The Supply Side: Walmart Marketplace aims to attract more third-party sellers

Retail is about assortment, and Walmart Marketplace — an online portal for sellers — is looking for more third-party suppliers to provide a suite of services to sellers while also driving higher margins for itself.

Walmart recently held a two-day summit in Las Vegas for third-party sellers. The invitation-only event for about 1,500 attendees was intended to secure more sellers for the growing Marketplace.

During the event, Walmart announced several new features for sellers. Manish Joneja, Walmart’s senior vice president of marketplace and fulfillment services, said the evolution of Walmart Marketplace is among the most significant opportunities in retail.

“We’re building alongside sellers, listening to their needs to create a platform that’s easy to use and the first choice for customers and sellers alike,” he said. “By design, our marketplace is a level playing field, providing customers access to what they want regardless of whether Walmart or a third-party seller owns the inventory.”

He said the retailer is creating new opportunities to reach more customers through Walmart Business, a channel for B2B sellers, and Walmart Restored, a program to help sellers seize the emerging popularity of refurbished goods. Walmart Marketplace is also expanding beyond North America to Chile for eligible cross-border sellers.

Walmart Marketplace had a reported 151,820 sellers as of June 2022, up more than 60% from 2021. That’s still a far cry from Amazon’s 6.2 million third-party sellers.

During the recent earnings call, Walmart CFO John David Rainey said customers buying items on Walmart Marketplace increased 14% in the fiscal second quarter. He said general merchandise sold well on the platform in the three-month period, with double-digit growth across the home and apparel categories, even as others have seen weaker discretionary spending.

Rainey also said sellers participating in Walmart Marketplace are potential customers for Walmart’s new businesses since they can hire the retail giant to pack and ship orders and advertise their products to customers.

Joneja said Walmart Marketplace is also adding several brand shops that will allow sellers to market to browsers through digital storefronts and highlight specific items. He said the new feature will help products stand out online. Walmart’s new Build Brand Shelves feature allows sellers to feature curated assortments or try a seasonal collection. Both can boost discoverability and enhance customer experience, according to the retailer.

Jon Allen, CEO of Woodridge Retail Group in Bentonville, said his clients who sell on Walmart Marketplace often buy advertising, but the return is not always fast. He said that for new product launches and to build brand awareness, the ads do their job because making a product seen in a sea of competitors is critical to consumers buying the product. He said it’s also easier for products to be seen on Walmart Marketplace than Amazon because there are fewer competing sellers.

FULFILLMENT GROWTH
Joneja said fulfillment is one of the biggest challenges for any retailer, but Walmart’s advanced supply chain can help sellers reduce costs while providing customer convenience. Just like Walmart has been able to create pickup and delivery systems and technology for itself, the retail giant also offers third-party sellers local pickup and delivery options through its last-mile delivery network.

“By offering access to Walmart Fulfillment Services (WFS), our low-cost end-to-end fulfillment solution, third-party sellers can now use WFS to ship multi-box items like patio sets. These new services mean more items can carry the Fulfilled by Walmart tag that helps drive conversion. And we know sellers see on average 50% growth in gross merchandise value (GMV) when shifting items to WFS,” Joneja said.

In August, Rainey told analysts that the number of sellers using Walmart fulfillment services grew by more than 50% in the recent quarter. He said that helps suppliers and is an additional revenue stream for Walmart.

Allen said fulfillment by Walmart is a game-changer, and it’s necessary for the clients he represents.

“Today, even a microwave is not fast enough as consumer expectations have been set to ready now,” Allen said. “To attain a two-day delivery, online sellers have to be part of an ecosystem that moves fast at scale like Walmart.”

He recommends that his clients use the fulfillment option by Walmart because it means the difference between two days to the customer instead of three or even five without it. He said using fulfillment by Walmart is a difference maker for his clients and boosts search rankings.

THIRD TO FIRST
Joneja, a Walmart Marketplace veteran who previously worked at Amazon and eBay, said another benefit for successful sellers is the chance to become a first-party supplier with Walmart, buying the goods and reselling them to customers online and in stores.

Blake Sorenson recently got several kinds of his seed-based snack products into 1,500 Walmart stores partly because of the third-party sales he generated on Amazon and Walmart.com. He said building a strong online sales presence is a great way for retailers to decide which stores to place the items in, given the limited shelf space in brick-and-mortar stores.

Sorenson continues to sell a more comprehensive selection of Blake’s Seed Based snacks on Walmart.com and Amazon. While he is thrilled to be in Walmart stores, he credits a robust online business for paving the way.

According to Rainey, Walmart’s e-commerce sales rose 24% in the second quarter, led by grocery and helped by Walmart Marketplace. Walmart remains a distant second to Amazon, which captured about 38% of U.S. online sales last year, compared to Walmart’s 7%, according to eMarketer.

However, analysts like the momentum Walmart is displaying with growing online sales. Walmart’s online revenue, including Marketplace, increased from $73.2 billion in fiscal 2022 to $82.1 billion last year. The bulk of sales were from the international segment, which totaled $53.4 billion. Sam’s Club e-commerce sales totaled $8.4 billion last year.

Allen said several clients started as third-party marketplace sellers and built a customer base that caught Walmart buyers’ attention. He said buyers often look at marketplace winners when they want to expand category offerings in stores and first-party online products.

“That’s been part of our secret sauce is getting sellers from third-party to first-party and even in stores. Marketplace is definitely a pathway to first-party with Walmart,” he said.

AMAZON OR WALMART
There are significant differences between the competitive marketplaces besides their size. The biggest category for consumers on Walmart.com is grocery, over-the-counter medications and cleaning supplies. Amazon’s most significant categories include home and kitchen, beauty and personal care, and toys and games. While Amazon still sells more electronics, books and clothing online, Walmart is closing that gap through Marketplace, according to analysts at Forrester.

A problem for Walmart is that most consumers start their search on Amazon, given its head start on other retailers, including Walmart. JungleScout reports that 75% of consumers purchase from Amazon in the U.S., whereas 43% shop at Walmart. Amazon boasts 2.5 billion visits to its site each month, well above the 429 million average monthly visits on Walmart.com, according to JungleScout.

Amazon charges a $39.99 monthly fee and also gets a referral fee on every sale. Amazon also offers a basic account for beginners but has limitations regarding categories and access to fulfillment services. Walmart has one type of seller account, and it is free from monthly fees. However, the retailer charges a referral fee for items sold and shipping costs for its fulfillment services. Referral fees can range from 6% to 15%, depending on the item sold.

Amazon and Walmart each offer sellers advertising at a cost.

Walmart and Amazon require sellers to hold their defect order rates down to 2% for 90 days at Walmart.com and 1% over 60 days at Amazon. Walmart requires an on-time shipping rate of 99% or more and keeping track of shipment confirmations. Amazon requires a seller to keep a late shipment rate of 4% or below over a 30-day period for self-fulfilled shipping only.

The fulfillment cost of Amazon and Walmart for sellers starts from $2.50 and $3.45, respectively. Both offer similar free next-day and two-day delivery for their members. For non-members, Walmart offers free delivery for orders above $35. For Amazon, it varies depending on the products and sellers.

Allen said Woodbridge represents clients on Amazon and Walmart.com as third-party sellers. He said the cost of doing business is typically less on Walmart.com. He also likes that Walmart looks at its marketplace like the minor leagues, where it scouts for talent to move to the bigger show.

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 Firebend.