As retail continues its digital transformation, consumer brands and traditional retailers are producing Amazon-like marketplaces that could lead to new battles for products and customers.
On June 8, 2021, Oriental Trading Company, Inc., a discount party supply chain, announced that it would be the youngest (at the time of writing) traditional U.S. retailer to open an online marketplace.
“Our company’s vision is to make life more comfortable, and that’s exactly what we’re building for our customers with this new solution. By creating this robust marketplace, customers can easily get everything they need at the prices they want in one place, ”said Steve Mendlik, President and CEO of Oriental Trading Company.
One way forward
Retailers like Oriental Trading Company face competition from all sides. Many retailers and direct-to-consumer brands believe that marketplaces are a way forward.
“Let’s start with the model that doesn’t work,” said Bloomreach CEO Raj De Datta, author of The Digital Seeker: A Guide for Digital Teams to Build Winning Experiences.
“What no longer works is, ‘I’m a retailer. I have a certain choice. I source all of my products. I work with all of my brands. I deal with the supply chain. I open a number of brick and mortar stores for my sales. I market online and offline. I am addicted to the number of people who come into my store and buy the product I bought from someone else and upgrade it a little to cover my margin and finish it off. ‘
“This retail model that has existed for a hundred years is gone,” said De Datta, speaking at a live event for CommerceCo from Practical Ecommerce.
What does the future look like for these companies? De Datta suggested finding a special niche, developing DTC brands or becoming a marketplace.
“This third opinion of becoming a marketplace is only possible for the greatest [brands] – a target or a Walmart that is incredibly large and wants to play the selection game, ”said De Datta.
Products and target group
The selection game, as described by De Datta, consists of two parts.
First, marketplaces need many products in relation to the segment served.
Oriental Trading Company serves a fairly small niche, selling 50,000 products of its own. His new marketplace could eventually offer tens of thousands more.
Amazon offers a total of around 350 million products. According to BigCommerce, about 12 million of these are sold by Amazon, the rest by marketplace sellers.
Second, marketplaces need an audience. Amazon has around 200,000 million Prime members. This audience, and the rest of the shoppers who visit Amazon, are vital to the company’s success.
As the number of retail marketplaces increases, so should competition for both products and people.
Marketplaces made easy
A list of popular U.S. retail marketplaces includes Amazon, Walmart, eBay, and Etsy. Others worldwide are Mercado Libre (Latin America), Rakuten (Japan), AliExpress (China) and many more.
But what about Best Buy, 1-800-Flowers, Kroger or Urban Outfitters? Everyone started a marketplace. In addition, they all use a marketplace platform called Mirakl. What Shopify and BigCommerce are to retailer-based e-commerce are to retail. Mirakl helps retailers turn a well-stocked ecommerce site with a reasonable audience into a third party platform.
However, the ease of opening a marketplace doesn’t guarantee more success than a single ecommerce site.
Emerging marketplaces have to fight for products and people. Walmart sells groceries. Kroger sells groceries. Giant Eagle (another Mirakl customer) sells groceries. Each of them need to attract both third party sellers and regular buyers. What applies to food also applies to apparently every other product niche.
On the one hand, this may not be any different from the competition for customers in a stationary or online shop. On the other hand, marketplaces often include providers as direct sellers.
Think of all of the Digital Native DTC brands that are sold on Amazon. Attracting these salespeople is very different from calling a retailer and buying products to put on a shelf. And imagine that these brands are suddenly able to offer products on 10 or 20 marketplaces. They could be much more selective with their inventory, among other things.
In short, marketplaces could be tempting to many businesses. But the competition will be tough. It could even be a bloodbath.