Today I will be taking my time to look at the benefits and non-benefits as it pertains to stand alone online shops versus online marketplaces in the e-commerce business. I have a special fixation for e-commerce because the internet has made it easy for you to start one within an hour if you so choose to.
Selling stuff is as old as man itself, for as long as humans exist, there will always be commerce.
Commerce is as old as when man started exchanging money for goods.
so you may be asking what is ecommerce business?
ecommerce business is the art of selling goods online, just like the normal commerce you know except that it is online now.
The difference with the age we live in is the form and shape it has taken. This means that you do not have to own a brick and mortar store and stock up inventory for you to sell. You can now use the drop shipping model to sell.
When you decide to sell goods online, the next dilemma may be what vehicle do you want to use to make this possible.
Apart from sourcing for your goods through online platforms like Salehoo, Aliexpress, and co, choosing the right platform will be the next most important decision that you will make in starting your e-commerce business.
There are various ways you can sell on the internet, if e-commerce is your thing, you can sell via Facebook or perhaps via your Instagram account or even through your Pinterest account. But the more professional way of selling can be divided into two major types.
Types of eCommerce Platforms
Online Marketplace: This involves selling in places like Amazon, Etsy, Bonanza, storenvy,eBay etc. To learn more about online marketplaces read my post on 10 online marketplaces where you can sell (with high traffic)
Standalone online shop: This involves setting up your own online store using e-shop providers like Shopify, Bigcommerce or having your own website where you sell your goods.
While you can be successful selling on either of these options, the main issue that is the bone of contention is what I like to highlight which is control over your own business.
Many people have always prevaricated on choosing what platform to use in pursuing their dream of owning an online store because they are not sure of what the advantages of ecommerce shop versus online marketplaces.
While some people have tried to hedge the risks for both by owning on both platforms.
The issue is that if you are just starting out, it may be too much of a work for you to start your e-commerce business on both platforms because then you may be spreading yourself too thin to give each platform the attention required to make it a success.
In the next few points, I am going to be looking at the pro’s and con’s of the online marketplaces versus the standalone online shop in ecommerce business.
Guaranteed traffic: its called a marketplace because they already have a name that attracts buyers to their platform.
Think of your huge brick and mortar bazaars where people open shops or shopping malls where different kinds of people open shops on a rented floor space. The online marketplace is just like that, they provide you with the platform to sell your goods, you pay rent to own it either before you start or as you make sales. Traffic to your shop guarantees that you will make sales which means your business will start yielding fruits faster.
Wider reach: Online marketplaces often have wider reach because they already have built a name and brand which they are often investing to make it better because that’s where they make their money from. You have access to all sorts of customers as long as you play by the rules. Having a wider reach is a subset of having traffic since you only attract people that you can reach.
Advertising: some online marketplaces provide you with free advertising or they may charge you a commission o advertise your products. Often their best bet is investing more money in their platform to ensure that people want to shop with them.
Low cost: Most marketplaces usually have a free version of their offering which you can use to starts as an online shop owner without paying anything. For example, in Amazon you are offered individual seller option where you pay nothing to list your products and sell, the only snag is that you have a limit to the number of products you can sell per month.
With Bonanza marketplace, you don’t have to pay anything to set up shop, you only pay commissions after you have made a sale. Etsy collects a very small listing fee of 2 cents, This makes sit easy for anyone wishing to start selling on their platforms to easily start with little investment.
Another reason its low cost is you don’t need to pay for a special domain name or maintain a website just to do your business, your only stress is to list your products and sell since all that has been taken care of by the marketplace provider.
Cons of Online marketplace
No control over your business: Most online marketplaces have rules which guide them which you must abide by, you do not have control over those rules.
If they suddenly change their algorithm you will have no say on how it affects you.
For instance, you may be making a huge sale on a platform, and there comes a rule that says your products can’t be accommodated on that platform anymore.
You will have no option than to leave that platform.
Sometimes a change in their algorithm may also bury your own products and make it difficult for searchers to find your products. This may mean a huge drop in your sales.
Some online marketplaces may ask you to pay for exclusive display of your products on the front line if you want more customers.
That’s the case of Bonanza platform, while you may not be paying anything to register on the platform, there are prices for different categories of services that they offer you.
Organic driven traffic may be low if you do not have money to pay for such services.
Fierce loyalty to their Buyers: Most online marketplaces have a fierce loyalty to their buyers, that’s why they offer buyer protection. While this is a good thing because people have to trust that they will not be scammed if they are using your platform for purchase, it can also be exploited to the detriment of the sellers who are small business people trying to make a living.
Some buyers exploit that loyalty and cheat the sellers by making spurious claims that may be false hence causing the seller to either be penalized or shut down, sometimes even without a fair hearing from the concerned party.
Competition may be stiff: Another notable con of online marketplace is that competition for sales can be stiff, this is because the consumer has a wide variety of options to choose from when they want to make a purchase. While that may be good for the consumer, it will work against you as a first-time seller.
This is because people are more willing to buy from experienced sellers than from a first-time seller. It’s like a catch 22, you need people to buy from you so that you can have more experience or reviews the currency of experience in such places, people won’t buy from you because you don’t have many reviews.
No Brand loyalty: When you are in the marketplace, there are thousands of other sellers too, so its difficult to build a brand. People don’t search for shops, they are searching for products. Only some online marketplace offers a buyer opportunity to save a shop so as to be able to come back and purchase more form the shop if they so wish. Even though people may like your goods they cannot be particularly loyal to your brand which is what breeds repeat sales.
Same look and feel: You cannot customize the look or feel, of your store because it’s a one size fits all. This means you really cannot bring out your personality on such platforms, hence the reason it’s never about you hahaha. The online marketplace has no place for personalization, although some may offer you some aspect of personalization like your header board or logo or picture, at best, that’s all it can do. You will have at look to a stand-alone online shop to find those.
Standalone Online Shop:
This is popularly known as an ecommerce store or online shop as you may deem fit. This resembles your normal brick and mortar store where you build your own shop to your taste and design.
Pros of a standalone online shop:
Customization: As I mentioned above with your own online shop, you get to do as you choose, depending on what platform you chose to use, like in Shopify, you can choose what themes you like, upload your own logo, input your own brand colors and generally put your own feel on the store.
Control: You have control over your own inventory, what you sell and how you sell, you don’t have to compete with other stores over your type of products. You also have control over what your brand represents and what you want to be known for.
Brand loyalty and repeat sales: Because you are able to customize your shop to your taste, you are able to send a message about what your brand represents, people who like your products become your loyal customers.
They do not have to check other competing products in the same view when they are shopping.
You also able to convert them to repeat customers by offering sign up to your newsletter what you cannot do with online marketplaces.
Better Margins: If you are able to get people to come to your shop via an advertising platform like Facebook or Instagram, chances are that the buyer already knows the price of your goods and is willing to purchase from you, hence saving you from sometimes cut-throat competition that comes from operating in online marketplaces.
In the online marketplace, the same product is shown to the consumer at different prices, and the consumer will always go for the lowest price. For stand-alone web stores such choices are not available hence you make better margins and avoid loss of customers.
Cons of Using Standalone eCommerce stores
Like everything in life there will always be disadvantages to it, here are some disadvantages of using stand-alone shops
Cost: While most online marketplaces often allow you to start with a free registration and perhaps only makes money when you make a sale, for stand-alone stores, you always have to pay a monthly subscription cost in other to keep it running.
This means that even before you have made a dime, you are spending, now if you have limited funds for your startup shop you may find it difficult to maintain it.
You also have to buy your own domain name and hosting which you will keep renewing per year, these are additional costs to you.
Traffic: For stand-alone eCommerce store you have to drive your own traffic to your store which costs money and time, you are also responsible for the optimization of your store so as to come up in searches.
This means that if you don’t understand basic SEO principles, it may be a long time before anyone visits your store and the fewer visitors you have the less likely you are to make sales. Kind of worrisome since you have a recurring monthly bill to pay.
Maintenance: You are responsible for maintaining your store, meaning that the site has to be run by you, this may not always be the case if you are using service providers like Shopify or Big Commerce. But all in all, this requires a lot of time and effort.
In conclusion, when starting out as a new business person, if you have limited funds, it’s always better to start with the free platform like online marketplaces so as to navigate the learning curve without running out of funds. As you get better and you are able to make more money you can begin to think of moving to a paid option.
Think of your online marketplace like the mass-produced stuff that you use when you are starting out in life, as you earn more and you have better income, you now develop a taste for the finer things in life and hence you want your own customized stuff.
Everything in life takes time, so be willing to start from where you are, the most important thing is that you are taking action.
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