CEO Sharon Price John says Build-A-Bear’s old e-commerce system is a big reason for disappointing online sales in December.
(Page 2 of 3)
Meanwhile Staples and rivals like Office Depot Inc. face more competition on the web. Amazon and Wal-Mart are among the general merchandise retailers that have become more aggressive in selling office products online—driving Staples in 2013, for instance, to match Amazon prices on identical product for the holiday shopping season.
To compete online in the future, Staples is taking steps to offer more products on its e-commerce sites, without investing a lot in additional inventory. The retailer aims to increase its B2B and consumer product offerings to more than 1 million SKUs from about 200,000. It plans to get there via a combination of its own sourcing and fulfillment, drop-shipping by suppliers and products offered by third-party sellers through a marketplace. The marketplace will enable Staples to boost product categories where its own SKU range is shallow. For example, Niraj Shah, CEO of home furnishings and decor e-retailer Wayfair.com, says he expects to list 50,000 SKUs on the Staples marketplace this year.
"Businesses have lots of needs beyond office products, and that's what we're going after," says Faisal Masud, Staples executive vice president, global e-commerce. "Businesses may need hard hats or networking technology, or products for their employee break rooms. We'll be covering any business needs." That will help move Staples into product categories, such as janitorial supplies, not impacted by the move to digital communication. And Staples will take a commission on marketplace sales, as all commercial marketplace operators do.
Among the biggest challenges is building the technology to support the increasing number of SKUs and product information, and enabling self-service features for third-party sellers. Staples, like Wal-Mart, is making big investments, including in developing e-commerce-focused research centers. Staples opened the doors of its "Velocity Lab" in the Boston area in December 2012 and plans to build another in Seattle. Those centers, and the marketplace push, fold into Staples' larger effort to reduce its retail floor space by 15% over the next two years as more consumers use the web and their mobile devices to shop.
No matter its size and e-commerce investment, though, Staples will still have to figure out how to get out from under the shadow of eBay and Amazon, says Retail Systems Research LLC managing partner Paula Rosenblum. She suggests Staples could better capitalize on its strong brand by selling more private-label products, rather than channeling sales by other sellers.
Andy Hoar, an analyst at Forrester Research Inc. who specializes in B2B e-commerce, says Staples will need to develop effective strategies for getting its traditional office supplies buyers and contractors to buy things like power tools, and it will need to offer a high level of customer service across its new product categories as it competes with Amazon and eBay.
While Staples benefits from a large base of business customers, small and large, 12-year-old consumer electronics e-retailer Newegg is relying on its large supplier base in Asia to offer products on its marketplace that shoppers may not find elsewhere. That's a key advantage in the online consumer electronics space, where many sellers sell the same products, producing thin profit margins. Being able to offer a wide array of differentiated product gives Newegg an advantage as it looks to expand further globally, says Soren Mills, chief marketing officer of Newegg North America.
Mills says Newegg's growth will come in part from Newegg's relationships in Asia, especially China.
"Our strong ties to Asia and to China in particular give Newegg an efficient pipeline of innovative products we can then make available to our customers at very competitive prices," he says. Among the current sellers is TV manufacturer Sichuan Changhong Electric Co., which is not currently sold by competitors like Best Buy or Sears.
Newegg won't provide dollar figures for its marketplace growth, but Mills said in early December that the gross merchandise value of products sold in its marketplace was on track to increase 109% year over year in 2013.
Newegg, which recently added features like quicker fulfillment services for sellers and more major retailers like Toys 'R' Us Inc., says having a broader selection helps introduce Newegg to new customers.
The marketplace brings more women to Newegg, where 60% of the shoppers are male, according to Top500Guide.com, as well as shoppers interested in more than technology products.
"Many of our new customers who find Newegg via the marketplace eventually find their way to our assortment of core tech and I.T. products," Mills says. He tells Internet Retailer that nearly half the new customers that Newegg attracts to its marketplace eventually purchase from the e-retailer's "core" technology and consumer electronics products.
Whether the new marketplace operators will be successful may well depend on how well they help their sellers get goods to customers. In that regard, they will be competing with Fulfillment by Amazon, which lets sellers on Amazon engage Amazon itself to store inventory and ship orders. Not only do the sellers benefit from Amazon's large network of distribution centers, their products can also be flagged as eligible for Amazon Prime two-day shipping, which makes them more attractive to the estimated 10 million or more Prime members. Amazon does not disclose how many consumers have signed up for Prime.
Amazon and eBay have set a high bar on fulfillment. Amazon was on track to be operating at least 100 fulfillment centers around the world by the end of 2013, roughly half of them located in the United States, including many near large cities to speed deliveries to consumers there, according to an estimate from ChannelAdvisor's Wingo.
EBay, meanwhile, in October bought same-day delivery firm Shutl Ltd. as the online marketplace expands its one-hour delivery service eBay Now to an anticipated 25 U.S. cities by the end of 2014, up from four metro areas as of late 2013. Customers pay $5 to receive items from local retailers including Toys 'R' Us and Best Buy. The acquisition reflects consumers' expectations of not only free shipping on many orders, but fast delivery, says Michael Jones, vice president of merchant development for eBay.