Marketplace and E-commerce are both used for online business purpose, but there are some fundamental differences between these two models.
WHAT IS MARKETPLACE?
a marketplace is a website where the products offered come from multiple sellers. It is an online platform where the website owner allows third-party sellers to sell on the platform i.e., various sellers can market their products to the customers directly. The marketplace owner does not own the inventory; neither does he invoice the customer.
WHAT IS E-COMMERCE?
An e-commerce website is a single brand online store or multi-brand online store where a specific brand sells its own products on their website. The inventory is owned by the website owner & the website owner also invoices the customer. Essentially E-commerce websites are where a seller sells products to multiple customers/buyers.
The marketplace is like a shopping mall whereas E-commerce is similar to a multi-brand retail shop.
TOP 6 DIFFERENCES BETWEEN MARKETPLACE & E-COMMERCE
While in e-commerce you have to focus on targeting buyers, in a marketplace you must attract not only buyers but also sellers who will be build the base of the platform. The target audience for marketplace is wide and for E-commerce the sellers need to attract their own traffic to the website.
Marketplace only connects a buyer and a seller; hence the marketplace owner does not need to maintain their own inventory. But a buyer can buy products from an E-commerce platform and hence the website owner needs to maintain inventory. Maintaining & managing inventory can significantly impact the profit margins for E-commerce sites.
A marketplace doesn’t sell or buy anything. So, it takes considerably less financial risks than e-commerce websites which have to constantly invest in stock that may take time to sell or never sell at all. Marketplaces gain economies of scale more easily, and, therefore, allow them to expand faster than e-commerce websites. Marketing for marketplace is also simpler and cheaper compared to E-commerce websites.
Marketplace earns their money through listing fees and commission fees and hence the margin for marketplace is lower compared to E-commerce. Due to this, marketplace owners need to work on volume to stay competitive in the game. However, E-commerce sites make greater margin on each individual sale, so they don’t need to be concerned with volume, but they have to constantly cautious with maintaining the quality.
If you are a seller and looking to get more customers for your products through online platforms, initially any marketplace may be a better option if you are looking to save time and willing to do this at a lower cost. Building your own e-commerce website will certainly going to be a time consuming and costly affair. But as marketplace platform are already ready, initial set-up is easier. Hence, time to launch your business takes lesser time in marketplace compared to e-commerce.
As e-commerce websites are essentially selling a product to a buyer, a lot of value-added services are involved in the process. Major support is from logistics services. Logistics is an integral part of the e-commerce dynamics and hence many e-commerce owners choose to launch their own logistics services. However, as marketplace only connect a buyer and a seller, they don’t need to be concerned about such value-added service providers.
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