Magento for Marketplaces

Why have a storefront on a marketplace, and not as a standalone instead?

Is everyone simply jumping on the bandwagon when it comes to being part of an online marketplace-setting up store at Ali Baba, eBay etc. or is there some real sense to it?

If you have been confused about the same thing then I suggest you continue reading. And hopefully, by the end of this article, you’ll have made up your mind on what’s the best decision for your e-commerce business.

What are Online Marketplaces?

Before we dive any deeper, let’s understand the basics.

What is a marketplace?

Simply put, it’s a zone of commercial activity where buyers can be introduced to sellers to allow transactions to occur between the two as goods or services are exchanged for money.

An online marketplace is the same thing, replicated to an online environment.

Adobe Experience Cloud thus defines online marketplaces as:

“An online marketplace is a website which connects buyers to third-party sellers. In contrast to an eCommerce platform where the operator of the site is the exclusive seller of products on that site, an online marketplace lets independent sellers display products and connect with buyers.”

A Key Difference

Selling online can happen in one of two ways.

1. Via an e-Commerce platform
2. Via an online marketplace

The former is usually referred to as being Single Vendor Website, and the latter, as Multi-Vendor Websites. The difference is self-explanatory but the consequences to either are complex and depend on the nature of a business.

Single Versus Multi-Vendor

For the business which chooses to operate as a standalone, there are some benefits. Greater flexibility, greater control over design, profit margins etc. to name a few. Interaction with buyers, however, remains minimum. The major chunk of investments when it comes to standalones, therefore, goes into bringing traffic onto the website itself.

Marketplaces, on the other hand, make this rather easy to achieve. With a single point of interaction between various customers and buyers, if the right optimizations are in place, it can be rather easy to direct traffic towards one’s online store.

And because inventory management etc. are more or less better taken care of in marketplaces, it is easier to achieve economies of scale while operating in a marketplace.

To make things easier to compare, we’ve compiled the following list of pros and cons of using an online marketplace:

Pros:

1. SEO Benefits
   As mentioned earlier, marketplaces connect buyers to customers. Well known marketplaces such as Ebay, Etsy etc. therefore rank higher up in search engine indices than any individual store would.
   In fact, in 2019, Amazon alone accounted for 74% of all digital transactions within the US.
   Clearly, Amazon seems to have a higher visibility on its own, than any of the individual brands which sell on it would.
2. Exposure
   With such high SEO rankings, it is obvious that market exposure is significantly higher when one operates in an online marketplace rather than when one functions as a standalone.
3. Repeat Business
   This one is linked to the above two reasons in that, if your product is good, and if it is already present on a well-known marketplace, then users are much more likely to revisit your store again. This can sometimes be achieved in standalones as well, but not without additional ad campaign money being spent first.
4. Additional Services
   If you’re an e-Commerce business that has just started out and currently lack the proper infrastructure for warehousing and shipment etc. or, if you really want to scale up your profits, then online marketplaces might as well be the best solution for you.
   These websites offer order fulfilment and dropshipping services etc.- things which must be done on one’s own if they operate via a single vendor-based model instead.
5. Simplicity
   In the end, the key reason behind the popularity of online marketplaces has been an almost direct consequence of the ease with which these can be used and worked on. Although the work cut out for big ticket B2B brands will likely always remain significantly higher, when it comes to small and medium businesses, this idea is almost crucial to determining success.

Cons:

1. Lower Profitability
   But all is not sunshine and rainbows. Online marketplaces come with their disadvantages as well. And the major one out of these, is a reduction in profit generation.
   While online marketplaces make it easier for buyers and sellers to interact, they do so at a price. Whatever earnings a business might have, need to be reduced by a fixed, or variable percentage (depending on the marketplace) upon each successful transaction.
   The same is not the case with single vendor models where the business gets to keep all of its profit for itself.
2. Competition
   Because online marketplaces work for multiple people at the same time, the amount of competition brought in by them can sometimes hamper growth rather than favor it. With little variation in product offerings- as is the case sometimes with e-commerce business models- pure luck can be the determining factor in deciding whether you, or your competition gets to win the customer at the end of the day.
3. Product Restrictions
   At times, an online marketplace might be very selective in the kinds of products it allows you to sell. Etsy for instance, ensures that each product being sold is an original and is extremely strict in its product guidelines.
4. Site Design
   This might be the biggest problem for big businesses, which unlike small business, need to maintain at least a certain level of brand visibility. With little variation in site design, it can sometimes become exceedingly difficult to maintain uniqueness and high brand visibility in an online marketplace.
5. Manageability
   More often than not, businesses operate on more than just one marketplace. Doing so allows for greater audience capture and increases product visibility. But then again, doing so can also mean having to monitor and manage orders, procurement, fulfilment etc. across multiple channels. Consequently, this can sometimes lead to haphazard selling methods and make it difficult to keep track of things. 

Magento as a Strategic Solution

One way to fix problems such as manageability and site design etc. is by investing in a platform that allows good convertibility options into a multi-vendor model, while still retaining a certain level of autonomy for the business owners.

Magento with its open-source platform, and a greater space for customization, tackles these problems head on.

With the right custom-built extensions, made by the right developers, e-Commerce businesses can function as both, single and multi-vendor models. Brand integrity can thus be maintained while still increasing brand visibility and achieving economies of scale at a much faster pace. And that is not it. Seeing how Magento has been a market player for a while now, it offers a range of solutions, all of which can really help boost the effectiveness of an eCommerce store.

Some of these include:

• Optimized Product Search and Dashboard functionality
• A Rating Platform to allow for better Product Review options for customers
• Better SEO functionality
• Seamless integration of third-party plug ins
• Multi-lingual and multi-currency options which allow for improved global transactions
• Suitable architecture to cater to multi-vendor problems including, but not limited to, handling upto 500,000 products at a time

While other platforms also allow for conversion into multi-vendor models, we believe that thus far, the best solutions are currently being offered by Magento as opposed to by any other eCommerce platform out there.

The Final Choice

Having analyzed different sides to multi-vendor and standalone models, it goes without saying that whichever model a business chooses to operate on, should be based upon its own, specific needs and requirements.

At the same time, however, there should be no hesitation in wanting to convert from standalone to the latter. Especially, given that good solutions such as those offered by Magento exist in the market- thereby countering any technical problems that may have thus far acted as an obstacle and kept you from making the right decision for your eCommerce business.