September 1, 2010, 10:34 AM

Making their move

(Page 2 of 3)

Two large bricks-and-mortar retailers plan to add the Buy.com marketplace offering to their sites, says Grover. Retailers tapping into the selection on Buy.com's marketplace will be able to control the look and feel of the marketplace, all the way to checkout, which will occur on the retailer's site, not at Buy.com. Buy.com and the retailer hosting the 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 its current offerings, this can empower the retailers 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.

In strengthening its marketplace offering, Grover says he hopes to entice more sellers and buyers to look to Buy.com. "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."

More selection, more options

The marketplace will also be a bigger part of the business at Sears.com, which introduced its online shopping mall last year, increasing its selection by some 10 million products. "We already offer just about every category, but the marketplace allows us to add depth and round out our assortment," says Imran Jooma, general manager of e-commerce at Sears.

Enabling outside merchants to sell on its site means Sears.com can offer more goods without taking on the risk of buying inventory or establishing relationships with a number of drop-ship vendors, says Nikki Baird, a managing partner at Retail Systems Research LLC. "Offering a marketplace is a way to achieve the same benefits but without that risk," she says.

But in recent months Sears' focus increasingly has been on offering consumers more convenient delivery options and drawing in local merchants to offer their goods through Sears.com.

To gain an edge against the online-only marketplaces such as those on Amazon.com, eBay and Buy.com, Sears is leveraging its MyGofer service, which allows consumers to order groceries and other products online for pickup at stores or for home delivery in some areas. The retailer, which in July began offering consumers in New York and Chicago home delivery of groceries, prescriptions and other items from its mygofer.com e-commerce site, has expanded that option to merchandise sold by marketplace merchants for consumers in the Chicago, Boston, Washington, D.C., and New York City areas. Consumers can bundle together items from various marketplace merchants, as well as Sears' own retail sites, for one delivery price.

The service is part of Sears' local marketplace, which launched in August to provide a venue for local retailers to sell to consumers in the same metropolitan area. As an added convenience, consumers can choose to receive same-day or next-day pickup from either the marketplace merchant's store or a Sears or Kmart store.

Sears hopes the program lures regional chains and family-owned retailers to sell their unique products on Sears.com. For instance, Skinstinct, an organic apparel retailer in Chicago, is selling apparel such as a silver flare dress on the local marketplace.

To show consumers which products are available for local pickup or delivery, Sears has added a "Shop for items I need" tab at the top of Sears.com. The tab allows consumers to select "now," "later today," "tomorrow" or "anytime." The site then instructs the consumer to enter her ZIP code to see which products are available locally.

To grow the number of merchants selling on the local marketplace, Sears is automatically enrolling all new marketplace sellers in the local marketplace program for no additional fee beyond the marketplace's standard $39.99 monthly fee. The merchant then only has to designate the locations where MyGofer or consumers can pick up purchases, and specify which SKUs, and how much of each, are available locally.

The local angle could set Sears apart from other marketplaces, says ChannelAdvisor's Wingo. "It may be very appealing to be able to order groceries from one third party and flowers from another and have them delivered in one package," he says. "That's very interesting."

An exclusive club

While Sears seeks to entice many retailers, Wal-Mart is being more choosy, selecting a single outside merchant in each category. "They're looking at filling out their categories and selection and seeing who can help them do that in one fell swoop," Wingo says.

Using this approach, Wal-Mart has added nearly 1 million new items to its online product assortment by enticing retailers such as CSN Stores LLC, Pro Team Inc., Shoebuy.com, Tool King and eBags. Those retailers face little competition on Walmart.com.

"Rather than have to compete with 50 other retailers selling the same product, like we do on other marketplaces, we provide the assortment for Wal-Mart to add bags," says eBags' Cobb. "It's less confusing for the consumer and a better experience for us."

Cobb prefers that setup to that of Amazon.com, which can pull product images from any of its marketplace merchants' feeds. "So they may use our photo to sell a product to another retailer," says Cobb. "That's disconcerting. On Walmart.com if we provide an image of one of our products the sale goes to eBags."

Tool King's Donald Cohen agrees. "It's more of a true partnership," he says.

But, at the same time, it means consumers have less of a selection and there's not as much price competition. "If they want to expand their selection, it's a curious way to do so," says Paula Rosenblum, managing partner at RSR. "It seems confused—either you want to offer more variety for your customers or you don't."

Standing out

For all these marketplaces, as for Amazon and eBay, success will only come if they can attract many consumers. And that means coming up with a strategy that's in line with the retailer's brand, says Rosenblum. "The marketplace has to be true to who the retailer is," she says. "It can cause a brand to lose its identity if its marketplace goes up-market or down-market with its marketplace merchandise. The dustbins of history are filled with retailers who are no longer around because they went too far afield from their identity."

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