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