On-Premise VS. SaaS Marketplace Software: Which is Better for Starting an Online Marketplace?

Global eCommerce marketplaces have conquered online retail in recent years. In 2019, sales on global marketplaces reached $2 trillion, which is 52% of all online retail in the world. Amazon became the first place for product search long ago, outracing Google 59% of all online shoppers search for products right on Amazon avoiding the biggest online search engine.

Niche marketplaces push out traditional online stores, too. Online entrepreneurs start small eCommerce marketplaces to take over their niche, drive their competitors to the marketplace, and make competitors work for them. This is how marketplace owners become leaders in their niches.

Big offline retailers move online as well. They understand that having their own marketplace is more profitable than selling offline. For example, Walmart, the largest retailer in the world, is actively developing its online marketplace. It is now the second-largest eCommerce marketplace after Amazon. Just look at how many offline malls are being closed in the United States. Hundreds of dead malls in dozens of States.

Starting an online marketplace is now the most reasonable way to enter the world of eCommerce. It is also a great way to expand your offline retail business online to get extra sales, a new audience, and increase brand awareness.

Whether you are going to open a big global eCommerce mall or a small niche marketplace, you will need to build it on some software platform. These days, you have two reasonable options: use a cloud-based marketplace platform or an on-premise marketplace solution. In this article, you will learn which one is better.

SaaS vs. On-Premise eCommerce Software: Pros and Cons

What is SaaS?

SaaS stands for Software as a Service. This means that a SaaS vendor offers its software in the cloud.

Cloud-based marketplace solutions allow you to quickly start a marketplace in just several clicks. It’s like registering an account on a website: you just fill in the form, pick a payment plan, and get your marketplace deployed in minutes. So, the first advantage of an SaaS solution is speed.

When you open a marketplace on a cloud-based platform, you don’t deal with installation, renting a hosting, server configuration, and other technical stuff. The vendor’s backend team does everything for you. No technical stuff is another advantage of SaaS.

What about the cons of an SaaS solution?

SaaS systems are closed. You don’t have access to the backend, you can’t tweak the platform and can’t customize it on the code level. You also can’t tweak the hosting because you have no access to it.

The vendor decides for you what functionality you can use. If the vendor thinks some features are not popular (and you do use them), they just remove those features without asking.

Data security can be another concern. The problem is that all your data is somewhere on the vendor’s servers and not on your own server. For a big global marketplace, it is more secure to keep your data on your side.

You don’t really own your cloud-based marketplace. You rent it. When the vendor decides to change conditions or policies, you have to accept them or leave.

What is an On-Premise Marketplace Platform?

An on-premise marketplace solution is the one you download and install on your own server. As opposed to SaaS, you really own the marketplace built on an on-premise platform.

The main advantage of an on-premise marketplace platform is that you have full access to the platform, its frontend and backend settings, server configuration, and all. You control your marketplace at 100%. Want to disable some features and enable some other? No problem—just do it in your admin panel.

Scalability is another advantage of a downloadable solution. Many on-premise marketplace platforms give you access to their source code. For some platforms, it’s a paid feature, for some its free. But with a downloadable solution, you can customize your marketplace on the code level and scale it limitlessly. It’s not possible with the cloud.

Another pro of a downloadable platform is data security. You have all your data on your own servers. No one except you is responsible for it and no one except you has access to it.

A one-time fee is one of the most important things that marketplace owners consider when choosing the platform. Usually, you buy the license for an on-premise marketplace software once, and it becomes yours forever. You don’t pay the rent monthly like with SaaS.

Normally, on-premise marketplace software is more feature-rich than SaaS. It’s more powerful and suits better for building big global eCommerce malls.

What about the cons of an on-premise marketplace solution?

Choosing a hosting and manual installation. This is why some entrepreneurs prefer SaaS platforms where you don’t need to worry about technical stuff. Installing a downloadable platform on your server requires some minor technical skills. Some vendors offer paid installation services but you will need to get the hosting anyway.

What Characteristics a Marketplace Platform Should Have for Building a Global Marketplace on It?

Security. Scalability. Flexibility.

The global online mall is a big deal. It can contain hundreds of thousands of products, users, and other important data. Storing all this data on some third-party servers is not what you need. You need your own infrastructure—hosting you choose and the platform with the full access.

If something happens on your side, you can quickly fix it. If the trouble is on the third-party side, you won’t be able to restore your marketplace by yourself. You will have to fully rely on the vendor. That’s why you should care about your marketplace data security and store it on your side and not in the cloud.

The bigger the marketplace, the more features it needs, the more traffic it must withstand. When choosing an eCommerce marketplace solution you should keep in mind that you will have to adapt your marketplace to the changing business environment. Make sure you can scale your marketplace platform by extending its functionality and developing your business-specific features.

Flexibility is another important characteristic of your marketplace software. The platform should be feature-rich out of the box so that you don’t need to hire a developer right away. Also, it’s important that the platform supports different sales scenarios such as selling physical and digital products, working with several storefronts for different countries, and so on.

So, SaaS or On-Premise?

For a small niche marketplace, it is better to choose a simpler platform. A SaaS marketplace solution such as Sharetribe or Arcadier will fit these kinds of projects.

For a big global marketplace such as Amazon and Etsy, it is better to pick a commercial on-premise marketplace platform. We looked through the popular user reviews websites such as Capterra, G2, and SourceForge and found the most popular on-premise marketplace solution for now. It is CS-Cart Multi-Vendor.

This is a professional eCommerce marketplace platform with access to the source code, one-time fee, quick deployment, and 500 eCommerce features out of the box. The platform integrates with over 70 payment gateways by default including Payment21®.

If you’re not sure you can choose the right hosting and install CS-Cart Multi-Vendor manually, they offer a paid installation service and hosting plans.