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More retailers want in on online marketplaces

Written by Tom Ryan

According to the National Retail Federation's (NRF) "State of Retailing Online 2015" report, online marketplaces — whereby a retailer sells goods via another retailer's site — now ranks fifth in terms of its effectiveness among customer acquisition tools. Thirty-two percent of retailers plan to spend more on online marketplaces in 2015 versus 2014.

On average, the 240 retailers surveyed in May and June 2015 indicated online marketplaces is tied for second as far as how they allocate their digital marketing budgets:

  • Search engine marketing: 33 percent
  • Search engine optimization: 16 percent
  • Online marketplace initiatives and operations: 16 percent
  • E-mail marketing: 14 percent
  • Remarketing: 13 percent
  • Social: 11 percent
  • Affiliate: 11 percent

"From Walmart and Alibaba, to Sears and Macy's, the collective world of e-commerce has integrated the use of marketplaces into their business and benefited from the increased customer traffic," said Forrester VP and principal analyst, Sucharita Mulpuru, in a statement. "For many retailers, using marketplaces gives them a new way to compete with Amazon, even if that means selling their products on Amazon itself."

Amazon fulfillment=
Photo: Amazon Fulfillment

Indeed, the growth in retailers' use of online marketplaces appears to be due largely to the expansion by Amazon's third-party seller business. In the just-reported second quarter, worldwide seller units accounted for 45 percent of all paid units, up from 41 percent a year ago. Amazon officials have touted how third-party sellers are benefiting from its FBA (Fulfillment By Amazon) program.

Also, 39 percent of U.S. online shoppers began researching their purchases on Amazon.com in 2014's third quarter versus only 11 percent started on search engines like Google, according to Forrester. In 2009, 24 percent started searching on search engines versus 18 percent on Amazon.com.

Retailers are also diversifying as more platforms arrive. Options include online marketplaces from store-based retailers such as Walmart, Macy's, Best Buy and Sears, as well as online platforms such as eBay, Newegg, Jet, Alibaba, Overstock and Rakuten.

In a column on Internet Retailer, "Should you sell on online marketplaces?," Eric Roth, head of the Retail and Consumer Group at Lazard Middle Market LLC, wrote that online marketplaces can help retailers attract new customers. On the downside, many limit or prevent sellers from steering customers to their own websites.

He wrote, "As businesses become larger and more mature, their brand awareness increases and the marketplace dynamics incentivize a shift away from marketplace participation to focus on channels more suited to long-term customer-relationship development."

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