ChannelAdvisor

Walmart launches Walmart Marketplace

Walmart.com gets in the marketplace game with Walmart Marketplace (WMMP)

In the world of retail, when you say the 'W' word, or even mention the city Bentonville, people stop what they are doing and listen (and sometimes tremble).  So today's launch of WMMP is something to stop and dig into in detail which is the purpose of this blog post.  First,  we'll provide a brief background of why retailers are adding third-party marketplaces.  Then we'll go on a deep dive into the new WMMP.  Finally we're wrap with some thoughts around what this means specifically for Amazon and Ebay - the current reigning kings of the marketplaces world and the broader internet retailer/e-commerce industry in general.

Why Are Retailers Adding Third-Party Marketplaces?

Since late 2006 when Amazon started growing at 20% greater than e-commerce, other retailers have taken notice and worked on decoding what the secret sauce is.  Around that same time is when Amazon launched both Prime and their 3P 'seller business'.   Since 2007, we've been predicting that Amazon's formula would be decoded and as an offshoot of that we would see an explosion of marketplaces amongst the top 20 retailers.   Since then we've seen folks like Overstock, Buy.com, Pixmania (EU) and play.com (EU) add vibrant third-party marketplaces onto their 'first-party' retail business.

The strategy just makes complete sense:

• You are spending large $ to build a brand and bring consumers to your site.
• Consumers love selection
• A 'bad' consumer experience is when they come to your site and don't find what you are looking for. 
• Even the mega players can only manage so much selection 
• Long-tail selection can be painful and expensive (eats into warehouse space) 
• You need to focus on your core (shoes or top 10 sellers or the value buyer, etc.)    

The easiest way to do this and maintain a good consumer experience is with the addition of a third-party marketplace.  Sure you can backfill null search results with some advertising and what-not, but asa consumer do you really want to go to retailerX and then be bounced to retailerY, retailerZ, etc.?  Over time, you just go to retailerY which isn't really good for retailerX.

The solution - partner with top/mid/smb retailers that bring some unique product lines to your e-commerce site, but instead of links are integrated at the product level. Their products are on parity with yours, in search results, checkout, etc.  The consumer never has to leave your site and in many cases the experience is so fluid they don't realize they are dealing with a third party.

A tour of the new Walmart Marketplace
Amongst the marketplaces, I would say that the WMMP experience has an Amazon feel, but is much more 'closed'.  For example, on Amazon, any smal business can say 'I have one of those widgets to sell' and be selling on Amazon in minutes.  With today's launch at least, WMMP has a very limited number of 3Ps at launch: eBags.com, CSN Stores and Pro Team.

Today they are running a front page banner highlighting WMMP, but other than that as a consumer, your first WMMP interaction is on item pages.  WMMP items are not highlighted in the search engine results pages that I can see.  This figure shows an eBags items and you can see a CSN item here and a Pro Team item here.  Note: to see a larger version of any of these images, click and a zoomed-in image will pop up.

In the figure above , I've added two red boxes and a big red arrow to highlight the two areas of the item page that indicate this product is sold via WMMP. First, in the upper right you see some text in he grey area that says: "Sold by Walmart Marketplace" and includes a link for more information (more on that in a sec).  Below the product image is a more detailed box that has three areas - the seller, the price and the shipping details.

If you click on the 'Learn More' link in the 'Sold By Walmart Marketplace' area, you get this pop-up that gives a high level overview of what the WMMP is all about:

On the item page under the merchant's name, is a link that says: "Retailer Info" - when you click on that, you are taken to a tabbed page with all of the details of the merchant.  You can see the eBags page live here, or here's a screen grab:

This is very Amazon-esque.  You can see a summary for the seller, detailed ratings, shipping information, Return policies, Customer Service information and an 'About Us' section that is a catch-all for the 3P merchant to add anything not covered on other tabs.  For comparison's sake, here's the same page (also for eBags) on Amazon's 3P system:

You can tell these are very similar.

Finally, when a consumer adds an item to checkout there are two more user flows of interest:

1. An interstitial is presented that asks the consumer to verify they are aware the item is not from Walmart:

2. The consumer is shown each product in a different box so they can pick from the different S+H options (Walmart's vs. the 3P):

 

Those are the highlights of the Walmart Marketplace.  The WMMP is a clean, consumer-friendly extension of the Walmart first-party business and should give Walmart.com shoppers all of the usual 3P benefits of added selection, price and

What's not clear at this time is how Walmart will treat some of the more delicate situations that arises in the world of 3P:

• What if there is overlap in products (both Walmart and the 3P) offer it?  Today WMMP appears to only have products that Walmart first-party does not offer.  The corollary is - what if a 3P has a lower price than you do for the same product?
• What if a 3P's consumer ratings are lower than some threshold?
• What if consumers are confused because there isn't that much on the site that highlights they are buying from a 3P?

We'll keep an eye out and an ear open for these situations and report back here on Amazon Strategies as this fledgling marketplace gets on its legs and has to cross some of these bridges on the path to success.

The WMMP's impact on eBay, Amazon and e-commerce
What does Walmart entering the marketplace segment mean for eBay and Amazon?  Even though Walmart is the 800lb gorilla of the offline world, it is a good bit smaller (Internet Retailer reports that in 2008 they were the 14th largest online retailer with $1.7b in sales vs. Amazon at the top with $20b).  Thus, while this is a strategic move in Walmart.com's court, it would have to be massively successful to help them catch up to Amazon.  Amazon already has millions of 3P's and a system that's churning through 4-6B in GMV/yr. 

eBay is probably more exposed to the WMMP because they have a more nascent focus on the high-end and have some early wins with Buy.com, TigerDirect and eCost, but as they work on getting more name-brand retailers on eBay.com, they will be fighting for mind-share with this new player.

Of course, like Amazon, some retailers will be scared to death of partnering with such a giant player as walmart.com so eBay continues to have and advantage in their neutrality that they haven't been able to execute on very well yet.  Long-term if they can execute, that could give them an interesting edge and draw out some unique selection (see next section).

We'll keep an eye on the eBay/Amazon impact, but what's more interesting to think about vs. this one situation of a 3P marketplace, is what if we take it a step further and assume this is the first of many new Marketplaces.  Imagine a day when Target, Office depot, Staples, Dell, Apple, OfficeMax, Sears, CDW, BestBuy, etc. - maybe the top 100 retailers PLUS twitter, facebook and even Google, Bing/Msft, Y! all have some flavor of a marketplace.

If that plays out like I think it will (only a fraction of those companies need to go that way for this to happen), then selection and product differentiation become king and you will see the larger retailers snapping up via M+A or at least 'exclusives' categories of products they view as exclusive.  Also you could see a price war erupt (in what marketplaces charge merchants) as marketplaces attempt to differentiate their merchant-facing opportunities in the fight for thin merchant mindshare and IT resources.

The bottom line is this is a positive for the million or so smaller merchants that utilize 3P channels because they should see more 'channels' out there fighting for their products which will create lots of opportunities for them in the form of lower prices, more paths to consumers and maybe even some M+A.

I'd love to hear your thoughts on the implications of this new marketplace via the comments.

SeekingAlpha Disclosure - I am long Google and Amazon.  eBay is an investor in ChannelAdvisor

Is Amazon slowly making some progress with Checkout By Amazon (CBA)

I've been talking to lots of reporters and Wall St'ers about Amazon lately and one of the things that seems to frustrate them (yet also make them that much more interested) is that Amazon doesn't really say much about their business.  The answer to these questions:

• How many Kindles have you shipped? 
• How many Prime buyers are there? 
• How is EC2 going?   

  is usually a benign: 'we are pleased with the progress, but have more to do'.  

Refresher: How Amazon develops products

In a past post, I talked about, from a partner's perspective at-least, how it appears that Amazon develop 'products' or 'offerings.  If you didn't get a chance to read it, the summary is that Amazon seems to go through this product lifecycle:

• Beta - Offering is not announced, available to a very closed, NDA list of partners/customers.
• 1.0 product - Offering is available either in a closed program or somewhat hidden/not promoted on the site.  Generally the offering is under the radar. 
• 2.0 product - The offering is available in an open fashion, easily found on the site, but still not heavily promoted.  
• 3.0 product - At this point the offering is tested, works and is ready to 'ramp'. Ramp in the Amazon world can mean a variety of things such as: 
  • Increased site 'customer' exposure 
  • Increased site 'buyer traffic' exposure
  • Increased category adoption (e.g. started in Cat1 and is now in Cat1-X) 
  • Actual promotional exposure
•   4.0 product/ platform - This is the most recent, and in my mind most interesting, stage where Amazon is starting to take on-site offerings, technologies, etc. and then opening them up as a platform.  

  

What's up with CBA?

Back in July of 08, we broke the Checkout By Amazon (CBA) story over on sister site, eBay Strategies and here we are a year later and there hasn't been a lot of notice to what Amazon is up to.  With the recent rumors of Facebook, Apple and Twitter all entering the payments battle with Paypal, I thought it would be interesting to 'check back in' with CBA and see what's new.  Also, we're hearing more and more SMB retailers talk about the program and see it show up with various ecommerce platform providers and some bigger name retailers.

Three public CBA resources to keep an eye on.

Since Amazon isn't out issuing press releases or talking about CBA on their quarterly earnings conference calls, you have to dig a little more to find out what is going on.

1. Official CBA home page - This is the official landing page for CBA.  You can monitor here to see any news related to product features and any webinars coming up.  For example, there is a webinar on August 25th that maybe of interest to readers. 
2. Partners page - You have to dig around a bit, but here's where Amazon lists all of the carts and ecommerce partners they have for the program.
3. Retailers list - This one is very hard to find and I have to spend a good bit of time digging to find it as it's kind of buried in here.  Now you don't have to as I've linked right to it for you. This page lists the retailers that accept CBA.
4. Ok this is a bonus - Job postings - It's always interesting to see where Amazon is hiring and CBA seems quite active which is a signal that this effort isn't just 'coasting'. 

Let's explore where CBA is with the commerce providers and then retailers based on this information.

CBA and the ecommerce platform providers

Amazon seems to have made the most progress with what I call the 'open source carts': zencart, magento and oscommerce seem to all support CBA with some community effort. 

Probably the biggest commercial carts/platforms to support CBA are Miva Merchant and cardinal commerce.

All of these players really hit the very smallest of small and in many cases 'brand new to ecommerce' merchants, so while CBA is getting some traction here, it's not likely to result in a ton of TPV (transaction processing volume).

CBA and retailers

Regardless of platform, retailers are free to directly integrate with CBA.  The retailer page shows that CBA is offered by about 322 retailers.  I don't have my IR500 list handy, but from memory, there are three of interest that are strong brands/top online retailers:

• Toolking.com -  An IR500 company that does some great work with social networking and has some innovative micro sites like Tooliday.com
• Patagonia -  A manufacturer that sells direct and via retailers like REI, Dick's Sporting Goods, etc.
• Jockey -  A manufacturer that sells direct. 

It's interesting to look at each CBA implementation of these brands to see specifics of how they have implemented CBA.

Toolking has PayPal above CBA.  Patagonia only has CBA and Jockey has both PayPal and Amazon, on the same horizontal line with PayPal to the left of CBA.

One interesting trend is that you see two manufacturers adopting CBA. Amazon has lots of manufacturer relationships and there are lots of manufacturers that want to sell direct to consumers.   I wonder if Amazon could somehow pressure/reward vendors/manufacturers that add CBA - that's one angle they have that nobody else in the space does. 

Where is CBA in the Amazon product lifecycle?

Based upon these findings, my best guess is thatCBA is getting some 'behind the scenes' traction, but Amazon certainly isn't pushing it super-hard.  Thus I'd say it is in the 2.0 phase or more like 1.5 - it's not a closed program, but Amazon isn't actively promoting it that hard in a public-facing way.

CBA is having some early success in the first year with providers, over 300 retailers/manufacturers and they are methodically adding some interesting new features.  We'll continue to keep a close eye on CBA and report their progress on a quarterly basis.

SeekingAlpha Disclosure - I am long Google and Amazon. eBay is an investor in ChannelAdvisor

Amazon and Target announce 2011 separation - Breaking up is hard to do...

There's been lots of excitement today around Target'sannouncement that they will be leaving the Amazon ecommerce platform (they call it Merchants.com internally).  From the statement:

"We believe it is in Target's best interest going forward to assume full control over the design and management of Target's e-commerce technology platform, fulfillment and guest services operations," Steve Eastman, president of Target.com.

The articles go on to say that by Holiday 2011, Target plans to roll out the new system.

What does this mean?  First let's look at how big Target.com is and then let's dig into the Target/Amazon relationship specifics to understand more.

How big is Target online?

I pulled out my handy, always-at-my-side/or-under-my-pillow Internet Retailer 500 guide. IR500 has for 2008 the following data points:

• Target.com's IR500 rank: 20
• 2008 online sales: $1,209,208,320 (We'll call it $1.2b for short) 
• 52m/m visitors  

Compete.com has Target at a top 28 of all websites rank with 30m unique visitors and 54m total visitors.  So all that data lines up.

How do Target.com/Amazon work together today?

Amazon and Target.com have a complex multi-facited relationship that includes:

1. Amazon's ecommerce technology powers target.com
2. Amazon/Target appear to both work on the internet marketing 
   1.  Specifically, Target has its own internet marketing team, but tends to have to make requests from Amazon to get much done. 
3. Amazon handles fulfillment for Target.com
4. Amazon handles customer-service for Target.com 
5. Target.com sells on Amazon (Merchants@/3P type business)  

Here's a screen shot of what number 5 looks like if you haven't seen it before - note the logo at the very bottom (click to enlarge)

What does this mean?

Given the data and details on how they work together, it's not clear how much of that $1.2b in GMV comes through the target.com front door and how much comes through the Amazon 3P.  If we assume that maybe it's 25% then you have a 900m/300m kind of split.

Thus if Target.com leaves Amazon, but Amazon.com retains the Target product, that really lessons the blow and doesn't hurt the Amazon selection.  That's going to be the key point to watch over the next two years.  As usual, we'll keep you posted.

Also, does anyone find it interesting, or just a coincidence, that this separation is coming right on the heels (har har) of the Zappos announcement?

SeekingAlpha Disclosure: I am long Google and Amazon

New Whitepaper available - online consumer behavior survey

Based on feedback we received at our Catalyst conferences where we have an online consumer panel that retailers love, we started doing a bi-annual survey of consumer online buying behavior.  The 2H09 version is out now.   This information is something I think every online retailer, regardless of size should read and understand as you make your Q4 plans.  You can download the white paper here.

Highlights

 

Here are some highlights of what consumers told us in the survey:

1. Consumers are spending about the same amount of time online but are spending less money – scouring the Web for deals that yield higher savings and offer extra value above and beyond low prices.
2.  Shoppers don’t necessarily realize where they purchase and may not understand how Google Product Search and other comparison shopping engines function.
3. Amazon and eBay are top-of-mind retail brands, but Amazon commands twice the mindshare of eBay.
4. Free shipping and peer ratings/reviews hold more influence over purchasing decisions than they did in 2008.
5. 70 percent of consumers said they regularly purchase from eBay or Amazon.
   
6.  81 percent of consumers begin their product searches with Google and 11 percent begin with Yahoo – which is an increase of five percentage points in favor of Google, and a six percent decrease in Yahoo usage.
7.  Bing is making a quick impact since it launched on May 28, accounting for two percent of searches and 13 percent of respondents already having used Bing Cashback – a share that will grow in light of the recent Yahoo/Microsoft search deal.
8.  Shoppers are diversifying the comparison shopping engines they use to research products, prices and deals. We discovered some useful trends by comparing consumer behavioral data to actual internal sales data from thousands of online retailers that make up the ChannelAdvisor customer base.

The white paper goes into tons of details on these items, and they are strategic tidbits to plan your Q4 marketing plan.  Is Bing in your mix?  Have you diversified your CSEs?  Which search engines are you spending time on and does it match the consumer-side?

We hope this enables you to align your resources and plans to have a successful Q4!

SeekingAlpha Disclosure: I am long Amazon and Google. eBay is an investor in ChannelAdvisor

Amazon vs. eBay - summarized in two pictures (Goldman Sachs)

James Mitchell at a little firm called Goldman Sachs, put out an interesting report today that seemed to address concerns around pressure that video game console declining sales put on Amazon for Q2.  In there he looks at some of the 'heartbeat' metrics of the business and compares them to eBay as a comp.

They say a picture is worth a thousand words and I thought in this case I'd put two out there for a nice 2k word message.  The bottom line is that while eBay definitely is stabilizing, they aren't out of the woods yet and let's not forget they face a competitor unlike any foe they have ever faced.

Figure 1: Amazon vs. eBay User growth since 2006

Figure 2: Amazon vs. eBay Y/Y unit growth rates (unit = items sold via the respective site)

SeekingAlpha disclosure: I am long Amazon and Google.  eBay is an investor in ChannelAdvisor.