The difference between Online Shops, Marketplaces, and E-Commerce. There are now many online marketing strategies available on the internet, so it is very important to choose the best one for your online business. Terms like online shop, marketplace, and e-commerce have emerged. Let’s explore each one!
These three terms, online shop, marketplace, and e-commerce, are often used interchangeably, yet there are fundamental differences that are quite important to understand, especially if you want to venture into the world of online business.
The main difference between Online Shops, Marketplaces, and E-Commerce lies in the scale of the business and ownership of the products. E-commerce and Online Shops typically sell products from a single entity (company or individual), whereas a Marketplace is a platform that hosts various sellers from different entities.
The difference between Online Shops, Marketplaces, and E-Commerce
1. E-commerce (Electronic Commerce)
Broad Definition: E-commerce is the most common and broadest term. It refers to all activities of buying and selling goods or services conducted electronically via the internet. This encompasses the entire transaction process, from offerings, orders, payments, to delivery, all facilitated by digital technology.
Scope:
- Very broad: E-commerce includes all types of online transactions, whether B2B (Business-to-Business), B2C (Business-to-Consumer), C2C (Consumer-to-Consumer), C2B (Consumer-to-Business), and others.
- Umbrella Terminology: Online shops and marketplaces are actually forms or parts of e-commerce.
Example:
- When you buy a shirt on a particular fashion brand’s website.
- When a company purchases raw materials from another supplier online.
- When you sell second-hand goods on a specific platform to another individual.
Although slightly different, the e-commerce shopping system is almost the same as a marketplace, where buyers simply select the desired items on a website, then click the “buy” button and transfer the specified amount. The difference is that in e-commerce, the goods or products sold come from the website itself. It does not provide a platform for other sellers to offer their products. There is no haggling, and the price given is a fixed price.
One does not need to go out of the house to purchase their necessities; by simply viewing products from an e-commerce-based online shop, they can easily obtain what they need without the hassle of queuing. Furthermore, online transactions can be made 24 hours a day.
E-commerce allows individuals to conduct business without leaving their homes; with just a computer and an internet connection, e-commerce activities can take place anywhere. The prices offered by e-commerce users for their products are generally below market prices, which certainly attracts both local and international buyers.
In a traditional offline buying and selling cycle, customers are limited to that particular area, but in e-commerce, companies can expand their business to other regions and even countries, which can significantly increase the company’s profits.
2. Online Shop
Narrow Definition: An online shop is a store or business that sells its own products or services directly to consumers through digital platforms. These platforms can include:
- Personal website: A brand or individual has their own website (their own domain) to showcase and sell their products.
- Examples: the official websites of Adidas, Nike, Zara, or a local bakery with its own website.
- Social media: Using social media platforms such as Instagram, Facebook, TikTok, or WhatsApp Business to market and sell products. The transaction process is often still manual or semi-automated (for example, chatting for orders, bank transfers for payments).
Key Characteristics:
- Single Seller: Typically, there is only one seller (store/brand owner) who manages and sells products on the platform.
- Full Control: The seller has complete control over branding, design, customer experience, customer data, and marketing strategy.
- Initial Costs: Creating your own online shop website may require an initial investment for web development, hosting, and domain.
- Independent Marketing: The seller is fully responsible for their marketing efforts to attract customers to their store.
An online shop, or what is referred to as an online store, is an online shopping system where buyers can inquire about prices or any questions related to products directly with sellers, whether through BBM, LINE, Facebook, Instagram, or WhatsApp.
3. Marketplace (Online Market / Lokapasar)
Definition: A marketplace is a third-party e-commerce platform that functions as a virtual “market” where numerous sellers (individuals or businesses) can register and sell their products to a wide range of buyers. Marketplaces provide the technological infrastructure, payment systems, and sometimes logistics, so sellers do not need to build their own website from scratch.
Key Characteristics:
- Multiple Sellers (Multi-vendor): This is the most prominent feature. Various shops or brands can open a “stall” or “;shop” on the same marketplace platform.
- Third Parties: The marketplace acts as an intermediary connecting sellers and buyers. They take a commission from each transaction or charge service fees to the sellers.
- High Competition: As many sellers congregate in one place, price and product competition tends to be more intense.
- Wide Reach (Automatic): Sellers benefit from the large traffic already established by the marketplace, so there is less effort required initially to attract visitors.
- Marketplace Rules and Policies: Sellers must adhere to the rules and policies set by the marketplace.
Example:
- Shopee: You can find thousands of shops from various brands and individual sellers offering fashion, electronics, food, and more.
- Tokopedia: Like Shopee, many sellers from different categories come together here.
- Lazada, Blibli, Bukalapak, eBay, Amazon, Etsy.
A marketplace, on the other hand, is a business model where the website not only helps to promote goods but also facilitates online financial transactions. The website provides a platform or space for sellers to offer their products.
Which one of the three is the best?
Of course, this should be tailored to our needs. If we feel more comfortable shopping online by asking the seller directly, we can try shopping at an online shop. Just remember to ensure that the online shop we choose is not a dodgy one or a scam. On the other hand, if we find that asking the seller takes up too much time, we can try shopping on a marketplace where prices are fixed, there’s no haggling, and payment is made immediately after clicking the “buy” button. Alternatively, if we want to purchase items sold directly by an official agent, we can opt for an e-commerce platform.
A safe and easy way to shop online.
- Get to know the reputation of the online store
- Pay via an escrow account
- If possible, choose the COD method
- Use internet banking services
- Be alert to fraud
Are there challenges in developing an online business?
Certainly, there are. Conducting business through different methods brings its own unique challenges, for example:
- Indonesians are still not accustomed to shopping from catalogues.
- They still need to physically see or hold the items being sold.
- They still enjoy bargaining over prices.
- There is still a lack of trust in electronic payments.
The Difference Between Online Shops, Marketplaces, and E-Commerce
Doing business online means we must be prepared to learn quickly about changes. Good luck!