Profit Generation: Marketplace, Hosted and Hybrid, Which One’s the Best?

You’re hoping to sell products online, or maybe you already do. The issue is “online” is too general. Just as you would for a brick-and-mortar store, you need to decide where you want to sell your products online. And profit generation is even a bigger issue once you’ve launched your store, which is something that’s directly linked to where you sell online.

At some point, you may have battled with selling your products on an online marketplace or selling your products on your own hosted website with a website builder.

Ideally, you want to increase profit margins. But at the same time, you may not want to overwhelm yourself with the work involved selling your products on multiple platforms.

So what do you do?

There are pros and cons of both tactics, and even a hybrid approach you can take.

With that said, before you make a decision, it’s important to understand the nuances of both tactics to help you make an informed decision as to what will be best for your business.

Let’s compare marketplaces vs selling your products on your own e-commerce store to see which fares best and will help you generate the most profit.

Marketplace advantages

Since there is an existing platform you establish your website in, you don’t have to pay a penny to develop your own. Most marketplaces charge product listing.

Either way, you’ll have to spend money before making a single sale, but not the same amount you’d have to invest in website development.

Starting right away

The best thing about selling on a marketplace is you can get set up pretty much the same day. For example, on Etsy, getting started is as simple as pressing the “open your Etsy shop” button. To make things even easier, you can sign up using your Google or Facebook account.

From there, it’s as simple as choosing a password, answering details about your store, what you hope to sell and your contact details and you’re good to go. The whole process will take around an hour depending on how much of the required information you have at hand.

The process is quick, intuitive and there will be ongoing support along the way if you get stuck. The same goes for signing up to sell on other marketplaces such as eBay or Amazon.

High website traffic

The marketplaces already have incredibly high traffic compared to an SMB. Because these sites already have traffic running through them, the chance of a potential customer finding a product like yours is much higher.

So, if you’re keen to get as many eyeballs as possible on your product and don’t currently have any budget available for SEO or paid advertising, then consider selling your products on marketplaces suitable to your niche.

Excellent customer service, warehouse operations, and shipping

One of the greatest advantages of selling on a marketplace is that they undertake tasks that are of central importance to customer experience. The seller is entrusted with the production/supply of the goods, and the rest is handled by the marketplace.

Optionally, Amazon handles the storage, packaging, shipping and after-sales support for the products sold on the marketplace, at a high standard difficult to maintain.

The ‘Fulfilment by Amazon’ provides an excellent 24x7customer service, which is reflected in the giant’s favorable reputation, which benefits the sellers as well as the shoppers.

Marketplace disadvantages

Competitors right beside you

One of the issues with selling on a marketplace is that when a customer searches for a specific product they’re looking for, they won’t just see your product, but they’ll see your competitors too.

Even within the marketplace, you’ll have to compete with many sellers and therefore competitively price your products. There are plenty of successful sellers that have nearly perfect scores and what differentiates them is their prices.

On top of that, the marketplace recommends competitor products to your visitors. So, when a shopper lands on a product page that belongs to you, he is recommended another seller.

Seller fees

The seller fees vary from one marketplace to another.

Amazon has a straightforward fee policy.

Sellers can also benefit from the ‘Fulfillment by Amazon’ service we’ve mentioned above with an additional fee.

Etsy and eBay have different policies regarding the amount that’ll be charged from a sale. Generally speaking, marketplaces charge fair fees, considering the benefits they offer.

Self-hosted e-commerce advantages

Customized website

There is no place like home. Having your own website feels the same. You can design it however you want and test different design elements to continuously improve user experience.

With the help of platforms like Magento, Woocommerce, Shift4Shop, etc, starting your own e-commerce website is easier than ever. However, you should note that these platforms differ in their openness to customization.

If you’re going to choose one, make sure you have a good understanding of what they offer and whether it fits your needs and interests.

What’s more, you have a chance to clearly state your unique selling proposition, namely, the unique qualities that differentiate you from competitors.

For example, you might have an excellent product assortment that’ll qualify for a heterogeneous audience, but it wouldn’t make a difference on a marketplace.

Brand awareness

A major downside of selling on a marketplace is that you’re not allowed to promote your brand. There is no room for marketing efforts.

Even if you successfully sell on a marketplace for 15 years, customers may not recognize your brand. They develop a loyalty to the marketplace, not the individual sellers they buy from.

On the other hand, a self-hosted website is that it allows you to create content that contains emotional appeals as well as instructional guidance. Creative content is crucial to any business that aims to build brand loyalty.

Your objective is to build a brand that comes to mind when people think of a certain product/products and your website is the only place you can freely express your brand’s value.

Extensive marketing campaigns

Having your own website means having your own data. The flow of customer data on your website will allow you to accurately segment your audience and target them with the right campaigns.

Moreover, you can freely contact your customers and send them campaign emails, learn their pain points and get feedback. A comprehensive approach to marketing strategy includes all of these elements and it’ll drastically improve your competitive strength.

Something you have to remember is that not every customer is ready to buy right away. This means whether they land on your Etsy, Amazon, eBay or your own website, they may not be ready to purchase a product.

However, one added benefit of selling your products in your own store is the ability to retarget your customers.

It works by using cookies to track what a customer has been looking at and then when they’re elsewhere on the web, send them super personalized ads to remind them of what they were browsing.

Self-hosted e-commerce disadvantages

Time and money devoted to development

Whether you get help from a technical person or use e-commerce platforms like the ones we’ve mentioned above, you’ll be paying money.

These platforms have different membership plans and what the technical person charges depends on her skills and the way you want to customize your website. In other words, we can’t estimate the amount you’ll need to pay.

One thing we’re sure is that you’ll need to devote a lot of time in website building. Control over your content comes with a big responsibility.

Like every other retailer, you’ll work on expanding your business when the time comes. As you expand, the time you’ll spend on your website will increase together with the workload.

Traffic generation from scratch

One of the struggles many e-commerce owners face when they launch their own sites is they struggle to generate traffic. They’ve spent loads of time building a beautiful site, have some really awesome products they think consumers will love, but the issue is, no one is visiting their site.

Here the options are to spend money working with an SEO specialist to help create content that pushes your website further up the Google rankings.

The second is to spend money on paid advertising to directly target potential customers with your awesome offering.

For a new e-commerce store, money might be tight and this perhaps isn’t a viable option straight away, not if you’re hoping to generate profit quickly.

Wrapping up e-commerce profit generation

In this post, we’ve looked at the advantages and disadvantages of selling your products on either an online marketplace or your own e-commerce website.

When making this decision, think carefully about what sort of business you want to create, how quickly you want to generate revenue and how to plan to differentiate yourself in the mind of the customer.

Doing so will put you in a good position to dominate whatever selling approach you choose.