The Marketplace concept is one that both intrigues me but it also scares the living daylights out of me. Call it an oxymoron but its greatest strength could be it biggest challenge. Let me explain.
So yesterday when Best Buy announced that is adding a marketplace to its offering.. The first problem that this creates for me is that this is not a unique offering. There are many other online retailers that does it and while it provides additional content to your offering for the long tail it may cause harm.
Best Buy is following Amazon.com, eBay, Mastercard, Sears, Walmart and others in opening an online marketplace that gives consumers access to products from other merchants in addition to its own. According to a Financial Times report, Best Buy is responding to the development of its unintended role as “Amazon’s showroom”, the situation where consumers visit the chain’s stores with smartphones to comparison shop and eventually make their purchases online. CEO Brian Dunn, in a statement, called the Best Buy Marketplace “a key development to our multi-channel platform … that enables consumers to shop how they want and encourages additional reasons to visit and purchase at BestBuy.com.” ANT Online, BeachAudio.com, Buy.com, Mambate, SF Planet and Wayfair are third-party sellers that are participating in the launch of the Best Buy Marketplace.
The issue I have with the marketplace concept is that you are adding another retailer to your platform. Revenue sharing occurs when a user buys a product on your platform. In terms of revenue a lot of transactions need to occur for this to become a profitable exercise.
Brian Walker of Forrester Research in his 7 March 2011 post titled The Hidden Genius Of Jeff Bezos mentions that Amazon was the first mover in doing the marketplace concept. They have figured out over many years how to handle product feeds from their partners. So being able to understand how to fit the Marketplace content into a new platform will take time. The same can be said for familiarizing users with the additional content and making them comfortable with buying from a third party retailer. The genius of the marketplace is that in Amazon’s case it provides a cost effective manner for product content creation.
The other notable thing to mention is that this can also be seen as a second Amazon dependent or rival that is trying to compete with them. Target has moved their ecommerce channel inhouse and has moved away from Amazon controlling their destiny.
It may go down in history as a big business blunder. But, back in 2001, when Target picked Amazon.com to power its e-commerce offerings it may have seemed like a good idea. Today, Target is finally parting ways with Amazon, launching an online retail experience that it fully controls. But have the tides shifted too much in retail? After all, Amazon’s market value of $87 billion is more than double that of Target. Target has slowly been moving away from Amazon over the past few years, with CEO Steve Eastman saying in 2009 that “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.”