Which platform should I choose to start my e-commerce business?
For business owners that are looking to use e-commerce to increase their sales, they can choose to present their brand on a marketplace or host their own website. But what are the advantages and disadvantages of the different platforms available?
This article briefly explains the different types of marketplaces based on the target audience and the pros and cons of both marketplace and hosting an independent e-commerce website.
What is an online marketplace?
An online marketplace is a third-party platform where you can list products and services online. This space is shared with other sellers and businesses that sell a variety of products, including similar offerings to your own.
There are three main types of marketplaces — Customer-to-Customer (C2C), Business-to-Customer (B2C) and Business-to-Business (B2B). They are differentiated by their target audience. Some businesses combine different types of marketplaces to cater to multiple audiences, such as Amazon, eBay, and Etsy.
- Customer-to-Customer (C2C)
C2C, also known as peer-to-peer (P2P), is used by individuals that have similar interests or requirements to share products and services within a community. This marketplace type has the fastest sales cycle and generates revenue by selling third-party ad space and feature opportunities to vendors to boost their listings.
Prominent C2C marketplaces include Craigslist, Uber, eBay, Taobao Marketplace, and Etsy.
- Business-to-Customer (B2C)
B2C marketplaces involve businesses selling their products and services to customers. It has a slightly longer sales cycle as compared to C2C. B2C marketplace websites charge fees to business users, which can come in the form of commissions, a monthly subscription fee, or individual listing fees.
Examples of successful B2C marketplaces include Amazon, Rakuten, JD.com, Tmall, and Flipkart.
- Business-to-Business (B2B)
B2B marketplaces involve suppliers selling wholesale products or services to other businesses and see the longest sales cycle of the three types. This type of marketplace generates revenue in the same way as B2C (with subscriptions, commission, or listing fees). However, it involves a much larger sales value that can reach up to thousands or even millions of dollars.
Alibaba, Amazon B2B, Quill, IndiaMart, and Fiverr are examples of B2B marketplaces.
Advantages of using an e-commerce marketplace
For newcomers to e-commerce with limited resources, using an e-commerce marketplace is an easy way to get started. These shared platforms boast colossal website traffic and a solid customer base. The marketplace owners will handle most processes, such as website design and payment processing. Some marketplaces such as Amazon provide additional fulfillment services with Fulfillment by Amazon (FBA).
Most e-commerce marketplaces also have an accompanying mobile app that allows you to reach out to more potential customers and offer a respectable range of payment methods.
Disadvantages of using an e-commerce marketplace
A significant downside of using a marketplace is that you will be competing with various vendors on the platform. Many sellers will most likely offer a similar product to yours, and it is difficult to distinguish yourself from other stores other than competitive pricing. As the marketplace website controls the website format and style, this gives you limited options to personalize your listings and dilutes your brand image.
As the marketplace processes orders on your behalf, you cannot access customer information, which can be used for marketing purposes such as newsletters to encourage repeat purchases. B2B and B2C marketplace types also involve the marketplace charging you additional fees to use them, resulting in lower profit margins.
What is the alternative to a marketplace?
If you do not want to use a marketplace platform, you can also opt to create an e-commerce website. This involves a lot of preparation and can be very time-consuming initially on your end, as you are required to design the website and market your site effectively to drive traffic. However, having a dedicated website also has its benefits!
There are also e-commerce website solutions available such as Shopify and BigCommerce, who can help you simplify the process of setting up your website.
Advantages of having a dedicated e-commerce website
The main reason people choose to open an independent e-commerce website is that it grants them full control of your business’s branding. You can decide on the appearance of the site and how visitors can interact with it. You can even bolster your brand image with supporting pages of your company’s brand story or articles that are relevant to your product.
Direct access to your customers also provides you with marketing opportunities, such as email marketing campaigns. Your business will have the chance to interact with your consumers directly and provide a tailored customer experience.
Unlike in a marketplace, you don’t need to fight other sellers to secure a transaction. Because the sales are generated directly through a website you own, you can avoid paying commission or listing fees. Do note that if you are using an e-commerce website solution to set up your e-tail website, there might be additional transactional fees.
Disadvantages of having a dedicated e-commerce website
The initial set up of your website requires more resources as compared to signing up for an account on a marketplace platform. As mobile usage and shopping on mobile become more prevalent, making your website mobile-friendly or even developing a dedicated application should be a priority. Constant upkeep of the website is also necessary, which requires a dedicated team of web developers.
Building trust in consumers when selling products using an e-commerce website can also prove to be quite time-consuming.
A 2012 study has found that 67% of consumers would trust an unfamiliar seller on familiar marketplaces for purchasing a product, even if they have not patronized that particular seller before.
57% of the study’s participants stated that they would continue using the same marketplace for repeat purchases of the product bought, versus 11% that said that they would subsequently purchase the item directly from the retailer’s website.
As you are starting with zero web presence, you will need a dedicated marketing strategy to build your brand online and push traffic to your website. This vital point can make or break your e-commerce store.
The deciding factor boils down to what resources you have at your disposal.
For business owners with limited resources, it is recommended that you use a marketplace first due to its lower startup cost. Alternatively, you can also explore using e-commerce solutions to help set up a website.
However, for long term growth, building an e-commerce website trumps using a marketplace as you get better control of your brand’s image and the customer’s experience.
More prominent business owners may also find utilizing both platforms to be the best option as they have sufficient resources. They list best-selling products in an established marketplace and a full range of their products on their brand’s e-commerce site, enjoying the best of both worlds!
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