Colin Murphy is the Head of Account Management and Product Development at SingleFeed. Prior to joining SingleFeed, he worked for the comparison shopping website Become.com, where he developed and managed relationships with the company’s largest partners. At Become.com Colin was also responsible for defining product features and functionality aimed at improving user experience and increasing revenue generation.
On Monday, Walmart announced the launch of their “Walmart Marketplace” and we asked for everyone’s thoughts in our Yahoo Group. I had several and so I thought I would share:
There are certainly worse strategies for an e-commerce company to adopt than following in the footsteps of Amazon. Bezos’ crew seems to have figured out the magic e-commerce recipe. As such, the marketplace could be a profitable venture for Walmart. Buy.com went this route several years ago and now prominently displays offers from competing retailers via both their “Marketplace Buying Choices” and their “Also available from these other merchants” sections… with the former functioning like a typical CPA marketplace where Buy.com owns the checkout process and the latter functioning like a typical PPC, click-thru to the retailer model (I believe these results are syndicated from one or several of the CSEs). In any event, Buy.com’s implementation is not unlike Amazon’s “Selling on” and “Product Ads” programs… in fact, the implementation is almost identical. All of that said, if Amazon and Buy.com are doing it, it must be increasing their RPV. So, we know these programs can be successful and, given that they implement it thoughtfully, Walmart may find similar success.
However, there is a bigger question in my mind: is this good for the consumer? One could argue that if these types of 3rd party seller programs are profitable for Buy/Amazon/Walmart, they must be providing value to consumers, as well. After all, consumers have to make purchases through these channels in order for them to be successful for Buy/Amazon/Walmart and that means that consumers are finding what they want. On the other hand, my gut reaction when I hear that “Walmart is launching a marketplace” is: Is that really neccessary? Do online consumers actually need more options (especially when they are already at Walmart)? Or is Walmart just trying to make a few extra bucks off CPC/CPA charges from consumers who don’t know what they’re clicking on? I can’t help but think that this blurring of boundaries and content ownership is still just an exploitation of the average online consumer’s tech prowess. Here’s my guess as to what the purchasing process currently looks like for many online shoppers:
1) Start at Google and search for “product XYZ”
2) Click an AdWords result that takes them to a CSE/Buy.com/Amazon
3) Click away from CSE/Buy.com/Amazon on another PPC result syndicated from elsewhere (or even another AdSense result!)
4) This routes them to a different retailer or maybe even another marketplace
5) Maybe they then go direct to another site, back to Amazon or back to Google… rinse & repeat.
6) Eventually they end up at some retailer making a purchase
It’s an arbitrage game and everyone’s skimming a couple cents off of each click-through as the consumer hops around from place to place without any real brand loyalty or conscience idea of where they want to purchase a product (Granted, there are some brands and product segments that are not affected by this: if you are looking for a dell laptop, chances are you’re going straight to Dell.com). This may be a slightly pessimistic view of the e-commerece / online marketing space but, if it’s true, I have hope that it will change as consumers become more confident online and better understand how the system works. They will develop loyalty to certain retailers and certain marketplaces/shopping engines and go directly to the sites and the content that they want to see. If they aren’t already set on a specific offer from a retailer, the process should look like this:
1) Visit their comprehensive marketplace or shopping engine of choice where they can compare product offerings and drill down on interesting offers
2) Visit a retailer and make a purchase.
This is a much more efficient process and we know that the web drives us towards efficiencies. Once a consumer arrives at a retailer there shouldn’t be much additional value in offering them other outlets (ie: Walmart Marketplace). But maybe that’s just how I shop online. Finally, in my opinion Amazon is much better equipped to become (remain, rather) one of these primary destination marketplaces… as are some of the comparison shopping engines… but I don’t think its a winning, long-term strategy for retailers like Walmart.
I welcome all of your thoughts and comments.
I agree, at the moment google is main start point for majority of online shoppers. Shopper can find from google any offer from comparison shopping sites, marketplaces plus many other offers from smaller ecommerce sites (adwords and organic). I dont think that it could be different in next 3-4 years.
Comparison shopping sites and/or marketplaces should provide much better quality to change it, but paid nature of their content prevent them from to acheive it.
Right now Walmart is a retailer.
If they do a good job with the Marketplace idea, they may end up turning into a shopping comparison engine, and then people will go directly there in order to comparison shop.
Just like Amazon used to be just a retailer and now people go there and actually comparison shop.
So it really depends on how good the marketplace will be (how easy it will be for the consumer to find the best price for the product). Somehow, I don’t think this will be the case. But lets wait and see…
Thanks for your insightful commentary Colin. While on the surface, I too am skeptical about whether or not these programs are accretive to the revenue and customer base of participating retailers, I have been amazed by the long term value analysis that we have run and that I have seen others run. For us, the participation has been overwhelmingly positive. Your premise that these may benefit the marketplace more than the consumer or the merchant may be true but there is the flip side that it may take an 800 lb gorilla like Amazon to win the search game. The rest of us then benefit by becoming more visible to a new set of customers than we would have been otherwise.
I have to take issue with some of you basic premises. You are assuming facts not in evidence. You make the assumption that a comprehensive comparison site is more efficient. If a comprehensive comparison shopping existed that might be the case. However most comparison shopping engines are very limited in scope. They don’t tackle secondary marketplaces well or often at all (Ebay and Craigslist and a whole host of other smaller players.). With most of them focused on CPC as their primary revenue stream, only the largest merchants play in those shopping engines. Another reason that no comparison engine is comprehensive, is that shopping is very time and price sensitive. Very often users are looking for a specific price point or sale on a item before buying.
One other thing you assert is that the “web drives us toward efficiencies” The web tends to reinforce network effects via Metcalfe’s law. (Ebay is the most valuable auction site because it has the great number of buyers, attracting the greatest number of sellers which in turn reinforce the number of buyers). Very often those rewarded are first movers. I don’t see how the web itself drives efficiency. It can drive pricing information. But it doesn’t necessarily drive us to efficiencies. In fact the low barrier to entry for an ecommerce site (or a well designed affiliate site) means the web has become more inefficient as shopping/buying mechanism.
The arbitrage you are describing has been on-going for more than a decade and I don’t see it stopping anytime soon. There are too many players who have a vested interest in making money off search engine traffic. Since no single shopping comparison site will cover all venues, the simple fact is that Google Search will remain effectively the “largest shopping exploration engine” on the planet.