Pros and Cons – Marketplaces vs. Platforms: What Every CPG Founder Needs to Know

 

Sam is the founder of an up-and-coming organic snack brand which is gaining traction, and they need to expand online.

 

They have 2 options:

1. 1. Sell through a big supermarket (marketplace) like Amazon or Walmart—lots of foot traffic, but strict rules and high fees.
2. 2. Run their own small store (platform) using Shopify or WooCommerce—more control, but they need to bring in customers themselves.

 

Each path has its advantages and drawbacks. Let’s explore them.

 

What Is a Marketplace? (The Big Supermarket Model)

Marketplaces are large online retailers that allow brands to list and sell their products.

 

Examples:

• - Amazon
• - Walmart Marketplace
• - Instacart
• - Faire (for wholesale CPG brands)

 

The Grocery Store Analogy

Selling on a marketplace is like stocking your products in a big supermarket:

• - Tons of shoppers already visit the store (built-in traffic).
• - Customers trust the supermarket brand.
• - You don’t have to worry about checkout systems or shelf space.

 

But there’s a catch:

• - The supermarket takes a cut of every sale.
• - You have zero control over customer experience.
• - You might have to compete with store-brand products.

 

✅ Pros of Selling on a Marketplace

• ✔ Instant Customer Reach – Millions of people shop on Amazon & Walmart daily.
  ✔ Built-in Trust & Payments – Customers already trust these platforms.
  ✔ Logistics Support – Services like Amazon FBA handle fulfillment for you.

 

🚨 Cons of Selling on a Marketplace

• ❌ High Seller Fees – Commissions, fulfillment fees, and advertising costs add up.
  ❌ No Direct Customer Relationship – You don’t own your customers; the marketplace does.
  ❌ Less Control Over Pricing & Branding – Marketplaces can lower your prices or even create competing private-label products.

What Is a Platform? (The Local Grocery Store Model)

Platforms allow businesses to build and operate their own e-commerce store.

 

Examples:

• - Shopify
• - WooCommerce (WordPress)
• - Magento

 

The Grocery Store Analogy

Selling on your own platform is like owning a small grocery store:

• - You set the prices and control the branding.
• - Customers come directly to your store.
• - You don’t have to pay a big supermarket a cut of every sale.

 

But there’s a challenge:

• - You have to bring in your own customers through marketing.
• - You’re responsible for everything—from the website to shipping.

 

✅ Pros of Selling on Your Own Platform

• ✔ Full Control Over Branding & Pricing – No restrictions on marketing, design, or promotions.
  ✔ Higher Profit Margins – No marketplace commissions eating into profits.
  ✔ Direct Customer Relationship – You own customer data, allowing you to retarget and build loyalty.

 

🚨 Cons of Selling on Your Own Platform

• ❌ Requires Marketing Spend – You need to drive your own traffic through ads, SEO, and social media.
  ❌ Handling Logistics Yourself – Fulfillment, shipping, and customer service are your responsibility.
  ❌ Upfront Costs for Setup – Websites and ad campaigns require an investment.

Marketplaces vs. Platforms: Which One Is Right for Your Brand?

Both marketplaces and platforms have their place, but the right choice depends on your business goals.

 

Marketplaces Are Best If:

• ✅ You want instant access to millions of shoppers.
  ✅ You don’t mind paying high fees in exchange for visibility.
  ✅ You’re okay with limited branding control.

 

Platforms Are Best If:

• ✅ You want to own your customer relationships.
  ✅ You prefer higher profit margins over instant sales.
  ✅ You’re willing to invest in marketing to drive traffic.

 

Hybrid Approach: Best of Both Worlds?

Many brands start on marketplaces for quick sales and later invest in their own platform to build brand equity.

 

Why Owning Your Platform Helps If You Want to Sell Your Business

If you ever plan to sell your CPG brand, having your own platform makes a huge difference.

 

How a Platform Increases Business Value:

• 💰 More Control = Higher Valuation – Investors/buyers prefer brands with direct customer relationships instead of relying on Amazon.
  💰 Stronger Brand Equity – Selling on your own site builds a loyal customer base, making your brand more attractive.
  💰 More Predictable Revenue – Buyers look for consistent, stable revenue, which is harder to achieve if you depend on a marketplace.
  💰 Higher Margins = More Profitability – Selling DTC means better profit margins, which increases your brand’s value.

 

Bottom Line: If you want to exit in the future, investing in your own platform is a smart long-term move.

 

How a Fractional CFO Can Help

Choosing between marketplaces and platforms is not just a marketing decision—it’s a financial one. A Fractional CFO helps by:

• 📊 Breaking down costs & profitability – Just like comparing grocery prices.
  📊 Choosing the right mix of sales channels – Maximizing margins while maintaining growth.
  📊 Helping forecast revenue from different channels – Ensuring sustainable long-term success.
  📊 Preparing financials for a future sale – Making sure your business is attractive to investors.

 

Conclusion

Choosing between marketplaces and platforms is like deciding where to buy groceries:

• 🛒 Marketplaces (Amazon, Walmart) = Selling in a big supermarket – tons of traffic, but high costs & little control.
  🏪 Platforms (Shopify, WooCommerce) = Running your own store – more work, but higher profits and long-term value.

 

If you’re just starting out, a marketplace might be an easy way to launch. But if you want to grow, scale, and eventually sell your business, investing in your own platform is the smarter play.

 

A Fractional CFO can help you decide which approach makes the most financial sense for your brand.