We have often discussed how competitors view Walmart as the big beast of retailing. Considering Walmart’s sales are greater than the combined sales for the next four largest U.S. retailers, it is understandable competitors face immense challenges and, consequently, direct a good deal of their attention to figuring out how to battle the market leader.
Yet Walmart is not the king of all retailing. They are only the dominate player in store-based retailing. When it comes to non-store based retailing, and specifically selling on the Internet, the beast tag shifts to Amazon. Similar to what it takes to compete against Walmart, the task of selling against Amazon is also quite difficult. It is especially challenging when a competitor tries to take on Amazon directly. Because Amazon seems to offer so many advantages, including wide product selection, low pricing and fast delivery, for most retailers a head-to-head battle is probably not a wise idea. So what can a competitor do to combat Amazon? One answer is to find others looking to do the same.
As Internet Retailer lays out in this story, competitors are discovering one option for fighting Amazon is to join with other retailers as part of an online marketplace, which are often found within a larger retailer’s site. While this idea is not new, – Amazon has been offering their own marketplace option for small specialty retailers for years – several large retailers have launched marketplaces and recruited other retailers to join. At the top of this list is none other than Walmart, which may be king of store-based retailing but ranks well below Amazon when it comes to online retail sales. Yet as the story discusses, Walmart is not alone in this strategy as Staples, Best-Buy, and Sears have also developed online marketplaces.
The key reason for offering a marketplace, where other retailers sell their wares, is that it expands product options available to customers. In doing so, the marketplace owner hopes customers stay on the website which in turn may help the host retailer sell more of its own products. It also allows retailers to capture a lot of customer information that they ordinarily would not obtain when shoppers leave the website to shop at other sites. Finally, retailers hosting marketplaces also take a percentage of the action.
Overall, this is an excellent article that not only discusses the strategic value of online marketplaces but also contains a number of fascinating statistics.
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