Should You Sell Your Product on Your Own E-Commerce Website, or Use an Online Marketplace?

What is the best platform for you to sell your product? This is the most common question we are asked when a potential client completes a contact form. In general, business owners fall under 3 categories:

  • A seller on the marketplace who wants to setup a separate e-commerce store
  • A seller who owns an E-commerce platform but wants to try to the marketplace as well
  • A person who wants to be a seller but doesn’t have a platform

In order to figure out the best strategies, we need to find the dots and connect them well, hopefully! Please note these dots are explained in order of priority from the top.

The Dots of E-Commerce

The Inventory

Is your inventory exclusive? Do you have monopoly power? If this is the case, you can control the supply and demand as well as the pricing of your product. If you want to create an independent brand and know that the barrier to entry for your space is high, then having your own store format might be the prudential way in the long run. Keep in mind this is just step one.

If you are a distributor of goods, you could be a wholesaler as well. There are multiple companies with the same product or very similar offers, so it might make more sense to choose the marketplace model. Keep in mind that the pricing will have to be similar or lower than that of your competitors (The market/marketplace will assist you if you fall too much out of place!). You are often not too particular about building a brand but most concerned with selling off your inventory for a decent profit margin. 

 Logistics

You will have to take care of logistics yourself. Tying up with vendors and in some cases speed post as well. You might need to restrict your market in order to reduce the cost of logistics. Figuring out logistics can be a little tough, as we have seen working with our clients. If you negotiate hard you might get a good pricing for one year, but you need to add these margins to your costs. Along with shipping, your warehousing needs to be taken into account. In case you are dealing with perishables, be extra careful to follow food safety guidelines to avoid fines or having your business shut down by a government regulated agency.

You also have the option of the items being picked up by the marketplace or storing your inventory at their warehouses. In turn, the marketplaces have worked very hard to strengthen their logistic network. All this does not come for free!

 E-Commerce Edge 

You need to build your own website for this. You can choose any open source framework or use a managed service. If you have a technology background and understand the power of technology, then you can build your own custom platform as well. If you think that your brand is a natural fit for the digital space whether your business has an offline presence or not, then you should definitely invest in your technology as you keep moving.

The e-commerce marketplace platforms handle all the technology for you. Mind you, these are very robust applications built after years of know-how and cost billions of dollars. In this case, you do not have to worry about the technology part. It all depends on points A and B, along with you interest, need, and expertise in technology.

 Finance

You will be dependent on the payment portal system and will receive money after all fees and commissions are deducted from your revenue, which could range from two to three percent. The payment terms for the clients might not be as flexible as they are on the marketplace. In case you have an outage from the payment gateways standpoint (yes that does happen), you can expect your sales to go down.

This is what these companies thrive on, they have tie-ups with banks in terms of cash backs, they have their own wallets, and some even offer EMIs (Equated Monthly Installments)! Also, the payment terms with the supplier are straight forward.

 

We hope these dots will help you make the right decision for your store/future store. Some of the dots have been picked up from Jack Ma’s famous Iron Triangle. In order to know more about this, you can check out our educational video (in English and Hindi).

In case you still feel that we have not been able to answer your questions, or there are some point that needs further clarification, feel free to contact us in India at contactus@dignitasdigital.com, or hello@dignitas.digital in the U.S..

Rishi Rais