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August 31, 2009

Walmart launches Walmart Marketplace

Wmt_logo


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.

Wmt_item_pg 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:

Wmt_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:

Wmt_merch_pg

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:

Amzn_ebags

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:

Wmt_confirm

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):

Wmt_checkout_pg2  

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










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