Walmart’s Marketplace Gains Ground Fast

But Amazon has a powerful market position

Author: Andria Cheng

June 30, 2017

When Brandon Harden started to market apparel and other merchandise two years ago on Walmart.com, he did not have particularly high expectations.

His company, Seven Times Six, has been selling on Amazon and eBay for more than 10 years, and it uses roughly a dozen other marketplaces. Last year, his first full year of business on Walmart, sales on Walmart surpassed eBay to become Seven Times Six’s second-largest marketplace.

“Usually these marketplaces take some time to grow,” Harden said. “We didn’t expect there would be such a growth in the first full year.”

While Amazon is the alpha dog of marketplace sellers (for example, Seven Times Six still generates a good 85% its business from Amazon), Walmart’s quick rise is another illustration of its ecommerce ambitions and its ongoing fight against Amazon.

Walmart first started marketplace selling in 2009, but it was years before it began to expand the platform aggressively. In the past year, it has increased its assortment to 50 million items from 10 million, the company said in Q1 earnings announcement in May. (Amazon, in comparison, says it carries “hundreds of millions” of items.)

Walmart declined to give eMarketer Retail a breakdown between company-owned and third-party inventory, but it has cited third-party marketplaces as a contributing factor in Walmart.com's 63% gain in Q1 sales and the 69% jump in total gross merchandise sales. The company also has inked or expanded partnerships with more marketplace tech vendors to make it easier for sellers to get on board its system faster.

“Online shopping is all about where people are going,” said Frank Poore, President and CEO of CommerceHub, which helps retailers and brands sell online. Brands worry about Amazon’s dominance and want to diversify to protect themselves, he said. “They don’t want to have too much concentration in any one channel.”

Plus, brands on Walmart.com benefit from its sizable traffic, he said. Walmart said in its annual report this year that it had an average of 92 million unique visitors a month.

Walmart’s marketplace expansion parallels other ecommerce moves it has made to extend its reach in ways that its traditional brick-and-mortar operations might not, buying men’s clothing retailer Bonobos, outdoor gear seller Moosejaw, and women’s clothing seller ModCloth. Marc Lore, the founder and CEO of Jet.com who now also heads Walmart eCommerce US, has said acquisitions help expand Walmart’s assortment and give it access to more premium brands.

It’s a misperception that the Walmart.com shopper is the same as the in-store shopper.

Walmart is “seeking access to brands they haven’t historically attracted to the platform in order to attract new customers,” said David Spitz, CEO of ChannelAdvisor, which helps sellers market via marketplaces. “It’s a misperception that the Walmart.com shopper is the same as the in-store shopper. Walmart.com shoppers tend to be higher-income.”

Walmart’s marketplace, Spitz said, “has been really popular with our customers, because it offers scale and can really move product.”

Indeed, Walmart looks to be the biggest beneficiary in sellers’ move to spread their risks and diversify beyond Amazon. While only 9% of Amazon sellers also sell on Walmart.com (vs 65% on eBay, for instance), that percentage jumped to 36% among merchants with $2 million plus in annual revenue, according to a survey this year of 1,600 US Amazon sellers by Feedvisor, which helps Amazon sellers with repricing and other strategy. In another telling sign, when asked about other channels they want to expand to this year, Walmart, cited by 29% of Amazon sellers in the Feedvisor survey, garnered the top spot alongside sellers’ own websites, beating all other marketplaces including Shopify, eBay, Walmart’s own Jet.com and Etsy.

Neither Walmart nor Amazon disclose their marketplace sales, but a Euromonitor study suggests that Walmart is picking up pace. While third-party merchant retail sales on Amazon.com are nearly four times those of Walmart.com ($63 billion vs $16.6 billion in 2016), between 2011 and 2016, Walmart.com’s marketplace sellers’ retail sales rose an annual average of 58.6%, outpacing growth rates seen at Amazon, eBay, Sears, Rakuten and Etsy during the same period, the Euromonitor data showed.

CommerceHub’s Poore estimates US marketplaces will grow about three times over the next four to five years to about $780 billion.

To increase its ecommerce appeal, Walmart this year introduced free two-day shipping and unveiled a Pickup Discount program that gives shoppers discounts when they choose to pick up select items in stores. While neither initiative currently applies to marketplace items, the idea is an expanded Walmart.com traffic can potentially drive sales to other things on the site too.

Some sellers have gotten up and running on the marketplace in just a few hours.

Walmart has also taken steps to appeal to sellers, who can sign up for the platform only by invitation. The company said it provides “significant amount of support” to sellers on as-needed basis, regardless of their size. Seven Times Six’s Harden said that he has an account manager at Walmart he can call if there’s a major issue. (He said he doesn’t have the equivalent with Amazon.) Walmart said it’s also invested in self-service tools to reduce seller onboarding time by 61%. In some cases, it said, sellers have gotten up and running on the marketplace in just a few hours.

Despite the growth, Walmart faces plenty of challenges. For instance, Amazon offers many suppliers the option to bulk ship their merchandise to its warehouses and have their orders fulfilled by Amazon, which means many orders then qualify for its two-day Prime shipping. In contrast, Walmart marketplace sellers currently only have the option of shipping from their own warehouses.

“We ship in bulk to Amazon warehouses,” Seven Times Six’s Harden said. “That’s a huge benefit. It’s lower cost for us to ship.”

Indeed, while Walmart’s fleet of some 4,700 physical stores could be an advantage, the company “still doesn’t have an answer for Prime when it comes to marketplace sellers,” said ChannelAdvisor’s Spitz.

“We think that’s a major gap they need to address to compete with Amazon,” he said. “Consumers expect great prices, selection, and quick shipping, and Walmart needs to be able to make that promise for all its online sales, marketplace or first-party.”

Then there’s also the image issue: While Walmart.com’s customers may differ from its typical in-store shoppers, many brands may not be aware of it.

“Half of our brands were eager to get on Walmart marketplace,” said Will Land, CEO of Marketplace Valet, which helps brands sell on marketplaces. The other half, he said, not so much. “They said: ‘I want to be on Amazon, Newegg, eBay and Sears, but not on Walmart.’ They don’t want to be associated with the Walmart stigma: low price, inexpensive. They are worried having a product on Walmart will hurt their brand.”


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