Online Marketplace vs Online Store: What is Best for your Business and Why

By | Mar 26, 2020 | 769 views FacebookTwitterGmail Pinterest
  • Online Marketplace vs Online Store: What is Best for your Business and Why

If you have just stepped foot into the e-commerce world it’s understandable to get confused between an online store and a multi-seller website. Most people think that they are the same thing and overlap the words as synonyms. While they still belong to the same genetic pool of the digital and e-commerce world, a Multi-vendor marketplace is very different from an online store. Online stores came into existence in 1991 when the internet began to be used for purposes other than communication. Multi-seller models followed a few years later when customers drastically started relying on online shopping.  

The term “online” is very generic. There seem to be innumerable e-commerce options, with new players tapping into the market every day. Choosing the best option for selling can be a daunting task with such high market competition. Some e-tailers get started with an online marketplace selling one category of products like Nykaa or multiple stuff under one roof such as Amazon. Others opt for web stores and focus on niche B2B or B2C segments.

Let’s define what exactly is an Online store and a Multi-seller model

A web store: This is an independent Ecommerce website that an owner runs and customers purchase products directly from the seller. The store owner manages every aspect of the business such as stocking and inventory, orders and shipping, branding and marketing, etc. Since there is a single seller who runs the entire show, there is no profit partnership or commission structure. The owner pays salaries and deals with expenses such as warehousing, third-party services and so on.

An online marketplace: A typical multi-seller store consists of an owner, vendors and customers. The admin of the market invites multiple sellers to list their products on the storefronts. This model negates the need to hop from one store to another to compare prices and products. Customers can avail of the benefit of choice and price range under one roof. The owner only needs to manage the storefronts and drive traffic to the store fronts, while making commissions per vendor sale. Since a Multi-seller online store benefits all the parties involved, it is a win-all model that is very flexible and scalable.  

The primary point of difference between online marketplaces and e-commerce sites is the structure or the business model. Multi-selling websites will give you a huge number of visitors daily, but at the same time, you will be fighting with thousands of sellers to get noticed.  Contrarily, owning a web store is a sure-shot way to differentiate yourself, but it will need you to pour continuous dedication and effort to ramp up traffic and drive sales.

So what is best for your business, online store or a multi-vendor store?

A Multi-vendor marketplace is a quick way to have a successful business in less time. But if you are looking for an online boutique store and wish to play within a limited circle, then a web store could be an ideal choice. This article will help you dive deeper into the difference between an online store and a multi-seller market.  

Multi-seller store vs Online store

1. Multiple sellers vs single seller

Vendors or sellers consist of the base of your multi-vendor market. A typical online marketplace consists of different storefronts and vendors selling their products. Customers can browse and compare different vendors depending upon their products, the pricing, their ratings and customer reviews. If a customer is not satisfied with a particular vendor offering, he/she can switch to other options within the same market space.

Against this, a web store consists of a single seller. This brings a set of restrictions in terms of choices and pricing at some point in time. More so, since a single owner will always have a limited inventory. 

Suppose you want to buy a laptop online. If you go to an online store of an X brand, you will be able to compare the laptops of that brand only. But at a multi-vendor marketplace, you will be able to check out different brands and perhaps find your desired product in a decent price range.

2. Large traffic volume vs Limited Traffic

Some of the very popular models have become household names today. Why? Because a multi-seller online store can earn customers’ trust easily. People are comfortable shopping here because of the choice and price competency factor. If you run a multi-selling store, you will be better placed right from the start and it won’t take much time to establish yourself and attract customers. The vendors you host will also act as a major factor to drive traffic to your online marketplace.

In the case of a web store, you need to work your way up and establish your brand. Even if you do so, customer trust has to be built from scratch. Hence, you need to put in a lot of effort to convince people and drive them to your storefront. 

As a single seller, you don’t have the credibility of high-quality vendors like the multi-vendor model. Saying so, visitors won’t magically flock to your storefront. You will need to market your business to get the word out. Compared to a multi vendor marketplace, online stores always have to bear the brunt of poor traffic.

3. Competitive pricing vs single price option

A multi-selling set-up is a highly competitive model where several vendors compete with one another to make their product stand out. Since there are plenty of similar offerings for each category, vendors go the extra mile to offer discounts, combo deals, etc. This fierce competition benefits the customers in terms of pricing. Customers not only get to browse a variety of products but can also find a deal that fits their budget. Some online marketplaces also allow customers to haggle. There are auction sites as well where customers can quote their prices.  

Zero price benefit is the biggest downside of an online store. Being the owner of the web-store you cannot afford to lower your prices below a certain point. You need to cover all the expenses of running the store from your pricing. Perhaps, at times, you might be able to offer your customers perks such as free-shipping or holiday sales. But other than that you can’t offer them the benefit of price competitiveness, unlike an online marketplace. 

In the case of a web store, you need to rely on marketing gimmicks like upselling/cross-selling or product bundling to increase your average order value.

4. Admin and vendor responsibilities vs owner duties  

As an e-tailer, your biggest pain point could be managing the inventory or taking care of the logistics. Ideally, a lot of time and effort goes into managing these two aspects. Neglecting any one of these means ruining your online business. You do not have enough in your Inventory– it will turn down your customers. You do not provide decent shipping – you will end up losing them. 

But what if your multi vendor marketplace lets you earn a hefty amount without managing inventory, orders and shipping? Yes, that’s possible! Since you are not the seller, your only responsibilities are to maintain your website and drive traffic. Selling the Products, taking orders, managing deliveries, taking care of returns, etc. all this comes under the vendor role. You just have to set up an easy commission flow and enjoy a continuous income without getting into the nitty-gritty of business management. .

A multi-seller model is as much of a benefit to the sellers as it to the admin. Roles and responsibilities of the owner and sellers are clearly defined in an online marketplace and hence vendors don’t have to worry about anything other than closing the sale. They need not be bothered with issues such as site maintenance, Marketing, etc. Once the sellers list their products, they can start attracting heavy traffic from day one. This is a ready model for vendors to grow and thrive.

As an owner of the web store, you are wearing multiple hats at the same time. It is your duty to look-see into every business aspect from brand building to logistics. Because of this, sometimes the business owners get so busy in managing inventory, dealing with third-party carriers, etc. that they miss out to focus on their core business. Against an online marketplace, a web store can bound you and curb your growth if you fail to streamline logistics or strategize duties with your internal team.

5. Customer and vendor protection policies vs policy discretion of a single admin

Recently, Multi-seller spaces are taking off in popularity and functionality. With this growth comes the need for adequate legal agreements. Protection policies are an extension of commitment to combining highest-quality products and services with the highest level of integrity in vendor partnerships and customer relationships. 

An online marketplace can have innumerable policies including user agreement, cookie policy, privacy policy, customer policy and so on. As the owner, you might want vendors to accept some legal terms and conditions before registering on your space. This is understandable since you need to deal with several vendors at the same time. You can set up your privacy policy and provide a condition checkbox on the seller sign up page.  

Similarly, you might want to set up terms and conditions for your customers too. This is important as shoppers trust you with their personal details, shopping history, payment information, etc.  There are multiple parties involved in an online marketplace including the companies that support the Payments and carriers that manage shipping. Therefore, it’s important to have customer and vendor protection policies in place.

While the multi-seller model can have flexible policies, this is not usually the case in an online store. In case of A single admin generally is not able to make unbiased policies that are based for customer protection.

By now, we guess you have already made up your mind! With so many benefits you can’t ignore the idea of your multi-selling online store. Are you ready to launch one soon? Then this brings us to the most important question.

How to build an online marketplace?

A good e-commerce software such as StoreHippo is the answer to the above question. StoreHippo allows you to build your multi-selling store in less time compared to conventional ways. It is an end-to-end solution that offers you sufficient tools to manage your marketing, sales and operations. With future-ready features, it not only enables you to centralise your operations across the multi-vendor online store but also offers you;

  • Admin dashboard and approval flow
  • Vendor dashboards and inventory management
  • Product management system
  • Seller ledgers and commission flow
  • Integrated payment process
  • Marketing tools
  • Unified notifications
  • Ready themes for online marketplace setup

Whether you want to expand a traditional store, have an enterprise-level solution or start a business from scratch, StoreHippo helps you with the profitability and stability of your multi-seller online store. Book an appointment with us today and take our 14-day trial now!

Leave A Comment