More and more specialty stores are launching their own marketplaces

Some of the first brick-and-mortar retailers to launch online marketplaces were major retailers like Target and Walmart, looking for a way to compete with Amazon’s endless aisles. But now specialty retailers in a variety of industries are joining the market’s bandwagon, and leaning on the dominance they have in their own individual categories. But with so many marketplaces launching, not everyone will succeed. If third-party sellers are not properly vetted, retailers also risk damaging their reputation with shoppers.

There are more technology vendors than ever before that can help retailers launch their own marketplaces, and many retailers jumping on the market bandwagon are leveraging third-party software-as-a-service solutions such as Mirakl and BigCommerce to manage them. Having an online marketplace also allows retailers to offer more product ranges without weighing down their distribution networks.

“It’s a minimal cost, depending on how they handle it,” said David Marcotte, senior vice president of global retail at Kantar. “In terms of shoppers, it gives them another option and keeps them on the website.”

Products from third-party Michaels sellers will be available for purchase on Opening up its e-commerce platform would essentially more than quadruple Michaels’ online offerings in several categories, such as candle and soap making and leatherwork. Instead of subscription or listing fees, Michaels has a standard merchant commission rate.

“The launch of Michaels’ curated arts, crafts and decor marketplace is the next phase of our ongoing digital transformation to become the destination for all creatives to find inspiration, learn, shop and create,” Heather Bennett, executive vice president of marketing and e-commerce at Michaels, said in the announcement.

Marcotte said having an online marketplace gives retailers the opportunity to research products that are selling well and adjust their ranges accordingly. And despite the low cost, marketplaces offer retailers a new revenue stream from the fees they collect from suppliers.

For example, on David’s Bridal’s Pearl marketplace, vendors who want to be listed pay for a membership plan that ranges from $49 per month to $119 per month.

Jim Marcum, CEO of David’s Bridal, previously told Modern Retail that this platform would help the company retain shoppers’ attention. ‘We don’t believe [Pearl is] become a loss leader, but we don’t build revenue forecasts here either. That’s not important to us right now, believe it or not,” he said. “What matters to us is our relevance to the bride.”

Matt Moorut, principal analyst at Gartner, said these specialty retailers are also leveraging their relevance in their respective categories. The reputation of their brands in their categories gives specialty retailers an advantage over larger e-commerce marketplaces, he added.

“What specialty stores can do is offer this as a natural extension of the service they’ve always provided,” said Moorut. “In a sense, the specialty retailers can really leverage their own brand credibility in a way that Amazon and the like can’t. And they will have to because they just don’t have the same level of scale as some of those massive marketplaces.”

These specialty shops are indeed embracing what they are best known for. Michaels wants to bring together sellers in the arts and crafts category, including sellers of art supplies, diary products and baking items, among others. Now independent furniture seller Mathis house also launched its own marketplace in December, which was designed as a one-stop-shop destination for home furnishings.

Others use marketplaces to expand their offerings in adjacent categories. While 1-800-Flowers. com may be known for its floral arrangements, but is expanding further into gifts with the release of its marketplace platform Gifts & More in January, featuring gift items from local sellers.

Paperless Post, which has been selling invitations online since it was founded in 2009, also wants to gain a larger share in the events category. The online marketplace, called Party Shop, has products suitable for a range of party themes, including dinner plates, party favors and balloons.

“After the invitation is sent out, a whole period of planning begins,” said James Hirschfeld, CEO and co-founder of Paperless Post, previously told Modern Retail. “The invite is the start of a planning process leading up to the event where people are really excited and shopping.”

Gartner’s Moorut said third-party sellers can also benefit from joining niche platforms because there may be less competition. Smaller marketplaces can also be a cheaper option for sellers than Amazon or Walmart.

However, despite the potential opportunities, not all online marketplaces will succeed, Moorut said. With so many marketplaces available, it can be difficult for specialty retailers to attract high-quality customers and suppliers. And when third-party vendors fail to deliver the quality of service customers expect, the specialty store can bear the brunt of the criticism.

“If they get to a position where they just sit aside and collect dust, they’re doomed from the start,” Moorut said. “It’s going to be a tough road, not necessarily just because of the extra competition, but also because specialty retailers ultimately have to do what’s most efficient and effective for themselves.”

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