7 Differences between an e-commerce website and an online marketplace for entrepreneurs to consider in the multi-channel strategies.
As a business owner, there are many new opportunities and routes to market to consider, each with their own pro’s and con’s to consider. With the dramatic rise of online shopping the last few years ( accelerated thanks to Covid), it can be quite daunting knowing which opportunities to take.
It may sound and seem similar, but an e-commerce website and an online marketplace is not quite the the same thing. Both are used to sell goods, products or services online, however, there are a few basic differences between the two. Although a marketplace is an e-commerce website, not all e-commerce websites are marketplaces. This may sound a bit confusing but let’s look at a few key differences to make it clear.
What is a marketplace?
Firstly, a marketplace (much like a real market) is an online platform for sellers and buyers, where the website owner allows a third party to sell on their platform. In other words, it is one website with multiple vendors similar to Amazon, Takealot, Superbalist, Etsy, One Day Only and Zando. The website owner does not own the stock and doesn’t invoice the customer directly, the vendor does.
The platform owner however, is responsible for setting up the platform, monitoring the platform, monitoring the order processes, payments etc.
What is an e-commerce website?
On the other hand an e-commerce website is owned by a single brand which sells their products to their specific audience, like Mr Price Online, Woolworths Online and Checkers Sixty60. All the stock is owned by the owner who invoices the customer directly. It’s also called a single vendor website – no other vendors can join the site.
Both these options will require time, investment, active management and effort, so how will I know what is right for me?
In the online & business world, there is a general rule of thumb. Be where your customers are, be where your competitors are, and create unique and branded experiences for the customers that support you. Most experts agree that business is not a one channel game anymore, and multi-channel is the way of the foreseeable future.
What is a Multi-Channel Marketing approach? Multichannel sales strategy?
Multi-channel marketing/selling is the unified strategy to attract and communicate to customers through a variety of direct and indirect channels such as websites, social media, email marketing, text messaging, blogging and more.
It utilises more than one distribution and promotional channel to attract customers. Whether it is online, or offline.
Why make use of a Multi-Channel Marketing approach?
In today’s competitive online world it is important to be on as many platforms and channels as possible. This means that even if you have your own ecommerce website, you can always add your services or products to an online marketplace or online reseller, which will serve as another channel to get your brands and products out there.
Utilising more platforms, channels and strategies to market your products or services, will enhance your reach and the chances of your content to be seen by consumers, which in return has more revenue potential.
There is of course the important consideration of your capacity to manage all these channels!
To help navigate your multi-channel decisions, here are 7 differences between an e-commerce website and an online marketplace for entrepreneurs to consider;
1. Marketing & Ad spend:
An e-commerce store has a single-minded approach to marketing – they spend more to drive customers to their site. Once customers are on the site – it is a simple process as they buy directly from one supplier. It is very expensive and difficult to attract customers to a single vendor store, due to the mass amount of competition online.
A marketplace needs to attract buyers and makers, without who the marketplace does not exist. A marketplace enjoys the benefit of their own marketing and advertising as well as the marketing and advertising of makers. The marketplace therefore becomes a sort of collective online coop, to attract ideal customers, to an online shopping space filled with products they are interested in.
2. Products & choice for online shoppers:
With an eCommerce store, online shoppers can experience the maker’s brand and personal service. The Maker has the opportunity to tell their story, and win over the hearts of their customers within an online environment 100% tailored to building their brand. For the shopper however, a limited amount of products is a negative, as most prefer the one-stop-shop concept for online shopping. But it is also important to remember that customers also like to do their research online before purchasing, and this is where tailored websites and ecommerce stores are great.
The big benefit to online shoppers with an online marketplace has to do with the large product ranges/brands, conveniently available to them in one place. Successful marketplaces cater towards a niche product category, so shoppers interested in a specific type of product, will be interested.
3. Expenses & Margins:
On a marketplace the margins for sales are lower than an e-commerce website. This is because an additional commission is payable with each sale. The cost to maintain the marketplace store however, is substantially lower than an owned eCommerce site, where the maker needs to pay for hosting, web development support, payment gateways etc.
With a multi-channel strategy, it is also very important to consider pricing strategy. Ideally, your pricing should remain the same across all channels, whether online or offline.
4. Engaging the audience:
It is the same on your own e-commerce store or a marketplace. Shoppers no longer just want to shop online – they want an experience. With so many online shopping options you need to make sure that your marketplace or e-commerce website stands out from the crowd with:
- high SEO rankings,
- intelligent and interesting content,
- deals and specials, and
- good customer service, which in turn will lead to –
- good reviews.
The only difference here is, on a marketplace, all the makers on the platform are working together to attract buyers to the marketplace, increasing everyone’s chance for sales or exposure!
5. Trustworthy platforms:
This is important for both e-commerce websites as well as marketplaces. Research has shown that people are more likely to shop (and 54% will return) if they trust your brand and platform. Winning trust from online shoppers as a small business is a huge challenge.
A Marketplace with good brand visibility and reputation, will help alleviate this reluctance from shoppers to trust small businesses online. In a sense, the Marketplace brand, lends credibility and trustworthiness to the small businesses on the platform, as consumers know they can reach out to the platform managers for help if anything goes wrong.
6. Time and Money:
Investing in your own e-commerce website costs more initially and takes quite a lot of time to set up, which in turn means that it takes a little bit longer to break even. There are a lot of issues and technicalities to work out – for instance, which delivery service are you going to use? On what payment platform can you get the best deal etc. The maker will also need to take on all the marketing for the store.
In a marketplace you basically just register, load your products and start selling, as all the other back-end work has been done for you. It is important to note however, that the marketing, customer service and replenishment of orders of your store, still needs to happen from the maker’s side!
7. You are not alone
Being part of a marketplace, is also being part of a community! If you have a problem, or a question, there are a few people who will be able to help, give advice and guide. A great maker community will learn from each other, support each other and in turn, together help the collective to grow and attract more potential customers to the marketplace where everyone is!
We hope you found this article useful! Best of luck with your multi-channel considerations! It is an exciting road ahead.
With Market Love
The Linden Market Team