There is an epic battle brewing between Amazon and WalMart, and online marketplaces will be the main street where the showdown takes place.
Amazon and Walmart are growing online marketplaces where other merchants and brands can sell goods in a single place. In a marketplace, the platform, technology management, order processing and fulfillment are all handled by the operator. Third parties get access to more shoppers and are relieved of some of the risk associated with back-end fulfillment and the operational expenses.
In the U.S., retailers are building out marketplaces as a way to expand inventory and product offerings, gain revenue from new sources through fees from third party vendors, and build loyalty as shoppers come to think of that marketplace as their primary retail destination.
There are many – Alibaba, eBay, Etsy and even Sears are marketplaces. But the biggest in the U.S. are shaping up to be Amazon and Walmart.
Why would a retailer open a store and allow a competitor that kind of access to their data or control over operations? It seems insane, or so was the consensus at a small retail conference I attended just two years ago.
Not so much now.
At a retail conference last month in Dallas, Greg Buzek, founder and president of IHL Group said something that changed my mind completely, and is likely changing the minds of those companies signing up to sell on Amazon as part of Prime.
Consumers already turn to Amazon first to look for products and reviews. Some 30% of shoppers begin their searches on Google while 49% start on Amazon, according to Buzek. The vast majority of shoppers in total begin a search on a marketplace, when you include sites such as Etsy, eBay and Shopify.
Specifically, they will search the assortment available to Amazon Prime members, making eligibility there a priority, as well.
Amazon has not reported the number of Prime members, but there are scads of independent researchers crunching numbers and putting this figure between 50 and 60 million active users.
Even at the low end of this scale, that’s impressive.
And it’s the impetus for retailers that otherwise compete with Amazon to become marketplace sellers. Because Amazon Prime members are among the most coveted consumers around.
Close to 70% of U.S. households with a household income of $112,000 or higher have an Amazon Prime account, according to Buzek and IHL.
“If I told you that 70% of the country moved to one city, wouldn’t you open a store there?” mused Buzek....MORE