Does every online retailer need to have a third-party marketplace?

Discussion
Source: thebay.com
Jun 04, 2021

Hudson’s Bay, Lands’ End and United Natural Foods (UNFI) all recently launched online marketplaces. Saks.com, too, is exploring one.

Hudson’s Bay said its launch is part of its digital-first strategic evolution. The Canadian-based department store retailer wrote in a statement, “Whether it’s an offering that falls within Hudson’s Bay’s current assortment of apparel, home, beauty and accessories, or a new category introduction, quality vendors are encouraged to join hundreds of new merchants that will launch in the Marketplace on thebay.com in 2021.”

Lands’ End Marketplace spans categories such as footwear, home décor and intimates alongside the full product assortment of the brand. Lands’ End said in a statement that its marketplace platform “has a small product catalog which allows for greater visibility amongst partner brands. This also allows new vendors to take advantage of Lands’ End’s qualified traffic and industry leading conversion rate.”

UNFI said its new marketplace will enable the retailer “to extend product range, improve customer experience and streamline vendor onboarding.”

In a quarterly letter to vendors obtained by WWD, Marc Metrick, Saks.com’s CEO, said the luxury website will test a marketplace in coming weeks. He wrote that the format will allow Saks “to better understand and refine the experience for customers and brand partners as we identify opportunities to expand the breadth and depth of our assortment while maintaining the curated experience for which Saks is known.”

Amazon.com operates the dominant online marketplace with Walmart and eBay having sizable platforms. Google, Target, Instacart and Kroger were identified as emerging marketplaces in Feedvisor’s “Brands, Amazon, and the Rise of E-Marketplaces” study.

Express, Urban Outfitters, Crate & Barrel, J. Crew and Ahold Delhaize are among niche retailers with marketplaces. Macy’s drop ships certain categories and is considering a formal marketplace.

For retailers, third-party handling of delivery, returns and other aspects of the customer experience creates operational and reputational risks. Third-party sellers are also introduced to their customers.

Expanding assortments by adding third-party sellers capitalizes on the “endless aisle” potential of the internet to offer customers more choices and can accelerate online growth.

DISCUSSION QUESTIONS: Do you see more benefits than drawbacks for niche retailers launching third-party marketplaces? Of the retailers cited in the article (Hudson’s Bay, Lands’ End, UNFI, Saks.com), which would benefit the most from a marketplace?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"For some there are certainly benefits. But just doing what everyone else is, how they're doing it, because they're doing it is never the best strategy for meaningful growth."
"Small trials, thoughtful curation of products, and logistic and service integration will be key. It’s a big commitment and not one to go into lightly..."
"A successful online marketplace is two-sided: there must be both buyers and sellers. Finding vendors to partner with will likely be the easy part..."

Join the Discussion!

21 Comments on "Does every online retailer need to have a third-party marketplace?"


Sort by:   newest | oldest | most voted
Neil Saunders
BrainTrust

The addition of marketplaces can be good in terms of drawing traffic to the website, generating some incremental revenue, and broadening the offer without extortionate expense. However for traditional retailers – especially niche ones – marketplaces need to be carefully managed and curated and not just a miscellany of random products. Retailers also need to do some degree of vetting on marketplace vendors to ensure reliability and trustworthiness – after all, they are selling under the umbrella of the retail brand so any poor customer service rubs off on the retailer running the marketplace.

Bob Amster
BrainTrust

As in many cases in the retail industry, there are categories in which certain concepts are a no-brainer and other concepts are a “don’t bother.” Third-party marketplaces is one of those concepts.

Jennifer Bartashus
BrainTrust

We will see more retailers try third-party marketplaces, though not all will be successful long term. It comes down to execution. Marketplaces can take the management of long-tail assortment off of retailers while still giving customers a breadth of product choice. This is appealing from an inventory/cost perspective, and if done well can be a benefit for the retailer. But having a marketplace also requires a different type of expertise to ensure vendors are a good match for the retailer’s brand identity, that pricing is reasonable and fulfillment is within customer expectations. Otherwise customers can be disappointed, which could be worse than not having a specific product.

David Naumann
BrainTrust

The proliferation of marketplaces is diluting the value of the smaller niche marketplaces. It will become increasingly difficult to increase awareness and attract visitors to the lesser known marketplaces, as many consumers will stick with the marketplaces where they are loyal shoppers, especially if it has everything they need.

George Anderson
Staff

I think a Target-like approach with a curated selection of marketplace providers could be incrementally effective for retailers in scaling marketplace ops and addressing the branding issue where the retailer is praised or blamed for transactions for which it serves as a conduit.

Shawn Harris
BrainTrust

I believe that it is a winner-takes-most world when it comes to online. Though I do think that if you can monetize your distribution (aka eyeballs), logistics, and brand in your retail segment — profitably — then you should establish a marketplace.

Chuck Ehredt
BrainTrust

Considering marketplaces now means that brands are already late to the party. However the opportunity for grabbing market share is still possible with an intelligent design, good mix of appropriate partners, and efficient operations to ensure real value can be delivered to customers.

Marketplaces have been evolving for thousands of years. Before Amazon, the most dramatic evolution was shopping malls. Who knows what it will be in 20 years but, for the next 10 years, capturing and retaining customers as they increasingly migrate purchases (or at least shopping) online is of paramount importance. That can be achieved by operating a marketplace, but even with success of their own marketplace brands need to learn how to operate in marketplaces not controlled by themselves. That is where customers are spending their spare time and brands need to be visible in the appropriate digital spaces.

I see lots of medium and smaller brands optimizing their presence in marketplaces, but very few large brands engaging in this. That is a massive mistake for the large brands.

Ken Morris
BrainTrust

This is clearly a brand-driven decision, but it should be on every retailer’s radar. In part, it’s akin to a leased department in a store. If the third-party is somehow perceived as a subset of the main brand, then everyone wins. But premium brands need to be especially cautious here. At what point does a carefully branded item lose its claim to being unique? Exclusive? Superpremium? The risk of helping customers discover unknown brands is real, and especially dangerous if the shopping experience somehow takes the shine off the apple of a luxury brand. Proceed with caution!

Gene Detroyer
BrainTrust

Why not?

As long as the vendors are vetted, it makes logical sense for the shopper and there is no demand of exclusivity for the participant — just do it.

Online is all about convenience. The fewer places a shopper has to go, the more likely the shopper will come to your site. And the ROI of a marketplace is always outstanding.

Sterling Hawkins
BrainTrust

For some there are certainly benefits. But just doing what everyone else is doing, how they’re doing it, because they’re doing it is never the best strategy for meaningful growth. Every one of these companies would be best served rethinking their plans, partners and execution to create something uniquely suited to their market and customers.

Paula Rosenblum
BrainTrust

It’s useful to expand the assortment and potentially make the site more sticky, but I suspect it’s more trouble than it’s worth over the long haul.

Shouldn’t a retailer stand on its own merits?

Shikha Jain
BrainTrust

A successful online marketplace is two-sided: there must be both buyers and sellers. Finding vendors to partner with will likely be the easy part, though careful category and assortment curation is important. The key piece of the equation is the consumer — making your platform work for shoppers. Take Amazon. The top reasons shoppers go back to Amazon again and again are selection, convenience, and ease of price comparison. Value and price-related sensitivities are secondary for these consumers — likely the case for those who shop at Hudson’s Bay, Lands’ End and Saks, especially if they are able to provide the kind of assortment and convenience factors that consumers are looking for. The value offered by a strategically executed third-party marketplace that keeps shoppers on your website ultimately outweighs the risk for any retailer.

Patricia Vekich Waldron
Staff

There are other ways to expend resources to grow share with less risk than marketplaces.

Trevor Sumner
BrainTrust

Marketplaces implemented thoughtfully can drive incremental sales both from cross-sell, SEO, and promotional advertising in search, emails and in-store. The key is to make sure it doesn’t confuse the experience, dilute the brand, cause undue operational overhead or provide a bad fulfillment experience. Retail has a lot of things you have to get right, and there are many ways a marketplace can go wrong. Small trials, thoughtful curation of products, and logistic and service integration will be key. It’s a big commitment and not one to go into lightly as there are likely more efficient ways to drive incremental revenue, especially in improving the value of store footprints.

DeAnn Campbell
BrainTrust

I think shopping malls would be smart to integrate third-party platforms into their business model because they have the best portfolio of locally situated existing real estate to support that marketplace — more than anyone. It also makes sense for sellers in strategic categories – such as Walmart as a large multi vertical, or Lululemon as a wellness centered retailer, or Nordstrom as a luxury product retailer, as three examples. But if every retailer does it, then quality goes down and chaos ensues, prompting shoppers to retreat to Amazon.

Gene Detroyer
BrainTrust

Aren’t these marketplaces the strip malls of the future?

Ryan Mathews
BrainTrust

It all depends on the retailer, the brand, and the offering. If you are selling specialized high-margin items you will probably do just fine without a marketplace. The broader the offering, the more attractive marketplaces begin to look, but there is obviously a limit as to how many marketplaces consumers will support, especially when marketplaces begin to look like digital malls – lots of folks selling the same things to the same consumers. Finally, as to which of the retailers will benefit the most from a marketplace, it all depends on how it is constructed, what the assortment looks like, and, of course, execution.

CDimov
Guest

We all saw the big announcements about how marketplaces hit $2.67 trillion U.S. — and are now 62 percent of e-commerce sales. Marketplaces are becoming a growing piece of retail overall. So it’s best to embrace it early. Mostly, I see tremendous upside in launching a third-party marketplace. You get to curate the vendors on it, and expand your product offering to your clients. Plus you get a take of the GMV. Yes – you have to be vigilant about the vendor’s quality, service levels, return rates, etc., but that’s part of the game.

Expand your offering, take no inventory holding risk (vendor’s stock), and you get a portion of the sale to enhance your own gross margins! What’s not to love?

Andrew Blatherwick
BrainTrust
A marketplace is just an extension to the range of the retailer, rather like the idea of endless aisles. However, one big difference is that with a marketplace, some of the elements are out of the retailer’s control. That is where the dangers lie. If you are protective about your brand, do you really want someone else to be able to damage that brand by not representing the same brand values as yourself? You can, of course, police that through quality control, customer feedback and a careful selection policy to ensure that your brand is protected but not completely. The retailer also needs to ensure that they do not confuse the customer. If they stray too far away from their focus range, they will cause customers to question what they are doing and if they really are a specialty retailer at all. It seems like easy money — if you already have the e-commerce processes and technology in place, why not simply extend its usage? But beware, there are dangers and you have to know… Read more »
James Tenser
BrainTrust

I’d expect to see lots more retailers attempt to host e-marketplaces, but most will leave shoppers yawning. A curated assortment of vendors sounds high-minded, but will either create duplication if non-exclusive or make tenant brands hard to discover. Or both.

For tenant brands, the proliferation of marketplaces presents a management dilemma. How many e-shops can one maintain on multiple platforms before the returns diminish?

Robin Gaster
Guest

This is beyond stupid.

Marketplaces require a critical mass of both sellers and customers. Without enough sellers the catalog is bare, and without enough customers there are no sellers. Hudson Bay and Lands’ End have no chance of gathering either. It is possible to build a marketplace to challenge Amazon – I recently wrote about Gearflow for example – but this isn’t it. TBH there is no sign that either Walmart+ or the Target marketplace are meeting these twin requirements.

It’s also unclear what purpose this would serve. If modestly successful it would dilute attention from the host brand – the very thing it wishes to avoid – in exchange for a modest increase in customer visits.

wpDiscuz
Braintrust
"For some there are certainly benefits. But just doing what everyone else is, how they're doing it, because they're doing it is never the best strategy for meaningful growth."
"Small trials, thoughtful curation of products, and logistic and service integration will be key. It’s a big commitment and not one to go into lightly..."
"A successful online marketplace is two-sided: there must be both buyers and sellers. Finding vendors to partner with will likely be the easy part..."

Take Our Instant Poll

What’s the likelihood that significantly more retailers will be introducing third-party marketplaces over the next two years?

View Results

Loading ... Loading ...