The acquisition will add more than 300 products to L’Oreal’s lineup.
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Marketplace participation is a growth strategy that brings in sales from shoppers who are comfortable with the service, selection or rewards programs at heavily visited sites like Amazon and eBay, and so might be more likely to start their product searches there than at eBags.com, says senior vice president Peter Cobb. "At some point, we recognized that there are some people who have loyalties to some retailers and may not want to start up relationships with other retailers," Cobb says.
Such loyalties, whether to an online marketplace or a mass merchant, are a fact of life for specialty retailers. To compete for their share of traffic and sales, they distinguish themselves by offering what's difficult for shoppers to find elsewhere online, or by wrapping their merchandise in customer service or product information that price-driven marketplaces and mass merchants may not offer.
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The assortment at niche retailer Houseofantiquehardware.com, for example, includes very specialized products such as a $760 mortise lock set based on the design of doorknobs that graced the grandest Victorian interiors. In addition to being unusual, the lock sets, like much of the hardware on the site, require specialized knowledge for installation.
The retailer, which also operates on NetSuite's e-commerce platform, provides that kind of information on its site and through its 800 number. It also offers information in the form of product reviews, which it recently launched in a bid to build up its community of historic home rehabbers.
It could not provide these features on the Amazon marketplace, where retailers can provide only limited product information in their listings. So the e-retailer has chosen not to sell on Amazon. Instead, it seeks to leverage Amazon's traffic by purchasing Amazon Product Ads that appear on Amazon.com as listings in relevant product search results. Links in those listings direct shoppers to product pages on Houseofantiquehardware.com.
Other specialty retailers sell some products on marketplaces, while retaining certain items exclusively for their own web sites, where their profit margins are highest.
EBags, for example, puts only 75% to 80% of what it sells on its own site up on Amazon's marketplace and slightly less on Walmart.com. It retains some products exclusively on its site as a competitive strategy and to honor agreements with some manufacturers who don't want eBags to distribute their products beyond eBags.com. Many manufacturers of higher-end goods prefer not to associate their brands with discount-heavy sites like eBay.
Cobb calls such "competitive partnerships" a new reality. While selling on Amazon and Walmart.com can bring eBags sales, the customers who buy there belong to those venues, he notes, and they cost eBags about the same cut of revenue as comparison shopping engines do.
Sales on eBags.com are more lucrative. But to bring more consumers to its own site eBags.com must offer more, Cobb says. "We understand that the eBags shopping experience needs to be far superior," he says. "In some cases we don't have an edge on the assortment, so we have to have a faster site, superior navigation and search capability."
EBags also looks to distinguish the shopping experience on eBags.com with specialized tools it designed, such as its laptop case finder that matches some 2,000 cases with the dimensions of popular laptops, drawing the laptop specs from online comparison shopping portal CNET.com. Shoppers that engage the tool, Cobb says, convert at triple the rate of those who browse laptop cases on the site but don't use the finder tool.
The growth of online marketplaces and the growing web investments of major retail chains kick the online competition for customers and sales up another notch for specialty retailers. Not only do they battle each other for the Buy button, but they also now face bigger competitors with more reach and deeper pockets—in some cases, selling the same merchandise. To continue to thrive, they'll need to make not only their product offering but the experience of shopping at their online stores something special.