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Platform vs. Marketplace- Where should I sell?

Deciding to sell online for the first time is not an easy one with lots to consider like product selection and liability insurance, but once you have done it, one of the most fundamental decisions you will need to make for your store to be up and running is where. eCommerce platforms and marketplaces are two of the most commonly used and popular eCommerce solutions for beginner eCommerce retailers. Just like basically anything in life, both these options have pros and cons that vary depending on a variety of factors like target audience, product, business size, and budget. Choosing the right eCommerce solution for your business is crucial as it has broad implications on brand identity, profit, as well as growth and expansion.

In this article, we will help you understand the difference between a marketplace and a platform, the pros and cons for each one of them and the connection between the solution you chose and the safety of your store.

If this sounds like something that you’d like to dig deeper into, then we recommend you to keep reading.

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Marketplaces and Platforms: Back to Basics

There’s a good chance that until now, you didn’t even know that Shopify and Aliexpress dont belong to the same genre. Differentiating between a platform and a marketplace should be done as early on as possible as it has a direct impact on other important decisions, such as constructing business goals and plans. So, before we go any further, the difference between a platform and a marketplace: 

Platform

  • An end-to-end software application for businesses and buyers to meet and make transactions
  • You are in charge. Online sellers are responsible for aspects of the website such as website building and personalization, accounting, inventory, and customer service. 
  • Often used when launching a store online for the first time, or as an extension of a physical retail store as an online presence. 
  • Examples include Shopify, Squarespace, Magento, BigCommerce, and Wix. Certain platforms are ideal for new businesses with less activity or experience and others are suitable for businesses with larger order volumes and bigger audiences. 

Marketplace

  • A storefront that hosts product listings from multiple sellers
  • The marketplace owner doesn’t have to own the inventory of the products sold.
  • Examples include Amazon, eBay, Etsy, Walmart, and many more. 

A clear example that will help you remember the difference is a farmer’s market and a supermarket. In the dairy section of a supermarket, you will find many different brands of cheese all on the same shelf, this is more like a marketplace. However, when you go to a farmers market, each brand will have its booth for you to approach and buy your cheese from, similar to platforms. 

Marketplaces vs. Platforms

In order to make an informed decision of which solution is right for you, you first need to understand the benefits and drawbacks of each one of them. Here are the advantages and disadvantages to having your own store as opposed to selling it on an eCommerce marketplace:

ECommerce Platform

Pros

 

  • Control – You’re in control. When using a platform, you call the shots. You chose the features of your store, including selling scenarios, modules, extensions, functionality, navigation, and design. When you have your own platform, you decide whether you want your branding to be more unique, or prefer something more generic by using existing templates. It’s up to you!
  • Competition – On a platform, you’re not competing with anyone. You are the only one selling on your platform. You are not competing amongst other sellers over the same product category and don’t have to concern yourself with standing out. 
  • Customer data – When you have your own eCommerce site,  you have access to customer data and statistics about customer trends and behavior. This data is very valuable for promotions or campaigns that you would like to create for your business. 

Cons

  • Lead generation – On eCommerce platforms, the store owner is responsible for bringing in traffic and creating customer engagement.
  • Time-consuming – Setting up and customizing your own website on a platform can take time and requires maintenance.
  • Costly  – Setting up a business on an eCommerce platform involves set-up costs as well as fees for maintaining the site. 

ECommerce Marketplace 

Pros

  • Wider reach – Better audience engagement and wider reach. On marketplaces, you have millions of people scrolling from product to product, viewing and buying products every day. As a new business, finding exposure like this at the beginning would otherwise be a very difficult task.
  • Low set up costs – Although per sale marketplaces may require a commission, they often have low costs setting up if at all.
  • Quick to set up.

Cons

  • Competition – In marketplaces, there may be hundreds of other sellers, selling the same or a similar product to yours. 
  • Commission fees – Marketplaces charge a fee from the sellers for their services or product, and in some cases, this fee can be very high. This high commission can sometimes make it difficult for small online stores to be profitable.
  • Lack of brand awareness – A lack of store personalization may mean that you are not providing your customer with a unique experience when visiting your store. This often results in their experience not being memorable and reducing the chance of him returning, even after he makes a purchase. 

     

How to secure your store when selling online

Whether you are selling on a marketplace or platform, making sure that you are covering yourself from potential risks with liability insurance should not be overlooked. The insurance that you need will vary depending on whether you have chosen to sell on a platform or marketplace, and how your business is managed.

  • For example, if you are selling on a marketplace like eBay, holding inventory is not a requirement, and in this case, you won’t need your insurance policy to include risks for transporting inventory or managing a warehouse.

In some circumstances, securing your store with liability insurance is not an independent decision, but rather mandatory for you to be set up as a retailer. On Amazon marketplace, Amazon platform, or a platform like Walmart, they go that extra mile to keep your store safe by conditioning your store’s online presence by whether it has insurance coverage.

 

Getting insured with Spott will save you the hassle of having to assess the platform or marketplace that you would like to sell on and the level of eCommerce insurance that it requires. As a beginner online retailer, you are probably still asking yourself “What is the difference between Amazon marketplace and Amazon platform?” let alone, understanding its insurance requirements. Lucky for you, Spott can make all the necessary risk assessments for your store by finding the liability insurance that is best for your eCommerce platform or marketplace (or both). By turning to Spott for liability eCommerce insurance you will also be avoiding unnecessary costs on a policy that isn’t suited to the needs of your store. 

 

To wrap it up, when choosing a place to sell online, the decision varies from retailer to retailer. While marketplaces are a great way to start as a beginner, depending on your product niches, goals, revenue, and audience, it might be worthwhile going straight to a platform. Whilst starting with one is ideal for the early days, later down the track, expanding to both is another option and can even make your business thrive. What is certain, no matter what you are selling or where you are selling, getting liability insurance is a must. Deciding where to sell online is risky enough, so get in touch with a Spott insurance expert today to reduce further risk and get your eCommerce store covered today.

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