One of the biggest challenges to solve for an online business is reaching a substantial number of target audience in a limited time. Getting the right consumers to notice a venture and its offerings is an uphill task especially in the competitive online space.
Several companies often invest in aggressive marketing strategies to address this problem and get more and more people to notice their website and product. Many others contemplate selling their products on an online marketplace to tap into an existing audience.
But, is it advisable to sell on an online marketplace than through your own website? What are the pitfalls and what are the benefits? This article talks about the advantages and disadvantages of an online marketplace for e-commerce businesses.
What is an online marketplace?
An online marketplace is a website or an app that helps consumers shop for different types of products from multiple businesses in one place.
The marketplace need not necessarily have an inventory of its own but helps other sellers seamlessly offer their products to a huge number of buyers.
Some of the popular examples of online marketplaces in India include Amazon, Flipkart and Myntra.
Based on the type of offerings, online marketplaces can be broadly divided into two parts:
E-commerce marketplace: These platforms focus on selling products online which can include apparel, electronics, groceries, etc.
Service marketplace: Here multiple skilled professionals offer their services to users such as event planners, photographers, and so on.
Advantages of online marketplaces
Here’s a look at how a business can benefit by being a part of an online marketplace.
1. Minimum investment
If you decide to launch your product directly onto a marketplace, you do not need to build or develop a website, hire resources for technical support or invest in a domain. You can begin selling products immediately and without worrying about arranging funds for the venture.
This makes selling on online marketplaces highly accessible for a lot of entrepreneurs who do not have the necessary capital. Most platforms do not charge any onboarding fees either, helping businesses launch their products with almost zero investment.
2. Fewer hassles and issues
Online marketplaces offer all the necessary help for new and upcoming business to efficiently sell their products. When a business signs up for a marketplace model, they are also provided with a reliable platform, technical assistance, SEO optimisation, consistent traffic, promotions and so on.
Additionally, some marketplaces extend assistance with managing and storing the inventory, logistical support as well as customer service support making it extremely simple to start an e-commerce business online without any prior experience or in-depth knowledge.
3. Well-established audience base
Owing to the range of products and multiple businesses operating on an online marketplace, the platform has a huge and well-established user base. When a new business launches itself on the platform it automatically taps into this audience.
Being able to attract such a large number of consumers can otherwise take years for a business and demand a strong marketing strategy, resources and money. With an online marketplace, a business can be assured of reaching a substantial target audience right from the start.
Also read: Growth of Digital Payments in India: 5 Factors That are Driving it
4. Increased customer trust
Since buyers frequent an online marketplace for shopping multiple products, they are already aware of its policies and processes. The users are assured of a seamless purchase and a powerful customer experience irrespective of the brand or business they buy from.
The reputation of an online marketplace also helps build trust in your product and business. Customers are more confident about the security of the platform and sharing their personal details when transacting through it. This indirectly builds credibility for your business.
Disadvantages of online marketplaces
An online marketplace may not always work for a business, here’s a look at what makes it difficult to succeed on the platform.
1. Stiff competition
An online marketplace has hundreds of other sellers listing products that are often very similar to your offerings. A buyer is not only able to compare them all against multiple criteria but also read reviews and feedback from other users before initiating a purchase.
You are hence competing against the price, quality and popularity of other products and sellers. It is certainly tough to ensure that your products get noticed each time a user looks for them on a marketplace.
2. Your audience is everyone’s audience
When a customer visits an e-commerce website, they have a high intent of purchasing a specific product from a certain brand. On the other hand, a customer preferring an online marketplace might be sure of the product they want but certainly not the brand they want it from.
Therefore, there is no sense of customer loyalty or scope to build a customer relationship. Additionally, the users do not engage or connect with you directly for support or assistance, making them further alienated from the brand and its attributes.
3. High commissions
Online marketplaces can charge a hefty fee for the services that they offer to a business. Since these platforms are responsible for the smooth functioning of the platform and promise businesses a robust infrastructure, their charges can be substantial.
The profit margins when selling through a marketplace are much lower than on a website. Sellers often try to mark up costs to manage commissions but can barely sustain considering the stiff competition.
4. Limited visibility
Brand recall is minimal when users shop from online marketplaces. They focus more on attributes such as price and reviews to help shoppers make purchases. Businesses that rely solely on marketplaces are less likely to be successful in building their brand and creating an identity.
Online marketplace thus does not promote features that are needed to sustain a business. In today’s customer-centric world merely selling products is not adequate without establishing brand awareness for a business’s success.
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| Advantages of online marketplace | Disadvantages of online marketplace |
| Reduced marketing costs | Lack of customisation options |
| Can easily reach a global audience | No communication with the buyer |
| Is an additional channel to sell your products | Need to strictly abide by the marketplace guidelines |
| A platform to check product viability | Lack of transparency on the working and processes |
| Consistent promotions of your product/category | No access to customer data |
Conclusion
Selling on an online marketplace can be a great way to begin a business considering it simplifies e-commerce processes for entrepreneurs. However, from a long-term perspective when a company wants to grow and create its own standing, developing a website or app is inevitable.
It is rather advisable to start selling on an online marketplace while parallelly working on your website. That way you will be able to steadily grow your business over the years.
Moreover, with solutions such as Paytm Payment Gateway, it is possible to ensure secure and hassle-free transactions for your customers with easy and quick integrations. Read about the benefits of partnering with Paytm Payment Gateway here for small and upcoming businesses.
