Marketplace vs. Own Website: An eCommerce Crisis

For eCommerce sellers, marketplaces can seem appealing on the surface. Marketplaces are low maintenance. You don’t have to design a website or create a checkout flow. There’s less to build and manage, so that you can simply upload your product information and start selling. Not to mention, marketplaces sometimes offer an element of discoverability. 

But what you gain in simplicity by selling on a marketplace, I believe you lose in other key business areas. In this article, I’m going to push back against marketplaces and provide three reasons why I recommend creating an eCommerce store over selling your products on a place like Amazon. 

1. Marketplaces lead to commoditization

When a consumer sees a lot of different versions of a similar product, their decision comes down to who is selling the cheapest version. That means in marketplaces, it’s all about price. There’s very little room for brand or brand value (which we’ll discuss more in a moment). 

Gaining any advantage means dropping prices. And the race to the bottom dilutes your margin as a seller. To compete in a marketplace, you have to choose between dropping your prices or selling a lot fewer items. In other words, your product becomes commoditized. 

2. Marketplaces cause brand dilution

Marketplaces also dilute brand value. When you have limited control over product presentation — as is the case on all marketplaces — you’re limited in how you are able to articulate the value customers receive from a brand. 

The ability to incentivize brand loyalty, for example, is greatly diminished on an online marketplace. There are fewer opportunities for a customer to fall in love with your brand. 

Patagonia is a good example. Patagonia articulates their place in the outdoor gear market through ongoing conservation efforts. They are unique in how strong of a stance their company takes on specific issues. You see that reflected everywhere, regardless of whether you go to their website or get their catalog. And when it’s time to buy, consumers don’t care if the jacket costs 10% more because there’s a perceived greater value in purchasing Patagonia over comparable brands.

You lose that when you sell at a marketplace instead of your own website. 

3. Marketplaces withhold valuable consumer data 

Very few marketplaces share consumer data with sellers. Consider this against the rich quantitative data that you can get from hosting your own store. On your own website, you can track Google Analytics, capture email addresses, use heat maps, and much more. On marketplaces, all you know is that people are either buying or they’re not buying.

Selling on marketplaces also means missing out on qualitative data. When you host your own store, you can design opportunities to hear from customers into the buyers’ journey. This can mean talking to them directly through surveys, chatbots, and more. You can get a better understanding of customer satisfaction, fix any issues online shoppers are experiencing, or hear what products or features they’re interested in for the future. 

Conclusion

In my opinion, the advantages of building your own eCommerce website far outweigh the simplicity of selling on a marketplace. If you want to understand your customers better, maintain the value of your brand, and avoid a race to the bottom on price, then building an eCommerce store is worth the extra investment.

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