5 differences between an online marketplace & an eCommerce website

Published on 28/07/2022 by Sukanya Awasthi

Internet shopping is more popular in the UK than in any other major country’. Keeping this in mind, it may be helpful for small and medium-sized companies to know which is a better platform for them: an online marketplace or an eCommerce website.

Marketplaces and eCommerce websites provide a platform for businesses to sell their goods

Online shopping is not a new concept. In fact, ‘over four in five UK consumers are digital buyers’ according to a report by Statista. If you have been selling products online or wish to do that in the future, you might be wondering which is the right platform for your business. In this article, we will help you understand various aspects of both marketplaces and eCommerce platforms.

What is a marketplace?

An online marketplace is typically a website that connects multiple sellers with potential customers —buyers— via the internet. This is similar to a shopping centre where users physically check out various outlets and browse through different products The only difference is that in the case of an online marketplace, they do so virtually. This way, sellers can list and showcase their products without having to spend resources and time to build and maintain their own websites. Some examples of marketplaces are Facebook Marketplace and Amazon Marketplace.

What is an eCommerce website?

eCommerce or electronic commerce websites assist businesses in setting up their online stores and integrating other essential components —for instance, payments and chatbots— to their websites. In other words, an eCommerce website is the online store of a single vendor. For example, when a buyer wants to shop for a product from a specific brand and visits their website directly, they use an eCommerce platform to make a purchase. These eCommerce websites are usually created using various tools.

Marketplace vs eCommerce platform: 5 differences

When talking about online buying and selling, many people may mistakenly use the phrases marketplace and eCommerce interchangeably. Despite the fact that they both serve online business needs, there are some fundamental distinctions between them. In this section, we will look at five ways in which these two platforms differ from each other.

1. Brand recognition

Building a brand reputation and recognition is typically an important part of a business. It may enable you to spread awareness about your products and services to potential customers, acquire their confidence, and possibly sway their purchasing decisions in order to increase sales. The way a brand is managed differs for marketplaces and eCommerce platforms as follows:

  • If the brand is just starting out, it has the opportunity to display itself in a marketplace without needing to build brand awareness from day one. On the contrary, building a brand’s reputation on an eCommerce platform may require more effort during the initial days and sometimes may also need aggressive advertising to reach target buyers. 
  • A marketplace possibly requires the acquisition of not just buyers but also sellers who would list their items on the site. This may add to a marketplace’s efforts to make itself a popular brand among buyers and sellers. On the other hand, since eCommerce platforms are only directed toward buyers, their efforts to build brand recognition are more unidirectional in this case.

2. Cost and time

Raising finance is an important part of starting a business’, according to an article by Startups, and many businesses who are just starting out aim to save both cost and time. How these two factors are dealt with in online marketplaces as compared to eCommerce sites is discussed below:

  • Using an online marketplace does not require setting up a website from scratch and can save businesses from the hassle. On the other hand, making an eCommerce website often requires building and maintaining a website, and that process may require additional time, money, and resources. Spending less time creating a website may also enable businesses to concentrate more on product development and sales and less on website maintenance.

3. Inventory of goods

Inventory is a stock of goods or raw materials a company sells to earn profit. Companies can use inventory management tools to improve the efficiency of resources and prevent the accumulation of dead stocks, according to an article by Wrike.

  • Marketplaces do not have their own inventory. If a product does not sell, is defective, or out of stock, the risks are not borne by the marketplace owner. On the contrary, brands with dedicated eCommerce websites usually manage their own inventories, sometimes in warehouses and inventory stores. This means that eCommerce platforms have to hold and manage their own inventory, unlike marketplaces. 
  • Moreover, buyers are more likely to find what they’re looking for in a marketplace due to the large inventory of items available from various categories. This can potentially lead to higher chances of a customer transacting. In the case of an eCommerce website, if any one product line is discontinued or unsold, it can become a task for the eCommerce brands to get rid of those products. One way would be to slash the prices by considerable margins to clear off that inventory.

4. Site traffic and engagement

It may be important for brands to engage with customers in the right way. Customer engagement can also sometimes be a challenging task for small to midsize enterprises (SMEs). ‘Consumers in the UK are the least likely to engage with brands outside of the transactional activity.’, according to a survey report by 3Radical. The ways in which marketplaces and eCommerce sites handle engagement is discussed below:

  • Online marketplaces allow businesses that have just set up their online marketplace accounts to engage with the existing traffic on the site. This can help connect with the potential consumers who have previously used such an online marketplace to make purchases. With an eCommerce platform, businesses would possibly have to attract new customers from scratch rather than selling and connecting with existing ones as in the case of an online marketplace.
  • The site traffic in the case of a marketplace is managed by the owner of the marketplace. As such, the sellers may not be able to use the site traffic to engage with consumers directly. One of the benefits of running your own eCommerce website is the ability to advertise to visitors who have previously made purchases from you and engage with them in the future. Since eCommerce websites have access to consumer information and statistics, they may communicate directly with customers to let them know about product launches, periodic sales, and promotional offers. This can potentially help them improve their brand engagement.

5. Personalisation

‘Half of all consumers in the UK are more likely to leave positive reviews after a personalised shopping experience’ according to a report by Segment. Personalised communication —like promotional emails, notifications, and text messages— may make shoppers feel more valued and seen. It can also improve the user experience with the brand.

  • It is challenging to stand out in an online marketplace where there are thousands of other users. To add to that, customisations of the seller profile are often not available on online marketplace platforms. However, since the database of an eCommerce website is owned and controlled by the brand, they can possibly use that information to reach out to their existing and potential customers. They may also analyse that data to understand customers and improve the user experience.
  • Moreover, a marketplace does not allow sellers to send personalised communication —emails, SMSs, or notifications— to their target customers. This is due to the fact that the owner of that marketplace usually manages the data regarding customer demographics and other details. eCommerce platforms allow brands to add a personal touch while connecting and communicating with their customers. In fact, personalisation can make buyers more loyal to a brand, according to Forbes.

What do consumers prefer: eCommerce sites or marketplaces?

Marketplaces and e-commerce platforms are likely to change and evolve. The majority of online marketplaces may act as an interface for SMEs and enterprises, making them a place for businesses that are just starting on their sales journey and want to generate revenue as early as possible. There are advantages and disadvantages to both online marketplaces and eCommerce websites that need to be analysed before making a decision. Whether you are a business owner starting an online business or a merchant trying to decide how to market your products, the choice of platform would depend on factors such as your budget, resources, and business needs.

Looking for eCommerce software? Check out our catalogue.

This article may refer to products, programs or services that are not available in your country, or that may be restricted under the laws or regulations of your country. We suggest that you consult the software provider directly for information regarding product availability and compliance with local laws.

About the author

Content Analyst for the UK market. Committed to offering insights on technology, emerging trends, and software suggestions to SMBs. Plant lady, café hopper, and dog mom.

Content Analyst for the UK market. Committed to offering insights on technology, emerging trends, and software suggestions to SMBs. Plant lady, café hopper, and dog mom.

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