Retailers Leverage Omnichannel Strength to Launch Curated Marketplaces

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Macy’s joined major retailers like Target, Walmart, and Urban Outfitters by launching its own third-party marketplace last month, expanding on a program it previously had in place to drop-ship products in certain categories. As more companies start selling products from other brands via their own online marketplaces, there are questions about the cost-to-benefit ratio, and how well the strategy works compared to a more traditional wholesale model.

Launching third-party marketplaces means retailers like Macy’s and Walmart no longer need to take possession of inventory in order to sell it to shoppers online. Instead, these companies can showcase products from other vendors on their curated marketplaces in exchange for a percentage of sales or a monthly fee.

The strategy has clearly been pioneered by Amazon, but major retailers like Walmart and Target are also early entrants into the space. While Amazon’s marketplace is one of the largest, other retailers—like Urban Outfitters and Express—have taken a more niche approach, only selling items from certain categories that fall outside their core product offerings. That reduces redundancy and helps retailers avoid cannibalizing their own sales.

For Macy’s, which just launched its third-party marketplace last month, the approach gives the department store a way to offer a wider assortment of goods than it currently sells in stores or online. It’s not an accident that the marketplace is launching just ahead of the holiday season. It’s a strategic move designed to help the retailer break through the noise and remain competitive this holiday season, says Brent Ramos, product director at Adswerve, a company that works with agencies, analysts, marketers, and publishers.

“Macy’s decision to launch its own third-party marketplace follows suit with general consumer demand for a curated, simple, online shopping experience with freedom for third-party participation,” Ramos says. “The launch of a marketplace allows for a more fluid exchange of commerce than traditional onsite shopping, and at the same time, offers third-party participation to offset Macy’s logistic costs while improving vendor support and market diversity.”

Third-party marketplaces are a burgeoning trend in the retail industry. Some retailers have been able to mix outside brands with their own in a seamless way, while others have struggled to ensure customers are able to identify which labels are not their own. In a best case scenario, a third-party marketplace can help a retailer focus on its strengths while still leaning into new product categories. 

Since teaming up with Shopify to open the Walmart Marketplace, Walmart has amassed an incredible trove of more than 90 million product listings. Walmart’s marketplace includes products from all categories, including general merchandise. Before selling on Walmart Marketplace, sellers must be vetted. The company then charges a referral fee for each sale.

Macy’s new marketplace is much more niche. Its debut makes good on an initiative announced in 2021. The new marketplace is being run by the Mirakl platform. It currently includes listings from more than 400 brands in 20 product categories.

“Large retailers are sprinting to launch third-party marketplaces to meet consumer expectations of Amazon-esque environments, but also wanting to retain control of their branding, inventory, and margins,” Ramos says. “If retailers can curate their own successful marketplace to deter Amazon, the upside of doing so creates stronger support and relationships for their third-party vendors, stronger profit margins, and a brand experience that will pay dividends downstream in other efforts.” 

Ramos says the real test of a successful marketplace will be a strong branded curation to bring value, seamless shipping with last-mile experience, and counterfeit policing to prevent the integrity issues that Amazon is now facing.

“Marketers should anticipate increased marketplace fragmentation into 2023, and build marketing plans to involve them,” Ramos says. “Any first-party data strategy on top will supercharge acquisition cost and ROAS metrics — relentlessly seeking how to activate this data is paramount.”

Stephanie Miles is a journalist who covers personal finance, technology, and real estate. As Street Fight’s senior editor, she is particularly interested in how local merchants and national brands are utilizing hyperlocal technology to reach consumers. She has written for FHM, the Daily News, Working World, Gawker, Cityfile, and Recessionwire.