The move to a marketplace is tempting for many struggling retailers. More products and brands translates to more customer visits and more sales, right? This seems like the first gut instinct to recover sales. And recover short-term sales it may, but what’s the end game? What really will distinguish you in the future? And, by succumbing to the marketplace, will you hurt your brand image in the end?

What Debenhams is going through with Boohoo, as reported in the FT's recent article 'Retailers turn to online marketplaces in scramble for sales', is eerily reminiscent of what happened to Sears in the States. 2006 was the last year of sales growth in the retailer’s history, prompting a hard pivot to e-commerce. Sears was one of the the first e-commerce retailers in the U.S., building off of its successful direct-to-consumer catalogue business. But this advantage started to wane, and the retailer watched as Amazon grew from less than 20% of their size in terms of revenue in 2005 to surpassing them 6 years later. Sears officially launched their marketplace in January of 2010, following a similar move by Wal-Mart the prior year. They loaded up their site with 65 million SKUs and quickly grew to be the #4 marketplace by breadth of offering. Taking a page out of Amazon’s playbook, they opened up Fulfilled by Sears and Shop Your Way rewards program to help their sellers succeed and build stickier customer relationships. They even opened up their website to all of eBay’s listings in 2018, adding over 70,000 new sellers. They did everything right, except listen to their customer.

Online revenue actually decreased for three straight-years in the heady growth years of the early 2010s, and as of 2020 remained stuck at a little over $1bn. In 2006, their last year of growth, total Sears revenues were $53bn. So much for an online marketplace saving the business. Other US retailers have attempted this strategy as well with similar results – Best Buy opened its market place a year after Sears and folded it in 2016 based on poor customer service, non-competitive pricing, and general customer confusion stemming from so many third-party sellers on the site. Juxtapose this against Target who is leveraging their store estate to multiply their pandemic-fueled e-commerce gains, making it easier for customers to pick up and return online purchases in their local store.

There are some really good and successful marketplaces – but only a handful. It not a great strategy for a retailer to try to take on Amazon at their own game. Marketplaces boil down to choice – and giving the consumer lots of it. While consumers like choice, too much can be bad for business. A website with hundreds and brands and endless SKUs can frighten the most enthusiastic shopper leading to increasing abandoned baskets and abandoned websites.

Curation is the key. Curated selections that cater to the target customer are a rare thing these days and one highly appreciated on the consumer side. It’s hard to measure and therefore hard to act on, which is why we find most retailers are in desperate need of a brand and SKU rationalisation. Here are four practical tips to stay in the game:

  • Invest in analytics that drive the right decisions on your brand and SKU portfolio. Think in terms of all-in cash profit;
  • Play to the functional shopper and the experiential shopper. Provide great service across both channels and make sure the customer experience is seamless. Optimise the website to cater to time-pressed customers who are likely to shop with purpose, but also offer experiential content with unique brand messages both online and in-store;
  • Use social media and CRM to hone your messages and give the right content and promotions to the right customer groups through the right channels. Keep measuring its effectiveness and adjust rapidly; and
  • Optimise omnichannel profitability. Don’t get stuck with all of the wrong costs. Use innovative ways to manage items that really break the bank – like returns.

Rushing to create or join a marketplace may bring some short-, even medium-, term gain but in the long run there is a risk of becoming ‘lost in the noise’ and joining the indistinct ‘muddle in the middle’ that has trapped many a retailer in the past.