September 1, 2009, 12:00 AM

Walmart creates a niche strategy for the third-party marketplace business

With the launch of a new marketplace, Walmart.com sees a key chance to build a business among niche online retailers that want exposure to an e-commerce brand maintained by the world’s largest store-based retailer. But Amazon.com and eBay are far ahead.

With the launch of a new marketplace, Walmart.com sees a key opportunity to build a third-party business among niche online retailers that want exposure to an e-commerce brand maintained by the world’s largest store-based retailer.

By building a third-party marketplace and signing up online retailers such as CSN Stores LLC, eBags.com and Dreams Inc., Walmart.com, No. 13 in the Internet Retailer Top 500 Guide, also sees a chance to offer niche merchandise it wouldn’t otherwise carry and do so in time for the upcoming holiday shopping season.

“Our focus is always on our customers and by adding nearly one million new items we give them even more reasons to shop Walmart.com,” says a spokesman. “We’re very pleased that Walmart Marketplace offers customers more selection and added convenience.”

Walmart.com, the e-commerce arm of Wal-Mart Stores Inc., rolled out Walmart Marketplace yesterday. The new marketplace is featured prominently on the home page and gives shoppers access to expanded merchandise in 32 categories, including products offered by other merchants in the home, baby, toys, sporting goods, shoes, bags, luggage, and licensed sports apparel, products and collectibles categories.

“We carefully chose three select retailers based on their ability to provide strong customer support and offer large assortments of high-quality brands and products,” the spokesman says.

Walmart.com isn’t revealing many details on Walmart Marketplace, including any per-transaction or set-up fees it’s charging participating retailers under the marketplace program. With Walmart Marketplace, Walmart.com will process all transactions, but individual merchants will be responsible for fulfilling and shipping each order, and handling customer service, exchanges and returns.

“We’ve integrated additional items into our online product assortment at Walmart.com,” the spokesman says. “Each retailer is identified on individual product pages in the top-right corner for Walmart Marketplace.”

Online retailers that signed up for Walmart Marketplace aren’t saying much about the new relationship either-at least for now. “We are delighted to be part of a select group of online retailers that Walmart.com has chosen for this program,” says CSN co-founder and CEO Niraj Shah.

After Amazon.com Inc. and eBay Inc., Walmart.com is a late comer to the third-party marketplace and doesn’t have much time to catch up with the established players, says Scot Wingo, CEO of ChannelAdvisor Corp., which helps retailers sell through online marketplaces like Amazon and eBay. “They are a good four years behind Amazon, and Amazon has a hell of lead with a marketplace that’s generated estimated sales of $4 billion to $6 billion each year,” says Wingo. “They also are Wal-Mart-clearly they can’t partner with many click-and-mortar folks as they tremble in fear of the 800-pound gorilla of the retailing industry.”

To succeed, Walmart.com needs to recruit more online retailers that offer Walmart.com shoppers different and unique products, Wingo contends. “Online retailers may be more open to partner with them versus Amazon because they are actually much smaller,” he says. “For its third-party marketplace, Amazon charges 8% to 15% depending on the category and Walmart.com has a chance to attract merchants if their fees are reasonable.”

For its part, Walmart.com expects to add more retailers to Walmart Marketplace in the coming months. “Walmart Marketplace enables select retailers to offer new products at Walmart.com, giving customers more selection, added convenience and the trust of purchasing these products through Walmart.com,” the spokesman says. “We’ll continue to further expand our online assortment in the coming months.”

Walmart.com is the latest major player to stake a claim in the third-party marketplace business. But Wingo also expects other major chain retailers and web merchants to follow Walmart.com into the market.

“Imagine a day when Target, Office Depot, Staples, Dell, Apple, OfficeMax, Sears, CDW, Best Buy, and even Google and Microsoft all have some flavor of a marketplace,” says Wingo. “If that plays out like I think it will, then selection and product differentiation become king and you will see the larger retailers snapping up others through acquisition, or at least the categories of products they view as exclusive.”

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