part of your business, then it’s something you need to build. Unless you’re an expert in web designing and web page development, you will have to hire someone else to do this job for you. You will not only need someone to create a webpage, but you will also need someone to help you maintain it regularly and fix it if any issues come up. This is where we can be of great help to you.
As a leading web and mobile app development company, Techwink has successfully handled different e-commerce stores and marketplace related projects. We can help you in building your marketplace or e-commerce store for any business. Now you can build your online business for selling or renting goods or services all on a single platform. From our experience, we have known that creating a tech platform is important but without a clear business model, technology is powerless. If you think you have a unique idea and a business model in your mind then, we assure you that we can be a trustworthy development partner of yours. Once the project is completed, we also provide monthly support and follow up consultation as and when required.
Do you want to build an online marketplace?
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Most frequent questions and answers
In a marketplace, the products are organized in one well-organized set because it predominantly has various sellers who have their respective list of products. But, on an e-commerce website, the arrangement of the products is based on categories.
Amazon Marketplace is an e-commerce platform owned and operated by Amazon that enables third-party sellers to sell new or used products on a fixed-price online marketplace alongside Amazon’s regular offerings.
The E-commerce marketplace or online e-commerce marketing is a place or a website where one can find different brands of products coming from multiple vendors, shops or person showcased on the same platform.