Why build your own e-commerce website instead of selling on independent marketplaces?

According to FMI-The Food Industry Association’s Food Retailing Industry Speaks 2020 report, food retailers saw a 300% jump in online sales in the first few months of the pandemic in 2020.

In the UAE as well, the first five months of 2020 saw a 300% rise in demand for e-commerce related services. Many experts believe the boom to be permanent.

And if we talk about the entire GCC region, e-commerce was just a $5 billion industry in the entire region in 2015. Right now, it stands at more than $24 billion with no signs of slowing down anytime soon.

However, merely knowing them is not enough. Rather, one should work on profiting from the upcoming growth in e-commerce.

Website vs Marketplaces

As a brick and mortar retailer, you have two ways through which you can offer your products/services online.

First, by building your own e-commerce website. Secondly, you can set up your online business on well-established marketplaces such as Instashop, Talabat, Noon, and Amazon, among others.

These are already established marketplaces, having a wide customer base. Consequently, it might seem like a good idea to go for them rather than building your own website from scratch and then working hard to market it.

There is no doubt that the above-mentioned marketplaces (and other similar ones) have a large user base that will provide significant brand exposure and maybe a huge influx of orders from day one. However, they also come with many inherent shortcomings.

The drawbacks of these platforms can be a major hurdle if you want to scale your brand and take it to the next level. In short, you cannot grab a major chunk of the GCC e-commerce market by depending on these third-party platforms.

5 drawbacks of setting up an online store on a third-party platform

In this section, we will discuss in detail the drawbacks of setting up your store on a third-party platform and how it is a major hurdle in your brand building endeavours.

1. No control over your online reputation

By using external delivery platforms, you let go of many things that are important for your brand reputation.

One of them is the customer experience. For example, if there is a late delivery, a wrong product is delivered, or there is a missing product, customers would blame you for all these wrongdoings and leave a bad review, adversely impacting your brand image.

This is even though you are not the one to be blamed for the poor execution. Instead, the third-party platform was responsible for the disappointment of the customer.  

2. Sacrificing your margins in a competitive market

The grocery industry is a highly competitive one, and the margins are very thin. That is because retailers are not selling very expensive or luxury products. Rather a low-cost item, one that is used by people on a daily basis. As such, the industry is driven by a price war.

Therefore, when a retailer sets up their store on a third-party platform, they pay them a certain commission for every sale (between 15%- 40%). This eats away at the already low margins, leading to a loss of money for each transaction. 

3. Letting go of crucial customer data

Data is the new oil in today’s world. It is the driver of growth for any business worldwide, and the same holds true for the e-grocery segment.

The importance is because the data allows you to analyse the customer’s buying behaviour and preferences and then formulate your marketing campaigns accordingly. This laser-targeted approach gives higher ROI compared to a general marketing campaign.

However, when you work on an independent platform, you are giving up this important tool of data collection.

All the information that the platform collects, for example, the customer’s contact information, preferences, browsing history, searches, products that they have added to the basket, and other vital information, are theirs (3rd party platforms) and not yours.

This has dual disadvantages. You not only lose a considerable tool for growth but also make your future competitor (i.e. the independent platform) more powerful and armed to upstage you in the future.

4. Threat of competing with the white label products

As a business that recently entered into e-commerce, you want to avoid as much competition as possible.

However, when you list your products/services on third-party platforms, you unknowingly increase the chances of having more competitors in your domain.

You might be wondering how?

Well, as we discussed in the previous point, you don’t have the important data about your customer. This means the third party platform is completely aware of what are your hot selling products and what customers love the most.

They can then use this vital information to launch a similar private label product, or even a better version, to cash on the hot demand.

And you won’t even have the legal rights to sue them. 

5. Poor loyalty incentives 

Customer loyalty is the backbone of any business. And when we talk about the hyper-competitive grocery business in the GCC region, the importance increases manifold.

When you are working with third-party service providers, the customers are loyal to THEIR platform.

The fact that customers choose your store rather than another one does not make any difference as long as they choose the platform in general.

Therefore, whatever efforts the service provider is putting in for building customer loyalty and the benefits they are getting, you will not even get a minuscule share of it.

A research conducted by Barclays Investment Bank found that 43% of Instacart users stated that if their preferred grocer became unavailable on the platform, they’d ditch that grocer and continue with another one on Instacart.

This is an alarming study and highlights how you are compromising customer loyalty by establishing your business on a third-party platform.

Building your own e-commerce website is the way forward

The above are the five major drawbacks of establishing your e-grocery business on a third-party platform.

As discussed at the start of the article, the future of e-commerce is bright in the GCC region. COVID-19 spurred the industry, and the trend will continue upwards for years to come.

Uber Eats / Careem Eats doubles its business in Dubai every six months, and Instashop was acquired by Delivery Hero for $360M. For those who don’t know, Instashop is a Dubai based grocery delivery platform. It has a wide user base of 500,000 and a presence in five markets.

The growth of Uber/Careem Eats and Instashop shows how big is the e-grocery landscape in UAE and the wider GCC region.

However, you won’t be able to take advantage and grab a chunk of this rapidly growing industry by merely working on independent platforms. Even if the platforms allow you to start selling online rapidly, not being able to control your online business fully can be prejudicial in the long run.

With that in mind, now is the perfect time for you to consider building your own e-commerce channel considering two main components: the technology (what solution is best suited for your business needs) and, most importantly, the operations.

Remember, online customers, do not tolerate mistakes and poor customer experience: your operations and customer service must be impeccable from day one to be able to keep your customer promise and build loyalty.

So are you ready to launch your e-commerce store?

If you want to have a fully working and operational e-commerce website that you can use to fulfill home delivery, and click and collect orders in less than 6 months, get in touch with Emerce Consulting.

We will ensure that you have all the correct elements to succeed online from day one of your operations.

We have a deep experience of over 14 years in all aspects of e-commerce i.e. e-commerce strategy and value proposition development, e-commerce platform selection, supply chain & fulfillment processes definition and implementation, merchandising strategy definition, customer service tools and processes implementation, digital marketing budget definition, amongst others.

Our experience includes working with top e-commerce brands and retailers across the GCC region. As such, we can help you in making a seamless transition to your own e-commerce store.

Get in touch now to kickstart your own e-commerce store!