Customer acquisition opportunities and new fulfillment options draw retailers of all sizes

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Online marketplaces — websites where many different merchants offer their wares — are perhaps retail’s biggest success story. According to Internet Retailer, total global online retail sales for 2017 were $2.56 trillion, which accounted for slightly over 11 percent of total sales; 60 percent of those ecommerce sales, $1.55 trillion, were made on the world’s top 75 online marketplaces — a 34 percent increase from the year before.

This is a worldwide phenomenon. While 43 of the top 75 marketplaces are based in North America, there are three in Latin America, two in the Middle East and Africa, 15 in Asia and 12 in Europe. Of the top five worldwide, three are Chinese (Taobao, Tmall and JD.com), and two are American.

In the United States, the top three of the five largest marketplaces (ranked by marketplace gross merchandise value) are Amazon, eBay and Walmart. Houzz, which specializes in products and services for home remodeling and decoration, is fourth; number five is Wish, which enables American consumers to buy directly from manufacturers and other suppliers
in China.

Consumers seem to like online marketplaces for the same reason they like ecommerce in general: product research, easy price comparison and the ability to buy things without having to put clothes on and go outside. Merchants like them for a whole host of reasons, one of the most obvious being market access. Before online marketplaces existed, many vendors on a site like Etsy, for example, would have had no way to reach consumers other than mail order, fairs and festivals and word of mouth.

INFRASTRUCTURAL ASSISTANCE

And once they’d made a sale, they’d have had to go out and find a shipper to send their handmade birdhouse or whatever off to its new owner. To some extent, this still applies. In addition to market access and exposure, marketplace operators tend to help with search engine advertising, order processing and payment and customer support. Shipping and fulfillment, however, are usually up to the individual vendor.

Until recently. A few years ago, UPS introduced an application that enables marketplace retailers to import orders directly into UPS.com for shipping.

“We launched our marketplace shipping tool in 2014 because we knew we could connect with eBay and Amazon and bring a customer’s information into UPS.com so they could ship more easily,” says Aaron Gill, UPS product manager. “Over time we’ve realized that there are a lot of other marketplaces we need to be able to connect to. They’re really growing as a channel for retailers to sell through.”

So far, UPS is connected to 20 marketplaces in the U.S. and internationally; the tool is currently available in 11 countries.

For retailers, two key attractions of the marketplace shipping tool are data centralization and automatic tracking. Many merchants sell through more than one online marketplace; on a good day, orders might be coming in through Amazon, eBay, Etsy or a half-dozen others. With the UPS service, all these orders — at least as far as shipping and fulfillment are concerned — come into the same place, making them vastly easier to keep track of and process.

The system also generates a tracking number and sends it back to the marketplace and can send an email to the customer, which means a harried artisan doesn’t have to answer the phone to tell somebody where their birdhouse is. They already know because it was emailed to them.

“UPS recognizes that marketplaces are a huge factor in ecommerce right now,” Gill says. “We also recognize that we need to do everything we can to bring value to both marketplace sellers and their customers.”

LOOKING FOR A DIFFERENCE

One company doing some interesting things, not just with shipping but with the overall possibilities of the online marketplace universe, is Pricefalls. It was founded in 2008 by Elliot Moskow, Peter Schaefer and Chad Casey, all of whom were then students at Bates College in Lewiston, Maine. Shortly thereafter they recruited a chemistry major named Ryan Rollo — “I was employee number one,” he says — whose title is currently vice president of operations.

The initial idea was to create an online marketplace for housewares and electronics based on the concept of a Dutch auction, which is basically the inverse of a traditional auction. A bid is placed by a potential buyer, and a price floor is set by the seller; the auction price falls until the price matches the bid or the price hits the floor. (This process was established, or at least popularized, in the Netherlands during the 17th-century tulip mania, hence the name.)

The good thing about a Dutch auction is that it’s very efficient; the auctioneer only has to accept one bid. The bad thing is that for low-margin products, it doesn’t allow for a lot of wiggle room. “We found that fixed prices worked better,” Rollo says. “We also found that it’s hard to advertise prices that aren’t the same when you get to the website.”

Once that was settled, several things happened in close succession. Most of the initial investors were in Las Vegas, so the founders wound up spending a lot of time there and eventually made it their headquarters. They switched from specializing in tech and home products to a broad-spectrum general merchandise approach. And they looked for a differentiator: What could they offer that other marketplaces weren’t?

“There weren’t many customer acquisition sources at the time,” says Rollo, meaning 2013 to 2014. “Today you’ve got some newer options, like Facebook and Instagram and YouTube ads, but then it was basically Google and Bing. We decided to be one of the few — or only — marketplaces to provide and share mutual marketing rights to customers that shopped from their store on Pricefalls.com.”

The Pricefalls catalog went from 1.5 million products in 2012 to 15 million today. Rollo doesn’t attribute all that to his company’s strategy, of course; the past six years or so have seen an enormous increase in ecommerce volume of every kind. Still, Rollo and his colleagues believe there is room for considerable innovation as the online retail landscape changes.

Speaking of the new UPS program, he says, “Retailers in the mid-tier and below need solutions that hook into every major channel because they need every one of them. No matter where the customer goes to find products, if you can get your product there and you can ship it automatically from the engine it’s bought from, then you’re in a better place than you were yesterday.”

Peter Johnston, a freelance writer and editor in the New York City area, can be reached at pjohnston@foxhoundenterprises.com.

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