Last updated on September 12th, 2018,

Explaining the economic and business advantages of a blockchain e-commerce marketplace: it’s about money and customers!

People have been asking about the real benefits of our blockchain e-commerce marketplace. We have already mentioned the benefits of using distributed ledger technologies, but now we want to show you some numbers to back up our claims.

As part of our research, we compared all the main solutions for e-commerce, including ours. In the following table you can see the results. This is an economic simulation of the costs involved in running an e-commerce shop with a monthly income of 5K USD, making 150 listings per month, and selling 100 items (each worth 50 USD).

SHOPIFY AMAZON EBAY

OUR BLOCKCHAIN-BASED MARKETPLACE

WOOCOMMERCE MAGENTO
Monthly fee 29 39,99 0 0 0 0
Credit card fee (2,6%+0,3 dollars per transaction) 160 0 0 0 150 150
Third party payments apps fee (Paypal) (0,01%) 50 0 0 0 0 0
Paypal fee (2,9%+0,30 cents) 0 0 0 0 175 175
Listing fee (0,3 dollars per item from 50 items listed) 0 0 15 0 0 0
LIsting fee (1$ per listing) 0 0 0 150 0
Referral fee (0,1%) 0 500 0 0 0 0
Final value fee (0,1%) 0 0 500 0 0 0
TOTAL 239 539,99 515 150 325* 325*

We can run more simulations with bigger figures. For instance, below you can see a business with a 10k USD income, 200 listings per month, and 200 items sold per month.

SHOPIFY AMAZON EBAY

OUR BLOCKCHAIN-BASED MARKETPLACE

WOOCOMMERCE MAGENTO
Monthly fee 29 39,99 0 0 0 0
Credit card fee (2,6%+0,3 dollars per transaction) 320 0 0 0 300 300
Third party payments apps fee (Paypal) (0,01%) 100 0 0 0 0 0
Paypal fee (2,9%+0,30 cents) 0 0 0 0 350 350
Listing fee (0,3 dollars per item from 50 items listed) 0 0 45 0 0 0
LIsting fee (1$ per listing) 0 0 0 200 0
Referral fee (0,1%) 0 1000 0 0 0 0
Final value fee (0,1%) 0 0 1000 0 0 0
TOTAL 449 1039,99 1045 200 650* 650*

And finally, another simulation for 100k USD of income, 300 listings, and 2000 items sold.

SHOPIFY AMAZON EBAY OUR BLOCKCHAIN-BASED MARKETPLACE WOOCOMMERCE MAGENTO
Monthly fee 29 39,99 0 0 0 0
Credit card fee (2,6%+0,3 dollars per transaction) 3200 0 0 0 3000 3000
Third party payments apps fee (Paypal) (0,01%) 1000 0 0 0 0 0
Paypal fee (2,9%+0,30 cents) 0 0 0 0 3500 3500
Listing fee (0,3 dollars per item from 50 items listed) 0 0 585 0 0 0
LIsting fee (1$ per listing) 0 0 0 300 0
Referral fee (0,1%) 0 10000 0 0 0 0
Final value fee (0,1%) 0 0 10000 0 0 0
TOTAL 4229 10039,99 10585 300 6500* 6500*

As you can see, every solution has its pricing and fee structure. In the case of Magento and Woocommerce, you have to choose between either Paypal or a credit card for payments, so the fees would vary depending on your choice. In some cases, the payment choice could cut your fees by up to half.

In every case, the cost of running the solution is pretty clear although there are also hidden expenses. For instance, running a shop using Woocommerce or Magento might be cheaper at first glance, but we have to keep in mind that we will need to customize the shop itself, which would include adding a template, plugins, and probably some coding (both php and CSS).

Software development for open source customization means money and resources. Shopify solves this issue at a reasonable cost since you can create and customize your own shop really easily. The problem is that you can’t create a marketplace (just individual shops), and you would still have to pay a lot of money to bring traffic to your site. If you have ever run an e-commerce shop, you might know that the most expensive aspects of the business can be bringing in customers, paying for advertisement campaigns, and marketing professionals.

The solution to these problems are marketplaces, where you can find your customers without spending too much money. You also have the option to easily create a customized storefront to “protect” your brand. Marketplaces rely on the network effect to create big communities of buyers and sellers, hence making e-commerce better and easier for both parties. They unify digital markets and that is the reason behind their great business value.

The problem here, again, is that the cost for Amazon and eBay is simply huge, with at least a 10% fee (we haven’t included vertical marketplaces, but the the figures are pretty similar). In fact, this cost can prevent SMEs from running e-commerce operations on marketplaces, since the fees will simply cannibalize the already low profit margins, especially in developing countries.

Moreover, we should point out that, when running your e-commerce operations on a platform you can’t control, you might be subjected to censorship. This can result in the inability to communicate with your customers. At least, you thought they were your customers but, if they are controlled by the marketplace, they belong to the marketplace! Thus, you are losing what matters most in e-commerce: customer engagement. Real profits in e-commerce come from customer loyalty, and you can’t fully take advantage of that if you work in a marketplace where you can’t freely communicate with your clients.

So, you have a problem. On one hand, if you run a SME selling goods online, maybe an open source solution isn’t the best option, since you have to build it from scratch. That’s a lot of work. Using a third party service to create an e-commerce store could fix that, but you still have to pay a lot of money to bring traffic to your site. And finally, if you upload your inventory to a marketplace with a large customer base, you will have to pay high fees, earning less profits, and you won’t have REAL access to your customers.

Marketplaces are still the best way to run e-commerce shops for small and medium companies, IF you can find a solution to the problems of fees, control, and privacy. We believe that solution can be found on the blockchain.

A blockchain e-commerce marketplace, like the one created by BitBoost, offers a better value to customers:

      1. A pricing scheme attached to listings on the blockchain. This will give sellers a really flexible and inexpensive way to protect their profits while doing e-commerce. Combined with low fees, the result is a really significant reduction in their costs.
      1. And what about customer engagement? As a seller, you will have a direct chat with your customers. They are all yours! We don’t store their data and we won’t ask you for yours either. As a seller, you will be able to freely engage with your customers without any constraints.
      1. Moreover, since the blockchain is an open ledger, there is no censorship. Nobody will be able to censor anything you want to sell (although selling illegal items wouldn’t be a good idea, since everybody would be able to see them).
    1. Data privacy! Every transaction is encrypted, and you won’t be required to share your personal information with anybody but the seller or buyer (for delivery purposes). This is a great advantage for those users who care about their privacy.

The e-commerce business is a huge sector, growing every year. Well-established players have done a great job to improve and expand online selling around the globe, but there is still a lot of room for improvement. It is our understanding that blockchain is the missing piece to create a better and easier e-commerce experience for everybody, helping individuals and companies to trade safely, with confidence…and for a nice profit! Now, we have shared data to support that. Do you want to know more? Drop us a line at [email protected]