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Ecommerce or marketplace website: which is best for your business?

More and more U.S. consumer spending is taking place online. Ecommerce was expected to grow 40% by the end of 2020, and it was estimated that there would be 2.05 billion global digital buyers in 2020. From July to September 2020 alone, people spent $199.44 billion with online retailers. However, online shoppers are a finicky bunch: according to McKinsey & Company, a user will abandon a bad site for competitors after 2 to 3 seconds. 

Given these statistics, it’s more important than ever for your potential customers to find exactly what they want as fast as possible. An amazing ecommerce or marketplace website allows online shoppers to quickly and easily find what they’re looking for. The question is, which type of platform should you use in order to garner the highest revenues: an ecommerce or a marketplace site?


The differences between an ecommerce and a marketplace website

Initially it may be tricky to determine the difference between an ecommerce and a marketplace website; giants like Amazon and Walmart use both types of site. The easiest way to tell the difference is whether a single company is selling products on a dedicated website (for instance, Staples or Nordstrom), or a variety of sellers are offering their respective products on a digital marketplace site such as Ebay, Etsy, or Creative Market.


Ecommerce vs marketplace: a comparison

Both ecommerce marketplace sites offer potentially game-changing opportunities for your business, but determining which platform could offer the bigger payoff depends on your business priorities. Here are the initial differences at a glance:

Ecommerce Marketplace
Sells one product set from the business owner Sells multiple product sets from various vendors
Takes time and effort to set up Can be set up fairly quickly and easily
No initial traffic or visitors Initial traffic may exist if individual sellers have followings
You have total control of the business — you determine the volume and frequency of listings and personalize the experience You have total responsibility — you manage listings, the product mix, marketing, and customer service for a wider variety of categories and listings 
In terms of product marketing, you have direct access to potential customers You may or may not be able to market products outside of on-site search 


Three key reasons to choose ecommerce

  1. End-to-end control. Being in control of sourcing, storing, and distributing your product selection, as well as how you manipulate your pricing strategy and interact with your customers from beginning to end, can determine your company’s rate of growth and make a difference in how quickly your business picks up.
  2. Being able to offer a personalized experience. If you know exactly who your target market is and what they’re looking for, it will be easier to customize the look and feel of your website, as well as offer a personalized shopping experience.
  3. Having direct access to customers. Making a sale is great. Turning that sale into multiple sales — and that customer into a repeat buyer down the road — is so much better. Marketing to your customers is crucial to increasing sales, and having the ability to manage all touch points across the funnel, as well as the shopping and fulfillment experience, can make all the difference in brand recognition, customer loyalty, and frequency of purchases.


Three key reasons to choose a marketplace

  1. Being part of a trend. Globally, more than 50% of ecommerce sales were made through online marketplaces in 2019, contributing $1.7 trillion to the economy each year — and that figure will likely grow dramatically in the next 5 years. With people’s ability to be both sellers and buyers, the size of this space and the frequency of transactions are set to increase. Plus, younger shoppers, such as those in Gen Z, tend to be much more brand agnostic when it comes to purchases, opting to prioritize the item type they’re looking for versus where they’re buying it.
  2. Less capital intensive to kickstart. Without the need to buy, store, and ship any inventory, a marketplace offers a low-cost option to get your website up and running in a very short amount of time.
  3. Easier to scale. If you want to focus on growing your sales fast and furiously, an online marketplace would make sense. You’ll have the opportunity to make a much wider volume of sales across a wide range of categories, and you’ll be able to iterate continually. Capitalizing on marketplace site searches, you can determine your ideal customer with the ultimate goal of determining your perfect product-market fit, adjusting and increasing your inventory accordingly, and focusing your growth on the biggest sales opportunities on your site.


Where Search and Discovery fit in

It’s one thing to have a product offering, but another thing altogether for users to find exactly what they’re looking for on your website, and quickly. 

That’s where optimized site search comes in. Whether you’re using an ecommerce or a marketplace site, Algolia can help. As an industry leader in on-site search technologies, we offer a comprehensive suite of solutions to help you better align your content with what users want. Our solutions can help you focus on accelerating conversations, increasing engagement, and building customer loyalty, as well as on successfully optimizing search at scale. 


Next steps for your website

When you’ve determined whether you want to launch an ecommerce or a marketplace site, it’s time to get your site set up and running — and start making those sales. 


For more information on ecommerce and marketplace options with Algolia, search no further. Signup for a forever free account. Discover how better search tools can power a better user experience for your customers and more effectively drive your bottom line!

About the author
John Stewart

VP Corporate Marketing

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