January 6, 2014, 2:43 PM

The marketplace race

(Page 3 of 3)

In response, newer marketplace operators are offering fulfillment options for sellers to make selling through their sites more attractive.

Take Sears, for instance. In March it launched Fulfilled by Sears for marketplace sellers. "We have the ability to ship orders much faster and more cost-effectively than other sellers do based on our national footprint of stores and warehouses," Imran Jooma, the chain's corporate executive vice president and president of online, marketing, pricing and financial services, said at the time.

Marketplace sellers pay fees for storage and handling. Client retailers also must cover their own costs for shipping products to Sears' fulfillment centers and from the centers to their customers' addresses, but they can ship at the volume discount rates Sears gets from carriers, the retailer-cum-marketplace operator says.

Newegg last year launched "Shipped By Newegg" in hopes of shipping 99% of orders within 24 hours of validating payments for those purchases. Shipping costs vary depending on package size and other factors—for instance, an extra $40 for TVs with screens larger than 42 inches, according to Newegg. The program also charges a monthly inventory storage fee of 43 cents per cubic foot from January through September, with that cost increasing to 57 cents from October through December, the holiday shopping season.

Wal-Mart, meanwhile, in 2013 introduced free shipping on orders over $50 on 98% of the items Wal-Mart itself sells online, but allows some orders placed with marketplace sellers to count toward the $50 minimum, which makes them more attractive to shoppers. About half of marketplace items are eligible for the free shipping program, a spokesman for the chain says.

Eric Best, CEO of Mercent Corp., which helps retailers sell on online marketplaces, says boosting fulfillment services certainly can play a role in the survival and growth of marketplaces, but that marketplaces must push themselves to do more than match Amazon and eBay. "It's not enough to be able to execute as good as Amazon has," he says. "You still have to have some unique value proposition."

And while newer marketplace operators race to develop their sites and services, Amazon and eBay are hardly standing still. Both took steps last year to make their marketplaces more attractive to sellers. Both, for example, announced programs to give marketplace sellers more access to loans, mainly to shore up inventory, and Amazon said it would expand Fulfillment by Amazon to enable marketplace merchants to sell and ship internationally. Amazon did not respond to requests to comment for this story.

EBay lately also has been pushing the message that its marketplace is more seller-friendly than Amazon's, in large part through policy and pricing changes. Those include the ability for sellers to remove poor feedback and ratings when an issue is favorably resolved, along with a revision of its fees that could lead to savings for merchants selling lower-priced items, according to experts. Plus, eBay does not sell products itself, so it does not compete with sellers the way Amazon does.

How many marketplaces can the web support? It's far too soon to say. But it's clear that the starting gun has sounded, and that, while the incumbent players are well in the lead, powerful new competitors are prepared to go the distance.



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