Surely you have already heard about e-commerce and all the wonders it can do with your business, but you probably don't know where to start, in order to sell online there are two options: Marketplace or your own store. Below I will explain what each one consists of, what are the advantages and disadvantages of each model, and which is the most convenient for a digital entrepreneur like you.
Online store
Your own online store can work in two ways: be the digital home for your products or services, or be an extension of your physical point of sale (in many cases they can be integrated and work together). There are several platforms that allow you to have your own online store, be it Woocommerce, Magento, Bigcommerce, or Shopify, each one has many features that will allow you to grow along with your sales. In our case, the one that has worked best for us is Shopify, due to its large number of functionalities and integrations with other systems. But what they don't tell you is that running an online store has many challenges. Promoting your products, managing your inventory, driving traffic to your store, keeping your customers happy, can become very complex, at least in the initial stage of your business. But once your store is set up, it can pretty much run on autopilot, leaving you to focus only on what's most important, which is selling.
Having an online store is often not for everyone, and it is good to evaluate your business model before opening one.
Advantages
- The database of your customers is completely yours, this allows you to see information such as email, location, where they made their purchase from, how they got to your product, average purchase ticket, among other things. This will allow you to offer a better service and launch more effective advertising campaigns based on the behavior of customers in your store.
- You control the shopping experience. Nowadays it is very important to keep your customers satisfied, a bad shopping experience translates into a public complaint on social networks and that can affect your business forever. With a good distribution channel, you can ensure that the products you send arrive in perfect condition and if there is a problem, you can resolve it directly with the customer without the need for intermediaries.
- You create your own brand. Selling has never been easier, now you have the same tools as the giants of the industry in which you work, with an online store you can make your brand internationally recognized.
- Endless functionalities. In addition to the powerful commerce tools that your online store has, it can be integrated with other systems in order to extend its functionalities and thus tailor a suit for your business model.
Disadvantages
- Starting from scratch is difficult, usually when you start your eCommerce business, the traffic your store has is small. But with good marketing strategies, you can position your product or service with a low budget.
- You need to create your own infrastructure to bring what you offer to your customers. This is not always an easy task, since in addition to offering a good shopping experience, you have to take care of your profit margins and if you don't do it effectively, your product may become uncompetitive.
- Like any business, an online store must have a good administration of its resources. You always have to be very clear about how you are going to invest your money so that your brand grows, many times this can take a long time, especially when you already have a physical point of sale to which you also have to dedicate time from your day.
Ideal for
Brands that have their own products or services and want to be recognized as independent. The initial cost of developing your online sales channel is low, which is why it can work for any local business and grow it into an internationally recognized brand.
marketplace
A marketplace is where you can find the products or services of many sellers under a single platform, with the aim of creating a one stop shop experience. Surely you have heard of Amazon, Mercadolibre, Uber Eats, among others. These have established themselves as the major players in e-commerce and once you get in with them, they offer you their great infrastructure and reputation to drive sales of your products. But not everything is rosy, in many cases selling on a Marketplace implies very high sales commissions, advertising and distribution costs, and in some cases even tax withholding on the sales you make. All this can greatly impact your profits and make a marketplace not such a viable option for your business.
Advantages
- To begin with, you have the infrastructure of companies that are worth billions of dollars. Selling on Amazon allows you to offer Amazon Prime, selling on Mercadolibre allows you to access the largest customer base in Mexico, and Uber Eats are secure sales for your restaurant. You're pretty much in the big leagues from the start.
- The reputation that a marketplace has is a great advantage, since in markets like Mexico, electronic commerce is still in its infancy and although it has grown a lot in recent years, people still prefer to buy in a place with a reputation for reasons of security.
- The administration of this sales channel is much less complex than that of an online store since maintenance is left to digital platforms.
Disadvantages
- Selling costs can be very high. Sales commissions, distribution costs, premium publications, can add up and drastically reduce your profit margins.
- If you are in Mexico due to new tax laws, marketplaces are now withholding sales tax from their sellers. In this way, merchants are forced to raise the prices of their products, thus reducing their level of competitiveness.
- Your customer information stays with the digital platform. Unlike an online store, the only information accessible to a seller in a marketplace is very basic (name, address, email, and phone) leaving everything good for the marketplace.
- You run the risk that the marketplace will replace your products with its own brand. You have probably heard of Amazon Basics, this line of products that is based on Amazon best sellers, in this way Amazon eliminates intermediaries between them and the end customer.
Ideal for
Businesses that distribute products from other more established brands or only care about generating online sales without necessarily having a recognized brand. It can also be a good option if you have little knowledge on how to enter the world of electronic commerce.
Online stores and marketplaces are not in conflict with each other, you can even use the two together to have multi-channel sales. You just have to see which one is the best based on the needs of your business or in the industry in which you are selling. In the end, if you have a good product and you know how to reach your market, no matter where you sell, you will most likely have a successful business.