What is the difference between a marketplace and an online store?

In order to understand the main differences between a marketplace and an online store, first of all we need to define the terminology used.

What is a marketplace?

It is an online platform that brings together the goods of many sellers in one place. In essence, it is a virtual shopping center where everyone rents their own “showcase” to present and sell their products.

On one site, you can usually find items of completely different categories – from clothing and electronics to food and household goods. Because of this, this format is very convenient for the buyer – everything they need can be found in one place.

For sellers, such platforms provide a ready-made infrastructure and audience. You don’t have to spend resources on creating and promoting a website – it is enough to register on an existing one, upload your products and start working. The process of registration and customization and the first sales usually takes only a few days.

Marketplaces also take on some of the tasks of order processing, logistics and customer support. This gives entrepreneurs the opportunity to focus on their product and its development.

In Ukraine, among the most famous examples are Rozetka, Epicentr, Lamoda, Kasta, Allo, Prom.ua and Bigl. Some of the sites are universal, others have a narrow specialization. For example, Lamoda focuses on clothing and accessories, “Allo” – on household appliances and electronics. But Rozetka or Prom.ua sell almost all existing groups of goods.

What is an online store?

It is an independent website, fully owned by one seller or brand. Unlike a marketplace, where the products of many sellers are presented, this resource is focused on the products of a particular company.

In this case, you determine your own pricing policy, site design, delivery and payment methods. An online store usually has a corporate style that corresponds to the company’s brand. A unique domain name, logo, color scheme – all this works for brand recognition and builds loyalty among the target audience.

However, the creation and support of such a site will require a lot of time and solid financial investments. After all, it is necessary not only to draw a design to make it for some of the existing CMS, but also to set up a system for accepting payments, buy the necessary modules, set up integration with delivery services, etc. In addition, to attract traffic will have to invest in marketing and advertising.

What are the advantages and disadvantages of marketplaces?

The variant with a marketplace is a simpler way of starting a business. It is enough to conclude a contract with the platform, add your goods, and you are already selling. Also for the launch of the project does not require large investments. But there are some disadvantages. Let’s get to the bottom of it.

Pros

Quick Start. To start selling here, all you need to do is register an account, fill out your company information, and upload your products. The whole process usually takes no more than one or two days. And if it usually takes several months to create and customize a personal website, a marketplace allows you to get started in just a couple of days from idea to launch.
Wide reach. Large resources attract millions of visitors every month. For example, Rozetka has about 40 million unique users per month, and Prom.ua – about 35 million. Placing your services on these platforms, you automatically get access to a huge base of potential customers without the need to invest heavily in advertising and promotion.
High level of trust. Customers tend to trust well-known sites more than small ones. The reputation of a marketplace also helps sellers connected to it. In addition, such services guarantee respect for consumer rights and thoroughly check their partners, which further increases loyalty.
Budget savings. Marketplaces provide a ready-made infrastructure for making sales – from order and payment processing to customer support and logistics. This gives you the opportunity to save money on hiring employees, developing a website, integrating payment systems and other operational tasks. To start selling, it is enough to have a ready-made product and a minimal budget for paying commissions. According to experts’ estimates, the starting investment here can be as little as 5-10 thousand hryvnias – an order of magnitude less than when opening your own online store.
The possibility of entering new markets. Many marketplaces operate practically all over the world (for example, Aliexpress or Amazon), which opens up the possibility for entrepreneurs to explore new areas. At the same time, in order to organize exports independently, many issues would have to be solved – from localizing the site and accepting payments to taxation and logistics. Marketplaces take these tasks on themselves, greatly simplifying the process of international expansion.

Minuses

Low probability of repeat orders. Customers primarily remember the site itself, not the brand of a particular partner. At the same time, the seller has no direct access to customers’ contacts, so it is difficult to influence their loyalty and stimulate them to repeat purchases. Therefore, if a person came to you and was satisfied, there is no guarantee that next time he will not choose a competitor.
Cash gaps. Such sites pay money to sellers on a certain schedule, usually with a delay of 14-30 days. This is due to the fact that the customer has the right to return the purchased item within 14 days. Thus, money falls out of circulation for some time. The risk is especially great at the start of a project, when it is difficult to predict future turnover and the necessary stock of products in the warehouse. It is therefore important to provide a financial cushion so as not to slow down the development of the business while waiting for payments to be made.
Goods may “hang up” for an indefinite period of time. Some marketplaces have their own warehouses where products can be stored or shipped from them. On the one hand, this is convenient and removes part of the operational tasks. On the other hand, if demand turns out to be lower than expected, the goods will lie dead for months.
High commissions. These online platforms charge a commission on each transaction, which, depending on the category to which the product belongs, can range from 2% to 35% or more. In addition, we have to take into account payment system commissions (usually from 1 to 3.5%), which are charged on each transaction. All these costs have a significant impact on margins and must be factored into the price of the final product.
High competition. There are dozens and hundreds of similar offers on large sites. It can be very difficult to stand out among them and attract attention, especially for new sellers. You have to compete not only on price, but also on the quality of the design of product cards, the speed of order processing, and the level of service, which requires a certain amount of effort on the part of the seller.
A number of strict requirements for concluding a contract. Each marketplace sets its own rules of the game, which are not always in the interests of the business. For example, the list of product categories available for connection may be severely limited. The platform may also set its own requirements regarding the level of prices. For example, Rozetka recently changed its policy, leaving only partners with the lowest prices on the site. If this is your only source of traffic, its loss can turn into a complete collapse of the business.

The advantages and disadvantages of having your own online store

This option allows you to fully control the entire sales process – from the selection of any product for sale, to the implementation of its pricing policy and the use of any methods of site promotion. But it is not without certain disadvantages. So, in order.

Pros

Absence of commissions. This is a significant part of the cost of trading through marketplaces. For example, Rozetka charges commissions of up to 35% for some product categories. Of course, you will have to invest in advertising your project, but repeated orders will take place without additional deductions to intermediaries.
You can develop your brand. In the design of the site you are free to use corporate style, colors, fonts, add unique content to your taste. This makes your resource recognizable, memorable and allows you to build off your competitors. A strong brand, in turn, encourages repeat applications and builds long-term loyalty.
Loyal audience. Through your online store you can build individual communication with customers, show your expertise in the niche by adding relevant content and educational articles. Through email newsletters, push notifications and other channels, visitors can be informed about promotions and new products, reminded of the need to replenish the stock of products or congratulated on a holiday.
You can connect any advertising tools. No one, of course, forbids you to promote your goods on the marketplace, to advertise them. But the effectiveness of this venture will be extremely low. In the case of your own site, you get 100% return on the traffic you attract. Here you can use SEO, SMM, Google Shopping ads, message boards, targeted advertising on Facebook and Instagram, as well as any other channels. At the same time you will have full access to analytics on user behavior, conversions and other metrics.
Freedom in pricing. A person can easily compare offers from different sellers on the marketplace and choose the cheapest one. This encourages dumping and reduces margins. In your own online store, you are free to set any price you want, focusing on your costs and desired margin. Practice shows that people are prepared to overpay for good service, prompt delivery, quality assurance and other benefits. In addition, the average check here, as a rule, is higher. After all, if a customer needs several products, he will buy them all in one place, on your site.
It is possible to realize any products. On many trading platforms it is forbidden to sell jewelry, medicines, elite alcohol and other specific things. In addition, rare and exclusive goods may simply not be in demand among the audience living there. On your own online resource can form any assortment, based on the needs of the CA and business model.

Minuses

Significant investments at the start. Development of a self-descriptive resource or even customization of a ready-made solution on the constructor will take from 6 to 12 months. The starting budget for the launch, depending on the complexity of the project, starts at $1000 and can even reach several tens of thousands. Plus you need to pay for a domain, hosting, telephony, and contractor services. As a result, launching a project will cost many times more and take longer.
You need to consult and solve problems. The entire organization of the site’s work – from processing orders to answering questions and complaints from users – falls on your shoulders. At first you can do it yourself, but when the business scales, you will have to hire employees and organize a full-fledged call center.
Constant investment in advertising and promotion. If the marketplaces have their own established loyal audience, and promotion is handled by the site itself, then here you will need a constant injection of traffic. To do this, you will either have to understand the intricacies of online advertising and SEO yourself, or hire the appropriate specialists.
Difficulties with scaling. Increasing sales volume is always a challenge. You’ll have to hire more staff for order processing, feedback, and logistics. On the marketplace, on the other hand, it will be relatively easy for you to scale up. All you need to do is simply ship more products to the service’s warehouse. All other processes will be taken over by the site’s customer service department.

What is better, your own online store VS a marketplace?

From 2020 to 2025 in eCommerce, the share of those who make their choice in favor of marketplaces, compared to their own store, has increased by 8% and already exceeds 60% of the total number of online sellers.

At the same time, it is impossible to unambiguously answer the popular question “what is better, your own online store or marketplace?” – it all depends on the specifics of the products sold, available resources and long-term goals. Let’s look at the main factors to consider.

What is your experience in eCommerce?

Registering on marketplaces is a great way to get started. If you have no experience in online trading and a sufficient budget to launch your resource, this way you can quickly and with minimal investment start to make a profit. The platform takes care of most of the operational tasks, helps with promotion. All this reduces the costs at the first stage of doing business and makes it much easier to enter the market.

At the same time, if you are already an experienced player in e-commerce and have launched several projects before, it is better to look in the direction of a branded online store. This will allow you complete freedom of development, and direct contact with the customer will give you the opportunity to better understand their needs, personalize communication, increase loyalty and average check. By developing your brand, you lay the foundation for long-term sustainable growth.

What kind of products do you sell?

If you sell products aimed at the masses, a marketplace is a great solution. Clothing, cosmetics, household appliances, electronics – all of this is perfectly marketable on large online marketplaces. A large influx of visitors, convenient filters, the presence of a mobile application, the trust of the CA to the resource – these factors ensure a constant flow of customers.

At the same time, it is desirable that the products sold had small dimensions, sold often and did not “hang” for a long time in the warehouse. After all, storage, for example, oversized furniture, in the warehouse of the trading floor for a long time will cost a round sum, especially with a low flow of orders. For the same reason, this model will not work well for perishable goods.

However, there are a number of cases for which a separate web resource will work much better:

Items that require post-sale customization or service. For example, closets that need to be assembled on site, air conditioners, built-in household appliances. In such cases, direct contact with the buyer, detailed consultations, additional services are required.
B2B goods and equipment for business. Coffee machines for coffee shops, professional cosmetics for beauty salons – such products do not sell well on large sites aimed at end consumers. A specialized store that speaks the same language with the CA is more suitable here.
Unique, one-of-a-kind handmade products. Designer clothes, author’s jewelry, art objects – such things get lost against the background of a large number of similar offers. They need a special presentation, they need to emphasize the uniqueness and value of each thing.
Development of your own brand. When your goal is to increase recognition among your audience and raise loyalty, you definitely need your own website. In addition, such companies can be searched on Google by name, which will bring in additional free search traffic.
Products for a narrow target audience. This can include products popular among subcultures (K-pop badges, figurines for anime fans), religious associations (aroma sticks for meditation, yoga mats), adherents of certain sports (bandages for Thai boxing, surfboards).

What are your objectives?

If you own a small offline store and want to move online, a marketplace is not a bad option for a start. For a business with a turnover of up to 400,000 UAH/month, it provides all the necessary infrastructure and a lot of traffic from potential customers.

However, if your goal is to build a large niche online store with a turnover of several million, it makes sense to focus on developing your own site. On a marketplace, it will be much more difficult to form your own base of brand-loyal audience because of high competition and numerous restrictions. It will also not be possible to earn much because of the high commissions of the service.

At the same time, many entrepreneurs successfully combine both approaches, using large and well-known platforms as an additional channel for attracting traffic even if they have their own online store. This way you can reach the maximum audience, test the demand for new products, attract visitors to your web resource.

In addition, with this approach you do not put all your eggs in one basket. If the site gets filtered in a search engine or the marketplace suddenly closes, you will still have a second source of income to stay afloat and not think about closing the business.