Low Cost, High Reward

This article was published in the August 2016 issue of STORES Magazine.

Marketplaces allow department stores and malls to expand omnichannel offerings

Just like their physical counterparts, online marketplaces can offer consumers the convenience of one-stop shopping for a range of products. Nearly two-thirds of consumers purchase products from online marketplaces once or twice each month, according to a recent study conducted by Forrester Consulting, and 95 percent of respondents agreed that marketplaces offer convenience.

Amazon’s experience lends credence to those numbers: According to its 2015 annual report, third parties account for nearly half of all items sold on Amazon.

Related resource: Shop.org’s Think Tank report on “The Promises and Perils of Online Retail Marketplaces”

Related resource: Shop.org’s Think Tank report on “The Promises and Perils of Online Retail Marketplaces

The Forrester survey was commissioned by online marketplace software provider Mirakl and e-commerce firm ChannelAdvisor; Mirakl launched its Department Store and Mall Marketplace Solution early this year.

“We give any online storefront a retail marketplace solution,” says Adrien Nussenbaum, U.S. chief executive officer and co-founder of the company. Mirakl is currently working with 90 retailers, he says, including Best Buy Canada, Carrefour Spain and Australian grocer Woolworth.

Retail 2.0

Establishing a marketplace “enables retail 2.0,” Nussenbaum says, allowing retailers to boost customer value quickly with little overhead. Rather than continuing to expand its inventory, the retailer works with its brands to populate a marketplace. Brands are more than suppliers; they are direct merchants on the store’s e-commerce platform. The brand sets the pricing and receives the order, while the customer experience occurs within the retailer’s marketplace.

Brands typically pay commission on each sale, and may pay a fixed monthly fee. In return, they gain access to the store’s volume of customers and foot traffic.

A marketplace allows retailers to offer a greater range of products. “If you want to own the customer,” Nussenbaum says, “you need to make sure she can find what she wants.”

Retailers can increase the number of products they offer without tying up working capital to hire buyers and purchase and hold inventory.

Retailers can increase the number of products they offer without tying up working capital to hire buyers and purchase and hold inventory. As a result, the incremental revenue from an online marketplace can lead to a higher profit margin than increasing the retailer’s own inventory typically does, Nussenbaum says.

A marketplace strategy also provides retailers with a more comprehensive picture of their customers. Given the larger range of products that can be offered in an online marketplace, customers will likely complete more of their shopping there. In turn, that provides additional intelligence on shopping patterns and the popularity of various products.

Back office functions

Say a customer places an order for Brand A’s product, which is sold on Retailer B’s marketplace. The order flows from Retailer B’s website to its marketplace software, then to Brand A’s fulfillment and inventory platform. Brand A ships the product and sends the confirmation to Retailer B’s marketplace platform.

Brand A’s fulfillment and inventory platform also sends updated inventory and shipping information to Retailer B’s marketplace platform. The information is updated on Retailer B’s website. Retailer B receives payment from the customer and transfers the correct amount to Brand A, minus any commission.

Mirakl’s technology enables these back-office functions by providing a cloud-based system through which information can flow from the seller to the store, Nussenbaum says. Mirakl offers out-of-the-box gateways and portals with which sellers can connect to the store. As a result, the seller typically doesn’t need to allocate a huge investment in IT in order to participate in the marketplace. The software is platform-agnostic and works with most e-commerce solutions, Nussenbaum says. Implementation typically takes between two and four months.

Shop.org Think Tank: The Promises and Perils of Online Retail Marketplaces from NRF on SlideShare