What are the differences between an ecommerce and a marketplace?

Many people believe that the online marketplace and e-commerce platforms can be the same thing. It is true that both are used for online business purposes, but there is a crucial difference between them. The e-commerce website is nothing more than a single seller web store, while on the other hand the marketplace platform is operated by a single company with the help of the contribution of multiple sellers. Here are 5 most important differences between the Market and Electronic Commerce that you should know:

Within what actually the different technological approaches it is necessary to emphasize that the electronic commerce showcases exist to provide an online commercial presence and therefore have been designed for it. They are rationalized for that purpose. On the other hand, marketplaces give buyers a one-stop shop to buy everything they need. The appropriate technology to manage a market platform is more complicated. For example, modern marketplace platforms support multiple API integrations with online and offline stores, too.

This is what is called a scalable model as far as the management model is concerned. As much as the market does not buy any products, you take considerably less financial risks than traditional e-commerce websites that have to constantly invest in stocks that may never sell. In this way, Markets achieve economies of scale more easily, and therefore allow them to expand more quickly than e-commerce websites. Markets are obviously difficult to build, but they can be incredibly long-lasting and profitable once they reach liquidity.

To understand the marketplace

Whether you are a new business or have been in business for several years, get more ecommerce sales. Where most people presume that the online marketplace and e-commerce websites can be the same thing.

Although both are used for online business purposes, there are some basic differences between them. For example, a marketplace is an online platform where the website owner allows third-party sellers to sell on the platform and invoice customers directly, meaning multiple sellers can market their products to customers. The marketplace owner does not own the inventory, nor does he invoice the customer. In fact, it is a platform for both sellers and buyers, similar to what is seen in a physical market.

In contrast, an e-commerce website is a single-brand online store or multi-brand online store in which a specific brand sells its own products on its website. The inventory is the sole property of the website owner. The website owner also bills the customer and pays the value added tax. There is no option to register as a seller, similar to what you see in a retail store. And it is customer specific. An e-commerce website is also called a single seller website where a store owner can operate the website for the sale of goods.

In other words, a marketplace can be an e-commerce website, but not all e-commerce websites are marketplaces. While it may sound confusing, here are 10 significant differences between a marketplace and an ecommerce website that you should know about.

In reality, the best place to sell online differs from vendor to vendor depending on your products, needs, and goals.

Here are 10 differences between the Market and Electronic Commerce that you should know.

Marketing and targeting approach

It is very important to have a clear concept about your marketing approach and orientation in the online market and e-commerce business. While in e-commerce you have to focus on targeting buyers, in a marketplace you have to attract not only buyers but also sellers who will be the heart of your platform. In e-commerce, the individual merchant has to spend more to drive traffic to their site.

Once a buyer finds their selection, the selection process is easier as they are selecting from the products offered by a single company. On the other hand, markets benefit from multiple users trading on their site. As there are many traders, they individually advertise the existence of the market, causing a viral spread of awareness. The happier buyers are, when transacting on the site, the more they help spread market recognition.

Scalability

A market does not sell or buy any product. So you take considerably less financial risk than e-commerce websites that have to constantly invest in stocks that may take time to sell or never sell. As already mentioned, markets obtain economies of scale more easily and therefore allow for faster expansion than e-commerce websites.

When traffic grows very quickly, it may be necessary to find new vendors to meet demand, but you won't have to worry about spending large amounts of money on new inventory or storage facilities.

Larger inventory

Keep in mind that the larger the inventory, the more likely buyers will find what they are looking for. A large inventory often means that extra effort must be put into marketing to get the attention of your visitors, even if they are interested in the website.

The Pareto principle, also known as the 80/20 rule, tends to apply in the development of markets, as a minority of products will add to the majority of sales. Sometimes keeping a larger inventory in stock can cause problems storing something else that will sell better. On e-commerce websites, the Pareto principle means that you will have to get rid of unsold products at some point, massively lowering their prices. On the contrary, in the markets, if there is a product that is not sold, you can choose to deactivate it with the push of a button. Since you have never bought the products, there are no associated costs.

Time and money

Building your own ecommerce website can be as simple or complicated as you like. There are many issues involved in it. So there will be a lot of time and work to create and maintain your e-commerce website. But in a market, as everything remains ready, you can register, list and sell without spending a lot of time and extra work.

Again, as ecommerce websites have a higher initial investment, they take longer to break even. On the other hand, markets have better profit margins since their income is basically percentages of transactions. Depending on the volume of transactions, this is the money earned that is generally reinvested in product development to accelerate growth.

A volume business

In the markets, the margins on each sale are lower compared to e-commerce sales. This is mainly due to the commission income that is deducted from sales. As a result, markets need to sell higher volumes of products than e-commerce.

Trend indicators

There are trend indicators that are used to spot trends in trading markets. They also point to the direction of the price movement. With the help of trend indicators, markets can more specifically track your sales. They also know which products are the best and which sellers are the most efficient. As a result, you can take the best and most effective steps to take and promote the content that really matters to your users.

Engaged public

Public participation is very important in online business, be it in a marketplace or on an e-commerce website. Markets have always been transaction-oriented and the goal is to connect buyers and sellers. Markets tend to focus entirely on getting buyers to buy and sellers to include more products or services. In fact, markets benefit from network effects: more buyers attract more sellers and vice versa.

Attracting the audience in the e-commerce business is difficult. It is time consuming and expensive. Even after gaining some experience, you may still be targeting the wrong people. Different social media like Facebook can go a long way in attracting the audience.

Trust

Building trust in both a marketplace and e-commerce is essential for you to be able to sell online. Your users need to trust your platform and others. 67% of customers trust a purchase in a known market, even if the merchants selling the product are unfamiliar. In case buyers have had a satisfactory experience, 54% will come back to buy in the same market again, and trust is a key part of this experience. On an e-commerce website, it is quite difficult as it is managed or owned by a single individual.

Technical aspects

Currently, in the market there are a large number of tools to build an e-commerce website and the best known are SAP Hybris, Salesforce Commerce Cloud or Magento. Markets offer buyers a one-stop-shop to buy everything they need. Therefore, marketplace solutions have been tailored from the start to meet the specific needs of marketplace buyers and operators.

The technical aspects of building a market must be unique. It must offer powerful APIs (application program interface), be cloud-based software that allows short implementation times, and have a scalable database designed for use in multiple markets. Modern market solutions are compatible with omni channel technology; assimilating the physical channels of the store, the web, the fulfillment and the social commerce in a single platform.

More complex navigation

In a market, the products are organized into a well-organized set because it is dominated by several sellers who have their respective list of products. But, on an e-commerce website, the arrangement of products is based on categories. There are more detailed and therefore more efficient filters for the research bar, which means that the user can then refine their search much more precisely. So, in terms of the browsing process and patterns, there is a big difference.

Other elements in their differentiation

A marketplace is an e-commerce platform, but not all e-commerce sites are marketplaces. So what are the differences between an ecommerce site and a marketplace? Here are the main ones to help guide you on your journey to the market:

The main difference between an e-commerce site and a solutions marketplace

1.Small investment, great platform

Ecommerce website: Starting an ecommerce website often requires investing a good amount of money beforehand to attract buyers with a great deal.

Market: When it comes to markets, you have the advantage of allowing sellers to manage their stock on their own, which significantly reduces your initial investment. Marketplaces can index more products than an ecommerce site since the product collection is from multiple sellers. While the cost of launching a robust marketplace is roughly the same as an ecommerce site, the simplicity of a marketplace is much more.

2. Mass inventory

For Marketplace: With a large inventory in a marketplace, customers can easily find the product they are looking for. However, a large catalog would require more efforts in marketing.

For the e-commerce website: On an e-commerce website, you need to get rid of some unsold products or lower their prices at some point, as keeping them in stock would prevent you from stocking up on something that sells more.

In a marketplace, you can easily get rid of an unsold product with one click. As you have not purchased the products, there are no costs associated with it.

3.Large and complex

A marketplace brings together product lists from multiple sellers, but organized into a well-organized catalog, with more references than an e-commerce website. Therefore, it demands a well-built navigation system and efficient search filters that allow users to refine their search more precisely.

4.Positive cash flow

Ecommerce: Ecommerce websites that have made larger investments initially, their income and resources will take longer to break down.

Market: Markets enjoy better profit margins as the revenue generated is made up of the percentage of transactions. Depending on the volume of transactions, the money earned is often reinvested in product development to accelerate growth.

5.Product selection

A market offers a wide variety of products. As many different manufacturers sell on the same platform, there is a greater variety to choose from than in a normal online store with a small set of brands. Also, markets are often used by small businesses to sell second-hand products, so prices are expected to be lower as well.

Today, there are numerous solutions used to build e-commerce websites available in the market, such as SAP Hybris, or Magento being the most popular. The market trend is constantly evolving and its success is growing every day.

What is the marketplace?

The word marketplace comes from the union of two terms in English:

Market, which means market

Place, which is place.

Thus, it can be understood as a shopping venue, a kind of virtual showcase that presents products from various brands or companies to customers.

Considering the universe of electronic commerce, this model works as a collaborative commerce portal. But there is a difference between them.

Ecommerce can be understood as a virtual store, typical of a certain brand or company. It uses the B2C concept, which directly relates the customer to the company.

Thus, ecommerce would be an online store that sells only the products of the company itself.

But the marketplace is a meeting of several companies on one platform.

The best example to define it is a shopping mall, but in a virtual environment.

This model, in addition to placing the customer in contact with products from various stores, also enables business between the companies involved, because it uses, among others, Business to Business and Business to Consumer or B2B2C.