It is very easy today to list yourself as a seller on Amazon marketplace by being a part of a larger ecosystem or open your own e-commerce website on Shopify. But they clearly are very different platforms from each other.
In this article, we will briefly explain the difference between them and share customer insights about the future of e-commerce industry.
Today’s e-commerce presence is operating based on two main entities:
1) E-commerce websites
2) Online marketplaces
While online marketplaces gather 3rd party sellers together to do business on a single platform, e-commerce websites do business by selling their own products. Online marketplaces may feature individual sellers, large scale manufacturers, retailers, distributors or anything in between.
But how online marketplaces work?
E-commerce websites are generally responsible for everything such as inventories, logistics, images, products, sales, marketing, product descriptions, pricing, advertising and more. On the contrary online marketplaces transfer the burden of these all operational inputs to the sellers.
Online marketplaces (e.g. Amazon, Etsy, Flipkart etc.) may have more than one operational model, but the well-known model is connecting sellers through their products to interested buyers.
Online marketplaces take care of the collecting orders & payments, forwarding orders to sellers, enabling shipping process directly or indirectly, tracking deliveries and releasing pay-outs to the sellers after deducting all the necessary fees according to the cost breakdown.
When we look at the general profile of sellers on online marketplaces, many of them are also selling their products on their own e-commerce websites, but they often prefer to benefit from higher traffic rather than their own sites. Of course, this is not the only reason. There is also distributing the burden of their operational conjecture. Especially small- sized businesses take advantage of online marketplaces in a way to promote their individual products, brands and creativity. It also means doing away with the requirement of having a dedicated and operational e-commerce website, technology, hosting, accounting software, payment getaway and other necessary stuff for selling online easily.
What are the pros and cons of selling your cool products on online marketplaces?
The truth is that selling on online marketplaces is not suitable for every business due to its nature though it may be very useful if:
Instead of wasting your energy on designing and maintaining your own digital store, you can spend that time to focus on your products. You can expand your reach and try to offer great products to your customers, instead of worrying about other things.
Online marketplaces attract high traffic, and this means that you can increase the visibility of your products, brand and business on a whole new level. This increased visibility can also help drive customers to your own website or your own brick-and-mortar location.
Sometimes, starting e-commerce websites from scratch can be costly. For small businesses, choosing online marketplaces to start your online business can help you to get off the ground with relatively low startup costs to promote and sell goods.
There also are some drawbacks of online marketplaces:
Standing out from the crowd can be difficult even though high web traffic is great, because there are so many products and brands on online marketplaces.
Unfortunately, nothing comes for free. You will face costs like listing fee, monthly seller plan fee and some other additional fees.
Online marketplaces have their own rules, guidelines and policies about what can be listed and how it can be listed, and you must be able to work within those constraints, as opposed to having your own.
We learned what online marketplaces are all about, now let’s tap into consumer insights
There are three major factors which influence consumer behavior in online marketplaces, and they are Price, Trust and Convenience.
Buyers can find up to 20% lower prices than their offline counterparts in normal times. This makes online marketplaces so ideal for the price sensitive customers. Customers can also compare prices easily and choose either the lowest or the most suitable price according to their needs.
Price sensitive customers are also a barrier for small businesses with tighter margins because retaining such customers are hard while they will be least loyal. So, small businesses can’t afford to bear with so much cost to retain those type of customers.
People generally trust things that they can see, hold or touch because of their nature. That’s why people generally have little trust issue for online businesses in terms of e-commerce websites. Even though this is considered negligible, or it seems like that, this is a serious challenge for small businesses to overcome.
On the contrary, online marketplaces are mostly doing alright when it comes to trust of customers, even though customers may not be quite familiar with the sellers or products itself of the platform. Therefore, building and fostering trust for the marketplace is just as important as building your portfolio. Majority of the customers states that any sort of trust seal on the platform is important for them or they abandon the e-commerce websites due to a suspected transaction, even though that may not be the case at all.
You can’t buy the trust, you can only earn it. Online marketplaces that can manage the customer information and support the customer especially after their purchase are likely the one that will gain more repeated customers by time. This comes from building online marketplaces mainly on customer-centric approach. This enables online marketplaces to retain previous customers and bring in the new ones.
Convenience is the true strength of online shopping, even more than the trust and price itself. That’s the main reason why people are preferring to shop online rather than offline. They choose it because it offers customers to save time, simplify the way they live and even access to bigger discounts.
Unfortunately, just having an e-commerce business or online marketplace is not enough for convenience. You must also be able to offer headache-free checkout process, high security, low shipping costs and amazing customer service.
The power of the Three
The three major factors that are mentioned above give us a significant conclusion which is that online marketplaces are the platforms that tie these all factors into the consumer’s shopping experience on a whole new level, and this reshapes the retail industry itself.
These all factors suggest the businesses that will be most successful moving forward are the ones that can limit overhead and effectively connect with customers through websites and mobile apps.
Consumers are more demanding than ever today. They want more than just price, trust and convenience. They want to shop online for the products they want in a platform where they can have a more personalized and localized customer approach. This is also the main reason why subscription plans or bundle offers are on demand.
People, especially millennials and first-time users of online shopping are more aware and conscious of locality, sustainability and personalization. They are looking after products and offers which will let them be the part of the community that they are involved tightly. It’s not just about selling products, it’s mostly about giving them an access to have an experience through the products.
There is also a huge controversy that online marketplaces are killing the SMEs. Some disagree on that. They say that online marketplaces are helping them to grow more. You make your own decision on that.
We believe that by creating a curated environment where SMEs and online marketplaces can offer a better ecosystem by sharing the mutual growth interests that bring different values such as intimacy, better personalization, better products and better prices that can be applied easily with localization will be the winner.