understand the differences between these online business models – WAU

Online stores cover all possible markets: sports, cosmetic, electronic, clothing, among others. Large companies have their digital commerce, but not always in unique modalities. E-commerce or marketplace: which business model is the best alternative?

The growth in the habit of shopping on the internet is nothing new. The mistrust of the past is gone and the moment is one of natural acceptance.

The proof of this is in the numbers: from 2017 to 2018, online shopping in London totaled R $ 166.2 billion. All that money was spent, basically, between marketplace and e-commerce platforms. Few know, but there are differences between these two business models!

The traditional online store has undergone changes, largely due to the search for a reduction in logistics processes, which also generates less cost.

There is also the intention to attract increasingly broad audiences, which requires an adaptation in the way of exhibiting products online. These characteristics directly impact the decision between a marketplace or an e-commerce.

In this post, you will better understand what is the difference between these two types of online commerce. Understand how each one works, what their characteristics are and see the main differences!

What is the difference between marketplace and e-commerce?

You have certainly read or heard of both terms: marketplace and e-commerce. Perhaps, I also thought that both are equal, but it is not exactly like that.

In practice, the two platform models are traditional online stores. Brands sell products there, without any difference. What happens is that the mode of operation is quite different, but it does not always impact the consumer.

The e-commerce

E-commerce is a traditional online store where the brand sells its products, taking care of the entire process, from purchase to delivery.

Naturally, in this process, some service may be outsourced, but the certainty is that the product purchased comes directly from that company. The brand only sells to the consumer what it has in its own stock and which is part of its list of products.

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The marketplace

In the marketplace model, this works differently. They are online platforms that bring together products from different stores, offering a much wider range of items.

The consumer buys the brand that owns the digital retail, that is, that website, however, the products are from other brands. In other words, the marketplace it’s like a big showcase where several companies exhibit their items.

In addition to these two most basic differences, which refer precisely to the business model, these retail platforms have a unique way of operating.

This also impacts a number of other issues, such as investment and logistics operation. These are very important issues and must be known in depth, either by managers and entrepreneurs, or by the consumer. Find out more below!

What are the main characteristics of each platform?

Marketplace and e-commerce do not get to fight a duel for the best business model, because they have different proposals.

Anyway, it is good to observe how the two models conduct their activities and how the virtual store works in each of them. Differences help in understanding the choices of a brand, and this can generate good insights for those who have their own business.

The investment

Maintaining your own e-commerce requires investments, regardless of the breadth of your products’ offer. Even though your store is small, some costs are basic, such as purchasing the merchandise itself, when you are a reseller.

In e-commerce, you need to invest more: labor, storage locations, logistics delivery providers and a number of other details, such as a dedicated server for online store.

The marketplace dispense all these expenses. Basically, the only job is how to create a website and keep it active, and manage operations. The number of employees involved is much smaller, and there is no need to store products.

With that in mind, the marketplace is just an environment that connects stores to customers. It only passes on the purchase information, while the brand sends it directly to the buyer.

The logistics operation

Maintaining an online store also requires basic logistical operations, such as storage, separation, preparation and shipping of goods. In addition, stock management is another important job that avoids problems with the consumer.

All of this is common to the reality of e-commerce, being only part of the job, but it requires expenses and an operational organization for everything to go as planned.

Per just expose the products, the marketplace has no logistics step in its work. He only records sales, passes on values ​​to partner brands and collects his share of the business. The involvement is much less and does not require logistical operations. This represents significant savings.

The form of payment

There are few differences between marketplace and e-commerce in this regard. Traditional online stores offer a wide selection of payment methods: credit card, bank transfer, boleto or through intermediation platforms.

In any of these alternatives, the user is in total security, of course, as long as the e-commerce in question is reliable.

As for the marketplace, payment methods may vary. Some do it in the traditional way, providing the direct checkout on your website and taking direct responsibility for each purchase.

However, there are some sites that choose to redirect. In these cases, they only expose the product and, when closing the purchase, the consumer is taken to the brand’s website. This marketplace practice can have two consequences.

The first is the withdrawal from purchase when there is a redirect, since the user realizes that it is not that company that sells the product directly.

Another issue is a possible problem with shipping the goods, when the purchase is closed in the marketplace. This can create a headache, as the consumer will seek a solution with this intermediary.

Public reach

Companies have their own target audience and persona and who your products are sold to. Although the selection of items is small, that is your niche and the understanding is in the direction of being faithful to that. E-commerce works like this, always following the brand’s proposal.

If a company specializes in sports products, it will never produce or make available on its website a social shoe, for example.

The marketplace has a acting naturally wider. It is common that they do not stick to a specific market, and this generates much more reach, even if it does not generate engagement and loyalty.

Users who arrive at the marketplace generally come from searching for products on the Web. They will not necessarily return to that site in the future. In e-commerce, because it has a specific direction, the return is much more likely to occur.

Competitiveness in the market

Marketplace and e-commerce also need to deal with their competitors differently.

Traditional online stores are focused on their niche market and, thus, compete only with other companies in the same segment. If your industry is electronics, your concern for the market will be with other e-commerce in the industry. Competitiveness is more controlled!

Marketplaces need to deal with all markets, including e-commerce like your competitors. In this type of platform, almost everything is sold by retailers.

Thus, in addition to being included in a marketplace market, these companies also have as competitors any other online store that sells the same category of products.

Profitability

Regardless of the type of online business, marketplace and e-commerce can be very advantageous, each in its specialty or scope.

Currently, 7 out of 10 Brazilians buy on the internet, and this represents all types of products imaginable. Of course, a store, e-commerce or marketplace has its share of that cake!

It is possible to evaluate the profitability factor from two views, considering these platform models.

While e-commerces bill for offering specific value-added products to a niche, the marketplace wins in volume, with small percentages of a large amount of sales made, on a huge selection of items. Difficult to assess which profit is most, right?

How to know which one to choose for your business?

It is not always easy to decide which way to go. The choice between e-commerce and marketplace should always follow some factors previously determined.

Different companies are more likely to adopt a marketplace model, for example. This happens with large retailers, such as Walmart and Lojas Americanas, two giants that adopted this model.

In these cases, the two retail giants have a wide presence and earn a lot from their physical stores. Logically, having an e-commerce would be an opportunity for more profits.

However, the operational and logistical cost could be too high, so, because they have a broader niche, they opted for the marketplace. Thus, they manage to have much more liquid earnings. Anyone who has a more specific target audience should know how to take advantage of this.

E-commerces are the contact spaces on the Web, where products of this line of interest are sold. That is one direct sales channel and, for many brands, is the only. Even with operational and logistical costs, having exposure on the internet is indispensable and very valuable when it comes to digital entrepreneurship.

The decision must start, first, from the understanding of your type of business, considering whether it serves a broad market, or a more specific one.

From this, assess the costs that each activity generates and the feasibility of each one, to make the most appropriate decision. There is no one that is right, as it is important to understand each business activity.

Marketplace and e-commerce have their places consolidated in this market, increasingly inserted in the digital transformation! For companies, both platform possibilities are profitable and help to make the brand more relevant and, above all, a reference.

Did you like to understand the differences between these two models? Now, take the opportunity to know which are the main e-commerce KPIs to evaluate the success of your online store!