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[9 comments]

Three ways the "other m-commerce" will change the retail game in 2014

January 23, 2014

Through a special arrangement, presented here for discussion is a summary of a current article from the newmarketbuilders blog.

Since the term was originally coined in 1997, "m-commerce" has referred to transactions from mobile electronic devices. Another "m" model promises to become the next retail game-changer: marketplaces, particularly among retailers seeking digital expansion.

Amazon created the forerunner of the marketplace model by offering a powerful platform for third-party sellers. These days, traditional retailers are getting in on the game in droves. Best Buy CEO Hubert Joly described its Marketplace expansion as one of three key initiatives going into the 2013 holiday season. Staples currently features 200,000 unique items online, but its plans are to reach over one million within the next year and a half. Walmart more than doubled its online assortments over the past year, to more than five million SKUs, with the lion's share of the expansion coming from its online marketplace.

Retailers' digital bazaars are fast becoming a go-to growth vehicle because they achieve three important goals:

1. DODGING "DEATH BY CATEGORY KILLING"

Carrying wide assortments within set categories was a recipe for retail success in the 80s, now the explosion in online competition and price transparency make it a liability. The endless aisles of online marketplaces provide radical category expansion even as retailers shrink their physical spaces and slow down store growth. Staples' expanded marketplace will offer everything from medical supplies to hard hats, even as the retailer sets its sights on reducing retail floor space by 15 percent over the next three years. Through its marketplace, Staples will also collect commissions on every sale without having to take on inventory or markdown risk. Although marketplace commissions may be small relative to the margins on products that retailers stock and sell themselves, the ROI is sky high.

2. EXPANDING THE BRANDING

Target's recent acquisition of digital brands CHEFS Catalog, Cooking.com, and DermStore.com has created a de facto digital marketplace filled with unique items. CEO Gregg Steinhafel also hinted that the company would explore selling its brands through additional marketplaces beyond eBay. For retailers like Target that carefully guard their brand assets, expanding brands on the digital down-low in neutral environments makes a lot of sense.

3. AVERTING SCALE-FAIL

The real power of small-format retail launches and accelerations from retailers like Walmart is that these stores will also serve as pick-up locations for the thousands of unique items that Walmart offers online, including those from its marketplace partners. Target plans to implement in-store pick-up for web-only items this year, including for its three recently-acquired digital brands. Every store that these retailers operate will have the potential to facilitate sales that transcend the inventory and the category limitations of each store. Physical scale, fueled by marketplaces, is now a killer advantage.

Marketplaces may be the other m-commerce, but they will work best when tethered to mobile. If you're a retailer and your endless aisle assortments aren't accessible by mobile, your marketplace might be a misfire.

Discussion Questions:

Do you think marketplace platforms will become a major revenue tool for many retailers outside Amazon in 2014? How do you see marketplaces complementing physical store selling and supporting mobile commerce?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

What's the likelihood that marketplace platforms will emerge as a major revenue tool for several chains in 2014?

Comments:

My caveated YES is based upon two conditions. First the extended aisle SKUs must be easy to access and browse and secondly, they need to be affordably delivered in an timely manner. Near immediate gratification is a must for most products.

With those conditions met, in an over-stored market place, keeping the amount of physical square feet efficiently small, while embracing mobile commerce can bring multiple benefits to the retailer.

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Mark Heckman, Principal, Mark Heckman Consulting

Expanding brands in areas the retailer is known for such as the food and kitchen related items for Target as an extension of their already accepted image may be attractive to consumers. Expanding the number of items just to have more items will be difficult for consumers to identify with and/or associate with the retailer brand.

However, many products or items retailers make available to expand their marketplace is only one aspect. While the items themselves may fit with the brand and be attractive to consumers, success will depend upon how well the back-office technology integrates the inventory throughout the whole system enabling seamless visibility as well as the efficiency of the supply chain process. If all three aspects are not competitive with the best systems in the market, the company's efforts are not likely to be successful.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

Mark's caveats are well thought out, but there is another issue that this article is missing.

The success of these endeavors isn't about marketplaces, it's about the communities that can -- or can't -- be built around marketplaces. There's nothing for example to stop Walmart or Amazon or anyone else from offering all the same SKUs in a marketplace that say Staples offers in theirs.

So ... how will customers make a choice where to buy?

The easy answer is price, but given the margin elasticity of marketplaces, the potential exists for all retailers to achieve at least relative price parity.

So, the next "cut" on the decision tree might be convenience but again the expertise to create easily navigated websites with seamless transactional features is a commodity today.

That really leaves some non-transactional quality as the only viable path to competitive advantage. If a marketplace had the same emotional "stickiness" that say, a social network did then people would transact on it and rarely even look outside its borders.

Bottom Line: Once everyone invests billions building out these marketplaces, it ain't going to be the marketplace that wins, it will be the best designed community.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

I do think marketplaces are an important part of the e-commerce mix for many retailers/manufacturers.

Amazon (obviously) and eBay are already important channels for many. If you aren't selling through Amazon, you have at least had spirited debates about the pros and cons of doing business with your "Frenemy" in Seattle.

The jury is out on other retailers being able to establish robust marketplaces (Sears, Best Buy, and now Staples). Many resellers won't want to enable a competitor, so will prefer Marketplaces that don't compete with their own inventories. eBay is already a very good channel for many resellers. Rauketan already has a presence in the US and is getting more aggressive. The Alibaba Group is already huge globally and could decide to enter the US market.

Certainly as US companies start to expand globally, they are going to find that marketplaces are the dominant models in many geographies (China, India, etc...).

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Jason Goldberg, VP Commerce Strategy, Razorfish

The concepts of both extending selection by having third parties sell on your site and extending your reach by selling on other sites are compelling. But having spent a number of years running a good chunk of Amazon's third party marketplace, both sides of this process are difficult, complicated and challenging. Much, much more than most people realize.

On providing a marketplace, Amazon spent (and continues to spend) a LOT (Billions with a capital "B") of money on these programs. From the listing of products to ensuring Amazon brand promises are upheld by each of the sellers by continuously and aggressively monitoring the sellers' quality -- it is a serious investment. It's much more of commitment for a retailer than setting up and managing their own ecommerce site. I've also worked with a number of other online retailers who have hatched the idea of setting up marketplaces only to discover the requirements too daunting to pursue.

From the seller's side -- in general -- it works much better for smaller sellers who are looking for distribution and do not have brands to convey or protect. Larger retailers whose brands are an important part of their value find it difficult to communicate and support that advantage through third party marketplaces. In Amazon's case, it's the Amazon that brand enhances the offerings of third party sellers. (In fact, Amazon owns the customer and retains all the digital marketing rights to those customers.)

That said, I'm all for marketplaces. But it's important to understand the key trade-offs and the significant investments required to make them successful.

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Todd Sherman, CMO, Point Inside

Mobile commerce is going to be or I should say, is becoming the next big thing. Mobile is the wave of the future as far as connecting and using the web is concerned.

Interesting to note a new site called Jobaline has build a mobile job recruiting marketplace app that is totally focused on store-level employees.

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Mel Kleiman, President, Humetrics

This piece might also be called: The evolution of the category killer segment.

Here's what came to mind when I read each item:

1. Move more of your store online and add more products since your buyers already have access to the marketplace - after all, aren't our merchants an asset?

2. Use your relationships and know-how to deliver a total customer solution - think store-within-store as solution-within-site - after all, we do know something about the how's and why's of shopper engagement.

3. Support where the shopper is going as far as how they shop your category - local pick-up.

I wish the author added some words on service strategies and where they are going - after all, service does bring in money - isn't that commerce?

But all this makes sense to me - of course we all know that each retail-sub has their own nuances, but this is a nice framework - this deserves deeper intellectualizing and continuous thought. Nice piece.

Vahe Katros, Consultant, Plan B

The first thing that comes to mind with this question is simple: Go where the customers are (going).

In some cases, companies like Amazon.com create the market and the sales channels. Others follow and recognize where there customers are and how they are going. If it's on mobile devices, have the presence. It's not prudent to think that the way our customers buy is going to be the same as it was ten years ago. New channels will complement or potentially obsolete existing channels.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

There is no doubt about the fact that mobile is the next big thing in the retail industry. Unique mobile solutions will not only simplify in-store retail operations for the retailers, but will also significantly improve customer experience.

Arusha Imtiaz, Marketing Executive, Confiz Limited

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