eCommerce refers to a business selling products or services directly through its own online store. This gives you complete control over branding, customer experience, and pricing.
Online marketplaces, on the other hand, function as virtual shopping malls, hosting a variety of sellers under one roof. This model offers broader customer reach but comes with less control over presentation.
eCommerce would be perfect for a well-established brand, those who want high-profit margins, and are willing to invest.
Online marketplaces offer a quick and cost-effective way to reach a large audience. The sales are quicker and more convenient.
Nowadays, everything from groceries to clothing to electronics is sold online. If you are one of those looking to sell online, there are two ways to go: eCommerce and online marketplaces.
With eCommerce, you can sell your products directly to the consumers. You have complete control over branding, customer experience, and pricing. On the other hand, online marketplaces, as the name says, function as virtual shopping malls. Multiple sellers listing and selling their products on one platform. But they don’t have control over branding and pricing.
So which one do the eCommerce development services recommend and in what situations? That’s what we’ll discuss in this blog, along with a comprehensive comparison between eCommerce and online marketplace. Let’s begin.
What is eCommerce?
eCommerce, or electronic commerce, is the concept of buying and selling products and services over the internet. Unlike the traditional brick-and-mortar stores with physical shelves and aisles, eCommerce uses websites and mobile apps. Customers browse products online, select what they want, and then pay and arrange for delivery or pick-up electronically.
eCommerce covers a wide range of transactions, from familiar online shopping to subscriptions.
Some common examples include Adidas, Nike, etc.
What is an Online Marketplace?
An online marketplace, unlike an e-commerce store, functions more like a digital mall. Instead of a single seller, multiple vendors list and sell their wares on the same platform. Think of it as a virtual version of a bustling marketplace where various shops come together under one roof.
They often provide features such as product listings, payment processing, and seller ratings. And some even offer logistics support, enabling smooth and secure transactions between parties.
The most common examples include Amazon and Etsy.
On a marketplace, you may find multiple sellers selling the same products of the same brands. And the pricing, shipping, delivery, etc. may be different.
eCommerce vs Online Marketplace
Aspect
eCommerce
Online Marketplace
Definition
Buying and selling goods/services online.
Digital platform connecting buyers and sellers.
Ownership
Single seller (brand or retailer) operates the platform.
Multiple sellers list products on the platform.
Product Range
Can sell its own products and possibly third-party items.
Typically consists of products from various sellers.
Business Model
Direct sales from the seller to the consumer.
Facilitates transactions between multiple parties, taking a commission or fee.
Examples
Individual online stores like Nike.com, BestBuy.com.
Platforms like Amazon, eBay, Airbnb, Uber.
Control
Sellers have more control over branding, pricing, and customer experience.
Sellers have less control over branding and may compete directly with others.
Customer Experience
Tailored experience often focusing on a single brand or product line.
Variety of products available from different sellers in one place.
Logistics
Seller manages shipping and fulfillment.
Marketplace may offer logistics support or leave it to individual sellers.
Payment Processing
Managed by the individual seller or through a payment gateway.
Managed by the marketplace, which may deduct a fee or commission.
Revenue
Sellers keep a larger portion of the revenue, but bear more operational costs.
Marketplace earns revenue through fees or commissions from sellers.
As you can see, both eCommerce and online marketplaces offer distinct advantages and disadvantages. The best choice for your business depends on your specific needs and goals.
For now, let’s see a comprehensive comparison between the two. After that, I’ll give you an idea on which one do our eCommerce experts recommend and when.
Comprehensive Comparison Between eCommerce & Online Marketplace
Often, the lines are blurred with online marketplace when talking about eCommerce. But as you can see from the table shown above, the two are quite different. So let’s compare eCommerce and online marketplace in detail.
Business Model
eCommerce follows a direct sales model. You, the business owner, sell your products directly to customers through your own online store. You handle everything from website creation and maintenance to eCommerce marketing and customer feedback. You also take care of inventory management and order fulfillment (shipping and returns).
On the other hand, online marketplaces operate on a commission or fee-based model. The marketplace platform acts as a middleman, connecting buyers and sellers within a centralized online location. As a seller, you list your products on the marketplace and pay a commission (usually a percentage of the sale) or listing fees to use the platform.
Verdict
eCommerce is ideal for established brands or businesses with unique products that want maximum control and profit potential. But online marketplaces are a good starting point for new businesses or those with limited resources.
Ownership
With eCommerce, you are responsible for creating and maintaining your online store. This could involve building an eCommerce website from scratch using a platform like Shopify, WooCommerce, or Magento. Or you can hire professional eCommerce developers.
You have full control over the branding of your store, including the design, layout, logo, and overall customer experience. So you can create a unique identity that reflects your brand values.
Furthermore, you own and manage your inventory, including storage, packaging, and shipping of products to customers. You can decide on fulfillment methods (in-house or outsourced) based on your needs.
On the other hand, online marketplaces function as digital shopping malls. You essentially rent space to the sellers and vendors to list and sell their products. But they don’t have control over the overall design, layout, or functionality of the platform.
But the branding capabilities within the marketplace are limited. A seller can typically customize their product listings and potentially the storefront to some extent. But the overall brand experience is heavily influenced by the marketplace’s design.
Verdict
eCommerce ownership is ideal for businesses that prioritize brand identity, control over every aspect of their online presence, and long-term growth strategies. On the flip side, ownership in a marketplace is suitable for businesses prioritizing quick access to a larger customer base and cost-effective selling.
Customer Experience
Ecommerce stores offer the opportunity to create a unique and brand-specific customer journey. You have complete control over the design and layout of your online store. You can create a user-friendly and visually-appealing shopping experience that reflects your brand identity.
You can personalize the shopping experience with features like product recommendations based on browsing history, loyalty programs, and targeted email marketing campaigns. Customers can directly interact with your brand through contact forms, live chat, and customer service options. This allows for building trust and fostering brand loyalty.
Verdict
eCommerce is an ideal opportunity for building strong brand relationships and offering a unique, personalized shopping experience. But that comes at the cost of investment.
With online marketplaces, on the other hand, you can have convenience and ease of purchase. It’s a good option for businesses offering competitive products and aiming for fast market reach without spending much.
Products
With eCommerce, you decide on the product range, including unique items that are not typically found on marketplaces. You control how products are displayed, described, and priced. You can create detailed product descriptions, high-quality images, and even interactive elements to showcase your offerings.
You are responsible for managing your inventory levels, including stock control, order fulfillment, and potential returns.
On the contrary, with online marketplaces, customers can find a broad range of products across different categories. That increases the chances of finding what they need within the platform.
Listing products on a marketplace is often easier and quicker compared to setting up your own store. Some marketplaces may have restrictions on the types of products allowed, which can limit your options.
Verdict
eCommerce product strategy is ideal for businesses with unique product offerings and a focus on brand storytelling. And online marketplace product strategy is well-suited for businesses with readily available products. They are focused on quick sales and the ability to compete effectively on price. However, it can be challenging to stand out from the crowd.
Revenue
In eCommerce, you keep 100% of the profits from each sale, minus any processing fees charged by payment gateways (e.g., credit card fees). And you have complete control over setting product prices, allowing you to optimize your profit margins.
You can implement strategies like upselling (encouraging higher-priced products) and cross-selling (with product bundling) to increase revenue per customer.
Online marketplace works on the commission model. You pay commission to the marketplace platform, typically a percentage of the total sale price. This commission fee varies depending on the marketplace and the product category.
Some marketplaces charge additional listing fees per product or subscription fees for premium placement within the platform. And of course, Competition within the marketplace can influence pricing strategies, potentially leading to lower profit margins.
Verdict
eCommerce revenue strategy is ideal for businesses that prioritize maximizing profit margins. And they have control over pricing strategies, and can effectively attract and retain customers. However, online marketplace revenue strategy is suitable for businesses that prioritize quick access to a large customer base and lower startup costs.
Final Verdict
Both eCommerce and online marketplaces offer viable options for selling online. But the best choice depends on your specific business goals, resources, and products.
Now, let me tell you when to choose which option.
Choose Ecommerce if:
You want to promote a well-established brand or a unique product line.
You prioritize high-profit margins and complete control over your business.
You’re willing to invest in building a brand identity and attracting customers.
You have the resources to manage your own website, marketing, inventory, and fulfillment.
Choose Online Marketplace if:
You’re a new business looking for a quick and cost-effective way to reach a large audience.
You prioritize convenience and faster sales potential.
You’re comfortable with a commission-based model and some limitations on branding and control.
Your products are readily available and competitive within a marketplace setting.
Ultimately, the best choice depends on your specific business goals and resources. Or, you can even leverage both eCommerce and online marketplaces.
Start by listing your products on a marketplace to gain initial traction and establish your brand. Then, once you have a loyal customer base, you can transition to your own online store for greater control and profitability.
FAQs on eCommerce vs Online Marketplace
Q1. Is eCommerce or an online marketplace cheaper?
Startup costs are typically lower for online marketplaces. You don’t need to invest in building and maintaining your own online store. However, marketplaces charge commission fees on sales, which can eat into your profit margins.
eCommerce requires upfront investment but allows you to keep 100% of the profits (minus processing fees).
Q2. Which is better for building customer relationships, eCommerce or an online marketplace?
eCommerce allows you to collect customer data directly and build relationships through personalized marketing and communication.
Online marketplaces typically own customer data, making it harder to build direct relationships with customers.
Q3. Which option offers a wider reach?
Online marketplaces generally have a much larger established customer base due to their existing audience. Reaching a broad audience with an eCommerce store can be more challenging initially, requiring investment in marketing efforts.
Conclusion
While some people think eCommerce and online marketplaces are the same thing, they are, in fact, different. eCommerce websites are dedicated to a particular company and its products and services. But online marketplaces are basically online shopping malls. You can find different products from different vendors and companies.
eCommerce would be an excellent choice if you want complete control over the branding and profits and are willing to invest in building the website. And online marketplaces would help if a business is looking for quick market access and convenience. Although there won’t be much control over the branding, the startup costs are much lower than eCommerce.So, whether you want eCommerce or online marketplace, consult with our experts today!
John Niles, a dedicated Technical Consultant at BrainSpate since 2023, specializes in eCommerce. With a global perspective, he crafts insightful content on cutting-edge web development technologies, enriching the digital commerce landscape.
