In the common sense, we often consider an e-commerce store and an online marketplaces the same thing. But there are some underlying differences that differentiate both of them.
In general, an e-commerce website demands a larger investment, as you need to invest significantly on products to maintain your inventory. With a large stock, you will be in a position to offer a great range of offerings to your customer. On the other hand, you can start a marketplace with a low investment where your sellers are responsible for the inventory and you just provide them with the storefront to carry out the business.
For building an e-commerce website, there are different solutions available, which include Magento, Shopify, Prestashop and others. But for building a marketplace, different technologies are required. Building a marketplace often requires more comprehensive efforts and there are very few solutions available on the market. There are various plugins/extensions available in the market for Magento, Shopify and others which can be integrated to make the ecommerce store to marketplace. You would require experts who can help you in online marketplace development and help you in integration of extensions as well.
In case of an e-commerce website, you may have to maintain a large inventory in order to offer your customers more choices. Since you own the products in your inventory, you may come across the issues related to unsold goods and may have to throw stock clearance sale to get rid of the unsold stock. But the marketplace offers you a more flexible choice and you can just deactivate the products that are not selling for a long time, and you never bear a cost to maintain your stock in a marketplace.
When adjudged on the scale of scalability, a marketplace seems to be a more stable model. Since the investment level is low and products are not owned by you in a marketplace, it has less financial risks as compared to a traditional e-commerce store.
The success in the online domain lies in building your reputation with your customers. In an ecommerce business model, you own the products and hence can respond to customer queries in a speedy manner. On the other hand, in a marketplace, your role is more like a mediator and you rely more on your sellers to provide information to your customers.
A marketplace enjoys more marketing benefits, as it indexes a large range of products from a particular sector. It allows sellers to market their products individually and which adds to the promotions of the marketplace itself. On the other hand, e-commerce stores rely on Google Adwords and promote specific product categories where the competition is crucial among different e-commerce players.
An e-commerce store generally requires a larger setup investment and hence the break even time may be quite longer despite a significant cash flow. But in case of a marketplace, the profit margins are higher and the cash generated could be invested again to diversify the business.
In a marketplace, the products are offered by multiple vendors and are organized in a catalog, while in e-commerce sites, products are arranged based on categories. Thus, there is a difference in navigation patterns and the search filters are designed using different parameters in both the cases.
A marketplace can better track its sales and also the performance of the vendors. Thus, it can have a better insight to choose the product portfolio and enhance its sales.
A marketplace needs to sale a larger volume in order to earn the same profit margins that an ecommerce site earns. Since a marketplace has to handle more number of transactions, it needs to focus more on the automation.
Example of marketplace development by PixelCrayons:
While choosing a technology partner for an e-commerce site development, the focus should be more on choosing a company that has experience in the e-commerce domain. From designing a storefront to the shopping cart solution, the developing company should have the desired expertise. One can check the portfolio of the company and can get to learn about the e-commerce stores or the marketplace developed by it. This will give you an idea about their capabilities and technological expertise.
In the e-commerce domain, PixelCrayons has the expertise of delivering custom solutions in a given budget. The company is a pioneer in implementing open source technologies to keep the cost to the lowest while creating a high-performance storefront.
They offer a complete digital storefront management solution for a business to quickly optimize their online store for selling a wide range of products arranged in different categories. They believe in developing cost-effective and performance-driven e-commerce solutions that can bring quick results and larger profits for a business owner or an entrepreneur.
We create online marketplaces embedded with powerful tools for the merchants to effectively showcase their products, connect them to potential customers and integrate with delivery mechanisms, billing & accounting systems and payment gateways.