Amazon started as online book store and has grown to be the worlds largest online retailer.
Do retailers understand what a marketplace is?
It’s been an interesting year already with the news that Halfords marketplace is to close and the question has to be asked if retailers really understand what a marketplace is when they open one on their ecommerce website.
The first thing to note is that some retailers open a marketplace in the hope that their merchants will be willing to supply goods to compliment, but not compete, with their own product selection. Retailers also have a choice whether to have a relatively open marketplace where merchants can apply to sell, or to have an invitation only marketplace where merchants are selected according to the retailers criteria.
Open or closed marketplaces
It’s notable that Halfords were an invitation only marketplace and also hearsay from merchants says that they wanted to protect their own brands and were selective in the product ranges that they would allow partners to upload. By not giving merchants the ability to freely compete against Halfords own product ranges it limited sales for merchants and choice for consumers.
Gameseek have taken a more Amazon like approach and give merchants full rein to compete against Gameseek as a retailer. They go so far as to make their own selling prices freely available and accept that if a merchant has the same product or similar product at a better offer then it’s likely the merchant who will win the sale.
There are really only two models of marketplace – those which are pure marketplaces such as eBay and those which are retailers operating a marketplace and, whilst merchants will often times complain about Amazon competing with them, an open platform where the consumer is offered the best proposition from either the retailer or a merchant which has been proven successful in attracting and retaining merchants.
Tesco, as in invitation only marketplace, have yet to prove their model a success. Having launched in 2012, they are still hardly known as a marketplace outside the ecommerce world and it’s perhaps fair to say that they’ve had a number of financial distractions in recent times meaning that development of their marketplace has taken a back seat.
Do retailers want to be a marketplace or a dropship retail experience?
Looking back at UK retailers who have opened marketplaces, it would appear that many are too protectionist and haven’t really embraced the concept of what a marketplace is. Some almost appear to use their marketplace platform as an opportunity to operate a dropship model with merchants merely used to fill gaps in their own inventory rather than performing as a true marketplace.
Operating a dropship model is a perfectly valid way to run a business, many retailers already do this for large bulky items like garden sheds, greenhouses and sofas. However, retailers need to recognise the difference between running a dropship model and running a marketplace.
What do merchants want?
Merchants are open to trading on multiple marketplaces but if a retailer dresses up a dropship model as a marketplace then merchants will quickly disengage and focus their efforts elsewhere. For a marketplace to be a successful proposition for a retailer then they need to take the tough decision to be a true marketplace and openly compete with their merchant partners.
If the model for a marketplace is to be a dropship model then the retailer needs to be clear about this and set expectations before merchants sign up. The retailer will also needs to understand that there will be a lower level of engagement and loyalty from their merchants and that ultimately their dropship marketplace will face very different challenges than a true marketplace.
As a merchant, if you have sold on a dropship marketplace what challenges did you face or were the level of sales sufficient that having your ability to compete openly with the retailer balance out not being able to freely list your entire inventory? Would you prefer to be effectively a dropship supplier with the retailer picking and choosing from your product selection, or do you prefer the Amazon and Gameseek model where the retailer operates as another, albeit much larger, merchant and you can openly compete against them with your full product range?
“Looking back at UK retailers who have opened marketplaces, it would appear that many are too protectionist and haven’t really embraced the concept of what a marketplace is”. They want their cake and to eat it.
We have found this with the UK retailer models we work with. GAME hide our new and mint behind their pre-owned. ShopTo we are surprised we sell anything as we cant even find our products. Gameseek have the correct idea but we still can’t get new products created.
UK is a tough market, low margin, and dominated by the big two. We even got an email from Tesco but have decided not to pursue the UK anymore.
The retailer markets we work best with are all based overseas. Some have worked better than others. We need to be nimble these days if it is not working for us we drop it and move on.
Our most successful market is very flexible, we have direct contact, they work with us on new lines and even on FEES and take our feedback onboard. They even mystery shop the merchants to make sure they are not dealing with chancers (we get a lot of them in our industry, repacking pre-owned and selling as new).
So successful in fact were able to drop Amazon FBA on the 1st Jan 18 and not felt the need to go back so far.
They are constantly evolving the marketplace which is important and allow us to showcase our brand, where GAME in the UK seem to have stood still.
Things change rapidly in this day and age, but using “some” of these retailer markets has worked for us.
If the retailer markets are “flexible” work with the merchants it is easy money with no risk.
If they get like Halfords and want their cake and to eat it they will fail.