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What are the Pros and Cons of Running a Marketplace vs. Pure Ecommerce Site?

What are the Pros and Cons of Running a Marketplace vs. Pure eCommerce Site?.jpg

Whether you are looking at marketplace platforms for your business or you want a straight ecommerce operation, there are pros and cons to consider. Naturally, you want to get the best option for your type of business, and you also want to make sure you understand that option well enough and thoroughly enough to use it successfully.

Making a switch from one to the other at a later point in time is possible, but it may not be easy or comfortable. When you select the right option from the beginning, it is easier to keep your company moving forward and your customers happy.

The Marketplace

A marketplace matches buyers and sellers, so you need to find both and make sure they can interact well and that they trust one another. That is not always easy to create, but it can be done. Larger companies or online entities may have more success with this, as opposed to smaller businesses that customers may not have heard of before. However, a marketplace can also help smaller businesses reach larger customers bases, as well.

Related: 4 Powerful Tips to Help Build Your Marketplace

Pros

The main pros of a marketplace include:

  • You do not usually have to worry about things like warehousing and delivery of goods.
  • Since you personally do not own any goods, you will not have to risk them sitting around while customers choose something else.
  • Monetization options are available, and using more than one of them can really be helpful.
  • Being able to showcase a larger number of different products can get you noticed, and that means a bigger customer base.

Cons

There are important cons to consider, such as:

  • Acquiring customers is your responsibility, and if you cannot do it successfully your marketplace will fall apart.
  • Everything you are offering and all the features you have need to be ready to go when you launch, instead of adding things over time.
  • You will generally have much lower margins than a standard ecommerce site, so you have to plan your strategy carefully.
  • Because you have competition, you cannot disappoint your customers - they will simply go elsewhere if you do.

The Ecommerce Site

An ecommerce site does not rely on bringing buyers and sellers together in the same way as a marketplace. Instead, it focuses on one company only, and then on the ability for customers to purchase what they want and need from that company in a convenient location. With that in mind, an ecommerce site is very different from a marketplace and may or may not be the right type of platform for the options you want to provide to customers.

Related: 5 Ways to Increase Leads for Your Ecommerce Company

Pros

When choosing an ecommerce site the pros can include:

  • You will have full control over everything, including your reputation and brand, and you do not have to worry about other sellers damaging you.
  • Margins for ecommerce sites are typically larger than those of marketplace platforms, so you can see the potential for bigger profits.
  • There is a bigger chance to build brand loyalty and get customers that come only to you to buy a particular product or line of goods.

Cons

You need to consider the cons of an ecommerce site, including:

  • All those things that were listed as pros in the marketplace, because an ecommerce site basically works on an opposite principle from marketplaces.
  • Everything about the business is on you, and if you make a mistake it can really hurt your business both short-term and long-term.

So, Bottom Line: Which is Better?

There is no "better" or "best" when it comes to whether you should be using an ecommerce site or one of the marketplace platforms. Both are good choices and both are bad choices, depending on what you plan to do with them. If you want to sell goods from your business only, then you probably want an ecommerce site. If you plan to have an online location where buyers and sellers come together and find one another, then a marketplace is most likely right for you. Either way, be sure you understand what you are selecting and why, and learn all you can about the platform or site you will be using before customers arrive.

 

Topics: Marketplace, Start-ups, eCommerce

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