Ecommerce vs. marketplace: How and when to choose each?
When talking about digital online businesses, we’re usually talking about an ecommerce, which has always been about selling and buying through the internet – and nowadays is a must-have for most retailers. In recent years, online marketplaces have been a growing trend, showing that the shift from ecommerce to marketplace can be a turning point for companies in a fast-paced digital world. But what’s the difference and how to choose between ecommerce vs marketplace?
Simply put, one is an extension of the other, with a few important distinctions. In this article, we will clarify the main differences between the two and will discuss which model, comparing ecommerce vs marketplace, is the most suitable for your business.
Ecommerce vs marketplace: from the basics
First things first: both business models consist of online stores. The main difference is that one (ecommerce) supports only a single seller, the owner of the store, and the other (marketplace) enables multiple sellers to offer products through the same storefront – there are both the store owner and third-party sellers operating under the hood. For the final customer, there is no practical difference in the shopping process: it is the same and happens on the same website, in a seamless way.
But while this difference may be irrelevant to the final consumer shopping experience, for business owners is the actual the opposite – choosing between one or another implies on huge impacts on the operation.
What an ecommerce operation looks like
In a regular ecommerce operation, the business owner sells its own inventory and takes care of each part of the operation, from the purchase until its fulfillment and everything on the backstage – storage, processing payments, logistics and taxes to quote a few. To summarize, in an ecommerce operation the owner is responsible for guaranteeing that everything’s running as it should and that the order gets to the final customer. In this case, the site owner is the one and only seller.
What is a marketplace operation
A marketplace is an extension (or evolution) of an ecommerce platform that allows third parties to sell through it, which means that besides the actual owner other sellers can also display and sell their products.
For retailers, becoming a marketplace is a way to increase the product assortment without the extra work of storing, managing and fulfilling them. In a marketplace, sellers take care of their own operations – the commerce website works as a sales channel for them to announce their products and services in order to reach more customers.
It’s good to point out that a marketplace can, such as an ecommerce, also work on a B2B model, besides just focusing on the final consumer.
Why become a marketplace?
It is a win-win operation. For the owner, a marketplace operation is a way to expand the business to different markets and segments and generate incremental revenue with little investment and risk, given that the seller is responsible for its own sales and orders. For third-parties, selling on marketplaces is a way to add an extra sales channel to display its products and to make them available in trustworthy and well-known websites. Also, therefore, to reach a number of potential customers that they wouldn’t by themselves.
Choosing between ecommerce and marketplace
We can answer this question to two different personas: retailers who already operate their own ecommerce and question whether or not to turn it into a marketplace; and people looking forward to having an online business and are not sure which model is the best. Below, we’ll focus on the first persona.
Some pros of becoming a marketplace should be crystal-clear prior to hammering out your decision:
1. Increasing product assortment
To offer a wider product assortment is a well-known way to increase revenue, but we know that it is no easy task since there’s the need of increasing and expanding inventory and managing even more SKUs.
As a retailer, once you become a marketplace you can establish new partnerships and welcome sellers that have a different product assortment, from new, local brands to different product categories and so on. This means that you get to increase product assortment with no risk or high investment, but just by allowing new sellers on your platform.
2. Total control over the operation
If a concern of yours is whether becoming a marketplace leaves you with less control than in an ecommerce operation, there’s no need to worry. As the owner, you have total control of who can become a seller on the platform, what products can be sold and, if needed, you can also put in place the desired selling rules.
All that with no extra work. With VTEX’s native marketplace, you can automate supplier management and product approval, while partners have a self-service portal available to manage its own products, as well as track their sales and orders.
3. Gathering consumer insights
Imagine having consumer data and insights that are not possible to gather by operating as an ecommerce. That’s what a marketplace does for you: open doors to opportunities and new business scenarios.
By having sellers from different markets that sell different products and brands, you get to know a whole new consumer habit and gather insights that can inform the next steps of your business to better serve customers’ needs.
4. Building loyalty and reaching new customers
If consumers can find all sorts of products, brands and different price ranges in your platform, why should they shop anywhere else? As a marketplace, you offer the convenience people are looking for and become the go-to place for shopping by selling everything they need and giving them options to choose from.
This is not only a way to build loyalty with consumers, but also to reach new audiences: some items, categories of products once available only at other ecommerces and stores can also be found at yours.
Nowadays, 50% of all global online sales take place on marketplace platforms. From a consumer perspective, a marketplace is the best of both worlds: it is a single and seamless platform where they find all sorts of products, as different as they can be.
By becoming a marketplace you get to reach broader audiences, increase your product assortment and also count on incremental revenue, which can usually take time and money in a traditional ecommerce. Worried about controlling the quality of your third-party sellers? That won’t be a problem: it is possible to choose between partial or full control of who, what and how products can be sold on your platform.
No wonder why it’s become such a trend in recent years, right?
But that doesn’t mean any business should make this shift. All said above should be taken into account, but not forgetting what are the main goals of the business for the mid and long-term. Decisions should be aligned and working towards the same desired future.