Difference Between eCommerce Platform and Marketplace

If you are considering starting an online business to sell products, you have two options: eCommerce platforms and marketplaces. The purpose of both the platforms is to connect buyers and sellers, but they cater to distinct business needs. Understanding the difference between an eCommerce platform and a marketplace will help business owners make informed decisions regarding which route to opt for. After all, both have them present unique advantages and shortcomings.

What is an eCommerce Platform?

The simplest definition of an eCommerce platform is that it is a software which allows merchants to build and manage their own online store. It provides all the necessary tools to sell the products directly to the customer. This includes tools for designing, listing, and then ultimately marketing the products. Magento 2, Shopify, and WooCommerce are the top 3 eCommerce platforms.

Key Features of an eCommerce Platform

• Full Control: One of the standout feature of an eCommerce platform is that the business has complete control over each aspect of their store. This is not just limited to the branding but also includes the website design and overall customer experience.
• Tailored Approach: Businesses can tailor the payment options and marketing strategies as per their requirements. For example, if you need to restrict certain payment methods for a few customer groups in Magento, you can do so using a Magento 2 Payment Restrictions Extension.
• Direct Customer Engagement: Another key feature of eCommerce platforms is that they allow businesses to engage directly with the customer. This allows store owners to collect valuable information which they can use for personalised offers and targeted advertising purposes.
• Marketing: The business owner is responsible for attracting the buyer through various marketing strategies such as social media marketing, search engine optimisation, and pay per click campaigns.

Pros and Cons of eCommerce Platforms

Pros:

• The buyer has complete control over their store.
• Direct access to the customer helps obtain data which can be used for personalised marketing.
• There’s no need to worry about competitors appearing on your website.
• Ability to upsell and cross sell products.
• Control over the discounts.

Cons:

• The merchant is responsible for setting up and maintaining the website which requires considerable resources.
• Attracting buyers through marketing requires resources, time, and expertise.
• Product sourcing, listing, and shipment need to be in perfect alignment.

What is a Marketplace?

A marketplace is an online platform which connects multiple sellers with buyers. The emphasis here is on the word ‘multiple’. In an eCommerce platform, there is only seller i.e. your business. In the marketplace, there would be hundreds of other sellers with similar products as yours. Marketplaces are managed by third parties with the sole purpose of facilitating transactions between sellers and buyers. Amazon, Etsy, AliExpress, Adobe Marketplace (formerly Magento Marketplace), Codecanyon, ThemeForest, and WooCommerce Marketplace are some examples of marketplaces.

Key Features of Marketplaces

• Large Customer Base: Marketplaces attract millions of shoppers every day. The below statistic shows the monthly visitors to Amazon.com.

 

Source: Statista

• Immediate Exposure: Due to the high volume of potential buyers, businesses enjoy immediate exposure for their products.
• Ready to Deploy: The marketplace provides the necessary infrastructure to sell the products. In other words, there is no need to build or manage a website. Just list your products and start selling.
• Commission Model: Unlike an eCommerce platform, businesses will pay a certain amount of commission to the marketplace on every successful sale. Apart from it, marketplaces charge a monthly usage fee.
• High Competition: Due to the number of sellers, there is intense competition, often leading to pricing wars.

Pros and Cons of Marketplaces

Pros:

• Start selling from day one as there is no need to set up a website.
• No technical experience required.
• A large existing customer base reduces marketing costs.
• Platforms enjoy greater trust among buyers.
• The marketplace oversees all the transactions, thereby reducing administrative costs and fraud risks.
• The marketplace manages the shipping and returns (in most cases).

Cons:

• Intense competition among the sellers.
• Commission charges reduce overall profitability.
• Limited to no control over store branding.
• No option of upselling and cross-selling.

eCommerce Platform vs Marketplace: Brief Summary

Feature	eCommerce Platform	Marketplace
Control Over Brand	Full	Limited
Customer Relationship	Direct Engagement	Marketplace Owns the Relationship
Marketing Efforts	Required	Minimal
Setup Complexity	Requires Website Setup & Maintenance	Just List Products & Start Selling
Cost Structure	Upfront Costs for Website Development and Maintenance Marketing Spend	Fixed Commission Per Sale Monthly/Annual Usage Fee
Competition	No Direct Competition on Own Store	High Competition from Other Sellers

Which Option to Choose for Your Business?

We cannot help you choose between an eCommerce platform and a marketplace since there are numerous factors to consider.

When to Choose an eCommerce Platform? If you wish to enjoy complete control over our branding, build direct relationships with the customers, and have the resources for marketing, go for an eCommerce platform.

When to Choose a Marketplace? If you prefer a quick setup and instant access to customers with minimal marketing spend, then the marketplace offers the best value.

However, there is a third option available as well. Businesses can opt for a hybrid approach, allowing them to enjoy the benefits of both the options. The marketplace will boost your store’s visibility, while the eCommerce platform can be leveraged for branding purposes. FME Extensions follows the hybrid approach. It has its own website for Magento 2 Extensions. At the same time, you can find all Magento 2 Extensions by FME at Adobe Marketplace.

Final Thoughts on eCommerce Platform and Marketplace

This concludes our article on the difference between eCommerce platform and marketplace. Although they are quite different, it does not mean you have to choose only one between the two. By opting for a hybrid approach, you can overcome the individual shortcomings of each platform, while enjoying the maximum benefits. Nevertheless, you should decide the choice of platform only after considering your resources and long-term business goals.

Read More Magento 2 Blogs:

• 11 Doubts about a Magento Development Company You Should Clarify
• How to Boost Traffic to Your eCommerce Website
• How to Install Extension from Magento Marketplace?