How to compete with hosted e-commerce solutions?

It depends on what you want to do. Self-hosted solutions tend to be more flexible and customizable.

On the other hand, hosted solutions are more likely to be PCI compliant so customers might have the option of storing credit card numbers (note: not all hosted solutions are PCI compliant, so you will have to ask and do your own research).

If customers “don’t get” what you’re trying to sell them, make a short bulleted list of actual features/benefits that is easy to understand and doesn’t read like a press release.