Online retailing has enabled blitz scaling by retailers through various business models. Despite differences in various channels, shoppers and retailers often consider many channels to be the same. For instance, e-commerce websites and social media marketplaces are often wrongly considered to be the same. However, the two are different channels and have entirely different operating models. Each channel has its own set of advantages and offers retailers the opportunity to reach out to different segments of online shoppers as per user behavior.
Understanding an E-Commerce Website and a Social Media Marketplace
Here is a legalistic of the main differences between an e-commerce website and a social media marketplace.
Single retailer website Vs Platform enabling retail sales: The first difference is the platform itself. An e-commerce website is a single retailer website where products of one retailers are available for sale. Social media marketplace is a platform that enables multiple retailers to sell products.
Fee per sale: On a social media marketplace, the retailer needs to pay a fee for every sale clocked through the marketplace. This could be a flat fee or a percentage of the sale value. On an e-commerce website, the retailer does not pay any fee, as the site is hosted and managed by the retailer in-house or through outsourcing.
Traction: Marketplaces have the advantage of greater traction due to the advertising and presence of multiple brands/retailers. A marketplace that hosts a few repute retailers is bound to benefit from the credibility of the retailers which will pass on to the other retailers on the platform. E-commerce websites can also achieve the same traction, provided the retailer has established credibility over a period of time.
Loyalty: E-commerce websites score better on loyalty and repeat purchases. A visitor who has purchased a product from a marketplace is likely to explore other options on the repeat visit to the market place. In an e-commerce website the visitor’s loyalty remains unchanged.
Both the channels offer distinct advantages to retailers and most businesses make themselves available on social media marketplaces as well as maintaining own an e-commerce website. Cost wise, an e-commerce website has heavy upfront expenditure, while social media marketplaces have relatively lesser upfront expenses. However, when it comes to per sale cost, e-commerce websites fare better, with nil payouts.
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