Why Are Retailer-Owned Marketplaces Taking Over And How Can You Benefit

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Why Are Retailer-Owned Marketplaces Taking Over? And How Can You Benefit?

2 Minuto de lectura

The number of retailer-owned third-party marketplaces, in which retailers list products from other sellers within their platform or website, has risen over the past few years. Many big-name retailers now have their own marketplace platforms, including Tesco, Boots, Superdrug, B&Q and The Range in the UK, as well as Walmart, Target, Home Depot and Macy’s in the U.S.

Third-party marketplaces are great for growth

Third-party marketplaces are a smart, strategic way for retailers to expand the range of their product offerings. They can help retailers drive growth and customer acquisition, without taking on the burden of all that new inventory directly. B&Q have reported that the marketplace they launched only a few years ago now accounts for about 40% of their online sales.

Most marketplace sellers are happy to work with big-name brands to tap into a retailer’s audience. By putting their products in front of a wider range of people and leveraging the trusted reputation of the retailer who owns the platform, sellers can boost their acquisition and conversion.

Third-party marketplaces offer these significant benefits for retailers:

  • Expanded product range. Retailers can expand their product range without investing in additional inventory. This can attract a wider customer base and increase sales potential.
  • Reduced operational costs. Retailers can save on the costs associated with warehousing, shipping and customer service, as third-party sellers handle these aspects.
  • Lower financial risk. Since retailers don’t own the inventory, they are less exposed to the risk of unsold products and potential losses.
  • Data insights. A marketplace offers insights about customer behavior and purchasing criteria that can improve new products, user journeys and the general customer experience, helping retailers make strategic decisions in these areas.
  • Improved customer experience. A wider range of products can enhance customers’ overall shopping experience, increasing customer satisfaction, loyalty and lifetime value.

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There are still challenges, however

Managing third-party marketplaces is not without its pitfalls. Customers will come because they trust the brand, but that also means every third-party seller is now a brand custodian to some degree. There are ways to introduce some separation for example, clearly labelling products provided by third parties  — but the buck ultimately stops with the marketplace brand.

That means retailers must carefully control who can sell on their marketplace, as well as set and police high standards of customer service and product quality. A high degree of control is essential for the long-term health of both the marketplace and the value of retail brand as a whole.

In addition, product returns can become a tricky problem in the third-party marketplace landscape. If customers buy from a marketplace that has a retailer’s branding on it, they’ll expect to be able to return items to the retailer’s store.

That’s fine from the customer’s perspective, but it leaves the retailer saddled with items it likely does not usually stock, in stores that may be far from where the item originated. The  third-party seller needs that stock to be returned to them somehow, having issued a refund to the customer. Retailers must communicate clear return policies that state customers should contact the marketplace seller for marketplace returns. But there will still be some cases where customers aren’t aware that they’ve purchased a third-party item — and they’ll expect to go through the default returns process for the retailer.

In these cases, the best-case scenario is a frustrating customer experience where the retailer’s returns journey refuses to accept the return. The worst case is marketplace inventory becoming mixed up with the retailer’s own, causing unnecessary operational headaches and requiring the retailer to make good with the marketplace sellers. 

An optimized returns management process is essential for avoiding these pitfalls and optimizing the third-party marketplace experience for retailers, sellers and consumers.

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