Whenever a company or an individual plans to enter the digital space to sell their products, the first question that haunts them is whether to set up their own e-commerce site or to sell via an e-commerce marketplace like Flipkart, Amazon or eBay.
Selling through your own website is called the direct business model, while the selling via a marketplace is called the marketplace business model. In the direct model you operate your own website and sell your products directly to the customer, while the marketplace model includes the listing of your products on a third-party website.
Both the approaches have their own advantages and disadvantages. Following are the differences between the two business models.
Amount of initial work and investment: Setting up your own website involves a higher amount of initial work and investment compared with selling on a marketplace. If you want to sell on a marketplace, all you need to do is get your product listed on their site. Since these marketplaces already have a lot of visitors, you do not need to make special efforts to attract customers. However, when you are building your own website, you need to get it designed, add product descriptions, as well as announce launch offers to attract traffic.
Control: When you are selling via your own site, you have complete control over its design, layout branding and the kind of experience you want to offer to your customers. You can also use your website to educate the customer about a new product or create awareness about a concept. You can even talk about your journey during the creation of the brand or the product. However, on a marketplace, you have no control over these aspects. Only the name of the seller and the description of the product are mentioned. There is no brand building in a marketplace. Also, in the event of change in policies of the marketplace, you might have withdraw and lose out on the customers.
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Competition: Since a marketplace offers the same product from different sellers, it leads to severe competition. Even if your product is different from that of other sellers, a potential customer might not buy your product since a marketplace does not highlight any seller’s product. However, if you have your own e-commerce platform, you can describe your products elaborately, highlighting how your product is better or different from others.
Margins: When you sell a product from your website, you get to keep the entire amount to yourself, while on making a sale via a marketplace you need to pay a fee to the company operating the marketplace.
Building a loyal customer base: The main objective of a marketplace is to connect the seller with the buyer. They show products on the basis of the requirements of the buyer and do not give preference to any particular seller. They are more concerned about making a sale and not with selling products of a particular company. Thus, if you sell through a marketplace, your brand might get lost among all the competing offerings. However, if you sell through your website, you are building your brand in the eyes of the customer, who will come back to you on being happy with the product.
If you have just launched your company or product, or if your company is a startup, it is better to get listed on the marketplace initially. At the beginning, companies are more focussed on sales rather than brand building. Once your company finds its feet, you can launch your own website and start offering products there as well. This will help you build your brand slowly but surely.