Big-box retailers forge their own online marketplace
With companies such as Amazon and eBay accounting for significant portions of annual eCommerce transactions in the United States, more big-box retailers are looking to join the race.
As Internet Retailer noted, Staples is one of the many major retailers currently forming its own marketplace. The company announced in October that the move would help it expand product selection by as much as 400 percent. Best Buy, Wal-Mart and Sears are some of the other household name retail brands that have forged their own marketplace.
Five years ago, Amazon was the only top 10 e-retailer in North America to run an online marketplace. With the addition of Staples and other major retailers to the mix, that figure has grown to five. Looking beyond the top 10, there are other major players as well, such as NewEgg, a computer electronics marketplace.
Why an online marketplace is good for both the internet retailer and the owner
Marketplaces can be tremendously beneficial for both the owner and the seller, as the proprietor is able to leverage them as an additional revenue stream while sellers gain access to the marketplace’s wider or more targeted audience.
For marketplace owners, the gross margin on commissions is significant, especially in a post-recession era where many businesses are trying to find new opportunities to improve profit margins. Owners can take out as much as 20 percent each sale even though they may not make quite as much as if they had sold the item from their own inventory. It’s almost pure profit.
Additionally, and as is the case with Staples, crafting an online marketplace also allows brands to offer more items to consumers. Although customers may not buy directly from the retailer in question, they are still on the merchant’s website making the purchase, which can create a stronger brand connection. By owning the online marketplace, retailers also gain access to the detailed browsing and purchase history of customers, which could be sold to sellers to further profit on marketplace activities.
For the seller, simply the opportunity to reach a broader or highly specified audience may be enough. For example, according to comScore, more than 100 million people visit Amazon every month. For most sellers, that would be a huge potential audience they could never reach on their own.
In other instances, selling on a niche online marketplace may help an internet retailer engage a more targeted audience. For example, NewEgg may not be as a big as Amazon, but it caters to a very specific product category of consumer electronics. Selling on that site could aid an internet retailer if they want to target that kind of audience.
Regardless of whether an internet retailer owns a marketplace or selling on one, it’s pivotal to leverage an omni channel eCommerce solution that can help them manage all aspects of their eCommerce operations.