July 28, 2010, 3:08 PM

Buy.com plans to roll out a white-label marketplace

Two large retailers plan to add the offering to their sites.

Zak Stambor

Managing Editor

Lead Photo

Neel Grover, CEO and president of Buy.com

Mass merchandise online retailer Buy.com Inc. plans to roll out a white-label marketplace later this year that allows retailers to sell all or some of Buy.com marketplace’s more than 7.5 million SKUs on their own sites.

Two large bricks-and-mortar retailers are working with Buy.com to add the marketplace offering to their sites before the end of the year, Neel Grover, CEO and president of Buy.com, No. 32 in the Internet Retailer Top 500 Guide, tells Internet Retailer.

The planned move, which will take effect later this year, would be the most dramatic change Buy.com has made since Japanese Internet marketplace operator Rakuten Inc. reached an agreement to purchase Buy.com for $250 million in May.

Rakuten operates Rakuten Ichiba, a Japanese marketplace that combines shopping and entertainment and focuses on helping merchants develop relationships with shoppers. “As a company, Buy.com shares our vision for the future of e-commerce, as a platform to give consumers the best value no matter their location and to merge shopping with entertainment, and to help retailers build deep and lasting consumer relationships,” Hiroshi Mikitani, Rakuten founder, chairman and CEO, said when the acquisition was announced.

Retailers hosting Buy.com’s white-label marketplace will be able to control the look and feel of the marketplace and Buy.com will work with them to fully integrate the marketplace into their sites so that consumers can complete the marketplace transaction on the retailer’s site.

Buy.com and the retailer hosting the white-label marketplace will both receive an undisclosed commission from each purchase from the marketplace retailer actually selling the merchandise.

“For a retailer with a lot of traffic that wants to sell things other than current offerings, this can empower them to offer consumers the full marketplace experience without having to do the five years of tech work that we’ve already put in,” says Grover.

Buy.com also plans to open its marketplace to more small and mid-size merchants later this year.

“We’ve been very selective about who we allow to sell on our site,” says Grover. “We have a couple thousand sellers on the site that meet highly selective criteria to be allowed to sell on our marketplace.”

The new initiative, which borrows from Rakuten Ichiba’s model in Japan, will dramatically expand the number of retailers that sell on Buy.com. “Rakuten is all about empowering merchants—regardless of their size,” says Grover. “In Japan Rakuten’s marketplace has large sellers like Wal-Mart and small sellers who sell products like quail eggs. They empower everyone and that makes a great ecosystem. Since May, we’ve examined the way their business works and it has led us to reevaluate our current model of focusing on large sellers.”

Rakuten Ichiba also gives retailers freedom to design their web stores and not just pick from design templates in an effort to facilitate closer ties between its merchants and their customers. Buy.com may be adopting similar changes, says Grover. “We’ll give sellers more flexibility on the site,” he says. “You’ll see more of the merchant’s brand on the site. Sellers will have more brand recognition throughout the site.”

The planned changes come on the heels of Buy.com’s announcement last week that it extended its return policy for from 30 to 45 days for goods Buy.com sells directly. Buy.com says it will offer merchants that sell on its marketplace the option to add the 45-day return policy. Retailers that do so will be given more prominent site placement, as well as a special badge denoting that they participate in the program.

“The marketplace is a really important part of our business and it has been an important part for the past five years,” says Grover. “Going forward it will be a bigger and bigger part of our business.”

Comments | 2 Responses

  • The white-labeling model is going to be like GSI Commerce operating store front for many brick-and-motor brands from its warehouse(s) and drop-shippers. The rev-sharing (who pays whom) may differs in terms of negotiation. In the business world, this means more choices for offline merchants to pick their backend partner for their online operation. The competition is heating up as Buy.com entering the game. For consumers, it means buy.com bargains as listed on http://www.ineedabargain.com/deals/tagged/11/Buy.com will be reached by more potential consumers.

  • What an interesting new feature. I love the idea and am anxious to see it in practice, notably how it affects conversion rates of ecommerce merchants' main product lines.

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