Marketplace versus online shop: What retailers should know

Marketplace vs. Onlineshop

Unsplash: Oleg Magni

Last year, online shoppers generated sales of more than 1.1 trillion euros worldwide. The market volume is expected to grow up to 2.5 trillion euros by 2023. More and more retailers want to benefit from this development and are planning to internationalize their business. But which path into cross-border e-commerce is the right one – marketplace or online shop?

According to Statista, the global e-commerce market is expected to grow by 8.9 percent annually until 2023. The share of cross-border sales is also rising: American goods are in high demand among the top e-commerce nations of Europe such as Great Britain, Germany and France.

Sales planning as part of the cross-border strategy

Before commencing with cross-border commerce, retailers should develop a precise strategy and consider whether they want to sell their products using their own online shop or via one of the major marketplaces such as Amazon and eBay – or local players such as Cdiscount (France).

The first step is to analyze the target market in detail: Who is our target group? Is there a demand for our products? Where does the target group shop and how would they like to be addressed? Europe is by no means a homogeneous market. Retailers should have precise knowledge of the target country in order to sell goods successfully. Against this background, cooperation with external service providers such as Hermes International, a division of Hermes Germany, can make sense.

There are plenty of arguments for or against different distribution channels. We have summarized the most important advantages and disadvantages of a marketplace presence or an individually owned online shop for you:

Advantages and disadvantages of a marketplace presence:

+ Low initial costs as the platform system can be used

+ Cost transparency through a fixed fee system

+ Large reach due to the platform’s high profile

+ Design specifications help to address the target group correctly (payment, layout, etc.)

– Dependence on platform specifications (payment, delivery time, etc.)

– Only limited adaptation/individualization of the layout possible

– Fees for use, sale per item, advertizing, etc. reduce the profit margin

– Strong competition

Advantages and disadvantages of your own online shop:

+ Free price structuring

+ Freedom of design for shop layout, payment method and shipping formalities

+ Greater profit margin, as there are no fees for the sale

+ Simplified brand building and better customer retention

– High costs for shop creation, design, maintenance (server, staff with extensive IT skills) and marketing of the website

– Lower reach and intensive (launch) marketing

 Summary

More flexibility and individuality on the one hand – a large range and a fairly easy market entry on the other. For companies that initially want to test whether they can assert themselves in the international market environment, market entry via a platform is probably the best choice. If this test is successful, the use of both sales channels can be profitable. Experts even recommend a symbiosis of marketplace and online shop in order to fully exploit the advantages of both systems and thus the growing potential of e-commerce.

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