Traditional Retailers Launch Online Marketplaces
Retailers Seek to Diversify Through Marketplaces
Third-party marketplaces, long a staple of Amazon (AMZN) and eBay (EBAY), are gaining in popularity among traditional retailers. Urban Outfitters (URBN), Macy’s (M), and Kroger (KR) are just some of the companies enabling third parties to sell goods through their websites.
Third-party marketplaces are a relatively low-cost way for retailers to boost revenue. Sellers list their inventory on the website and retailers get a cut of the sale—typically 15%, but the split can go as high as 40% in some cases. Retailers don’t hold inventory or cover shipping costs, making it a high-margin diversification channel.
Customers Get More Choice
By launching third-party marketplaces, retailers are hoping to give customers more choices. They are handpicking the sellers that can list products on their platforms. For example, grocery store operator Kroger is selling Bed Bath & Beyond (BBBY) products on its marketplace. Meanwhile Hudson’s Bay is using its marketplace to sell Louis Vuitton bags. Urban Outfitters’ marketplace is focused on second-hand clothes.
Macy’s is gearing up to launch its third-party marketplace in the second half of next year, offering customers access to a curated selection of third-party sellers. Macy’s said the marketplace will expand its existing categories and enable the department store operator to enter new ones.
Risks Loom
There are risks associated with marketplaces. If the sellers on the platform provide shoddy service or low-quality products, it may hurt retailers’ reputations. It could also dilute sales of their own goods if the third-party brands prove more popular. If retailers fail to properly integrate the marketplace with in-store pickup and returns, it may frustrate shoppers.
Retailers are hoping to avoid those problems by carefully choosing the brands that can sell on their platforms. They also think being able to quickly respond to trends will give them a competitive edge. The moves come at a time when ecommerce is booming and more people are opting to shop online.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS21121501
All your finances.
All in one app.
App Store rating
