The Supply Side: Online marketplace rise has opportunities, challenges

Online marketplaces are growing as more consumers become comfortable making purchases online. Confidence has grown over the past few years in step with Amazon Prime memberships surpassing 100 million U.S. households by late 2018.

A 2019 report from intelligence platform Feedvisor indicates more than half of consumers (58%) buy products online at least once every few weeks, with nearly one-fifth (18%) making online purchases at least a few times a week. For Amazon Prime members, 48% said they make online purchases at least once a week. The report found 74% of Amazon Prime members make online purchases at least every few weeks.

As consumers have become more comfortable with Amazon’s marketplace, they also shop other sites more often. Marketplaces accounted for over half of the global e-commerce sales in 2018, according to Feedvisor. The report said aside from Amazon, consumers also prefer to shop expansive, curated destinations such as Walmart’s Marketplace or eBay.

Marketplace represents more than 90% of all available products on Walmart’s website, which makes the retailer the third-largest e-commerce entity in the U.S. by total sales, behind Amazon and eBay.

Annibal Sodero, professor of supply chain at Ohio State University, said eBay, which first pioneered the marketplace concept, is now modifying its fulfillment services to look more like Amazon. In July, eBay introduced “Managed Delivery,” a fulfillment service akin to Fulfillment by Amazon (FBA) that enables sellers to store, pack and ship their products through logistics partners managed by eBay. The company said the Managed Delivery option will launch in 2020 in the U.S.

Feedvisor also reports Walmart.com and eBay are the two most visited marketplaces behind Amazon. More than half (52%) of the respondents in the Feedvisor survey reported they made purchases on Walmart.com and 43% named eBay. Overstock and Wayfair were each named by 12% of the respondents, while Jet.com was named by 7%.

As more consumers shop multiple marketplaces, suppliers are also tasked with managing multiple marketplace platforms. Feedvisor said more than half of U.S. Amazon marketplace merchants also sell on eBay, and close to half also sell on their own platforms. More than 30% sell on Walmart’s marketplace.

Feedvisor notes diversifying to multiple marketplace platforms was a 2019 business goal for 35% of Amazon sellers. While marketplace platforms allow sellers more opportunities for commerce, it’s not without risks and problems that can come with trying to manage the business over multiple platforms.

From the basic setup to sell on marketplaces, there can be major differences in the requirements, and each marketplace has its own set of rules and protocols. For instance, the number of characters allowed in the title on the landing page can vary from 80 at Google to 200 allowed by Amazon.

Sellers need to understand the nuances of product listings for each marketplace where they intend to conduct business, the report said. For non-brand owners, product descriptions must match what is already being sold on Amazon or eBay. Feedvisor said common errors typically result in anywhere from 10% to 30% of all the seller’s products not being listed.

Managing data across multiple marketplaces can also be cumbersome. Sellers of apparel and “fast fashion” can turn their inventory by 20% to 30% every week or two. That can present challenges in keeping the product listings current, the report said.

Selling across multiple marketplaces also requires detailed inventory management. Consumers have little tolerance for out-of-stocks, and retailers like Walmart and Amazon also frown on sellers running out of items as consumers are apt to complain with negative reviews on the retailer marketplace sites or social media. Amazon will suspend an entire account if sellers begin to get bad reviews. Feedvisor suggests order automation processes, which can be obtained from third-party service providers who can manage all the seller’s inventory in a centralized place.

Despite the challenges of managing multiple marketplace accounts, more sellers are expanding their distribution networks. On average, U.S.-based small and mid-sized businesses sell more than 4,000 items per minute across storefronts on the Amazon marketplace, according to eMarketer.com.

Dani Nadel, chief operating officer at Feedvisor, said by the end of 2019, Amazon is projected to see its share of the total U.S. e-commerce market reach 52.4%, up from 48% in 2018. She said Amazon is responsible for more than 5% of all combined U.S. offline and online sales.

Nadel reports Amazon’s loyalty is nearly unsurpassed in retail with the saturation of Amazon Prime members who have come to rely on two-day shipping as part of their $119 annual membership fee.

Her research found 83% of Prime members cited the two-day free shipping as the most compelling benefit of their Prime membership. One in 10 cited the video and music streaming service that comes with the membership. She said Prime members are so loyal that 76% are “very likely” to keep the membership. Another 19% said they were “somewhat likely” to stay on as members. Just 2% said they plan to not renew, while 2% were unsure.

For sellers on Amazon, those who qualify for Prime shipping stand a better chance to sell the product than a seller who fulfills the order on its own. Nadel said 67% of consumers look at Prime shipping eligibility when deciding to make a purchase. She said 75% “specifically” shop for items that are eligible for Prime shipping. She said 34% of Prime members only buy Prime-eligible products, and 53% frequently make Prime-eligible purchases.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.