Walmart in the Marketplace

Elastic Path, a leading ecommerce platform, is a partner of mine. I admire their company and product and LOVE their blog – www.getelastic.com. As a holiday gift, they sent me a desktop calendar they created that offers an ecommerce tip of the day for 2010.

After traveling all week, I returned home last Friday to go through the week’s tips. Having just started a segment on my blog about marketplaces, the January 6^th tip made me laugh out loud. It read, “Just because Amazon (or your competitor) does something, it doesn’t mean it will work for your site. It doesn’t mean it’s working for Amazon. Test for yourself.”

My first thought was, “Yes, they are talking to you, Walmart!!!”

This is not news, but while we are on the subject of marketplaces, I’d like to take some time to talk about Walmart. Let me preface this post by saying that I’m a big fan of Walmart. They are a former client of mine and I have a great deal of respect for the executives with whom I’ve interacted over the years. However, I am not convinced that they are in the best position to compete in the marketplace arena and as more channels emerge are running the risk of creating a fragmented brand across those channels. It’s hard to critique the world’s largest retailer, so here is my rationale mapped back to the Marketplace Success Driver framework ($100 to anyone that can come up with a better name for that…seriously) I established last week.

REACH: This is a no brainer. Walmart is Walmart. They have the reach. Let’s move on.

RELEVANCY: Let’s examine relevancy based on the questions I posed last week. Are they filling a gap in the marketplace or are they better suited to provide a service in the marketplace? I’d say No. Amazon pretty much has this covered.

Does the marketplace offer the right products? Not at this point. With the addition of three retailers (Proteam, CSN, and eBags) as third party sellers, I don’t see much value being added to the existing product offering. And what will happen when partners offer the same products but are unable to match Walmart on price. What good does that do anyone?

Is it a concept relevant to the needs of Walmart’s customer base? Walmart proved that consumers want to and will buy everything they can in one place – toiletries, tires, chicken wings, jeans – when they began popping up Supercenters ten years ago. People like convenience. But Walmart.com is not the same as Walmart’s physical stores. And before they invest more time and energy into a growing a marketplace, I’d like to see them focus on building a stronger foundation for Walmart.com that operates much like the physical store – a point on which I’ll elaborate more when I talk about user-centricity.

TRUSTWORTHY CONNECTIONS: Unlike Amazon and eBay, Walmart is heavily vetting the sellers they let into the marketplace – understandable considering their credibility is on the line when opening up their customer base to third parties. It’s great that they’re being careful, but how can they possibly offer breadth to consumers at this rate compared to Amazon who has millions of 3^rd party sellers?

However, with the partners they do have they’re offering the same trust-building tools – pre-purchase notifications, retailer scorecards, ratings & reviews, etc. So as they add new sellers over time, they can ensure that they have the tools in place to build trust right out of the gate. But as I mentioned in the Sears post yesterday, trust takes time to build.

USER-CENTRICITY: Walmart.com is a mediocre shopping experience. Walmart’s physical stores are carefully organized according to how consumers shop. They aren’t the most fancy stores but they don’t have to be. They’ve nailed the brick-and-mortar set-up all the way from store layout to merchandising within departments.

In my opinion, Walmart.com is organized according to how media companies buy advertising space.  Much like Sears, the experience as a whole is extremely busy. The categorization of the products is different than the “departments” in the physical store. And the advertising is a total distraction from the shopping experience.

I don’t see advertising for Applebee’s in the garden department at Walmart. So why would I see banner ads for eggbeaters in the apparel section of Walmart.com? From a business model perspective, I understand why Walmart.com sells banner space. But I guarantee I could develop a stronger business model for how Walmart.com could maximize that valuable real estate to sustain the digital business, drive greater conversion on products within their store AND provide added value that is a differentiator for both their target customers and existing and potential sellers.

I bring this up because I honestly believe that until Walmart offers a user-centric experience, they will never begin to catch up to their competitors and establish a marketplace that truly thrives.

Walmart and Walmart.com may operate as two separate companies, but they aren’t two separate brands. Walmart needs to create a true multi-channel strategy. They need to ditch the classifieds concept, implement a new strategy for Walmart.com, start testing digital and mobile in-store and then expand their footprint as a marketplace with partnerships and acquisitions that reinforces their brand. Only then will they be able to compete with Amazon.

Marketplace Mania!

Amazon’s success in transforming itself from a marketplace for books into a marketplace for books AND almost everything else forced Walmart to take notice and get into the game. The demand of global commerce and the abundance of excess inventory enabled eBay to expand its brand from a bidding platform to a channel for retailers to move secondary goods, as well as an outlet for selling outside the US. And we can’t forget the ever-increasing popularity of Etsy as a marketplace for niche handmade goods. The company saw explosive growth in 2009 contributing to the increase among many to jump on the marketplace bandwagon.

Back in October of last year in the post “What’s in store for 2010,” I wrote that marketplaces were going to be hot in 2010. But I failed to mention that not all emerging marketplaces were going to be successful.

This got me thinking. What enables success in the marketplace? Many factors may contribute to a marketplace’s success. But in order to win, a marketplace must have reach among a consumer segment, be relevant to the consumer segments’ needs and/or desires, and drive trustworthy connections through a user-centric system. Or in simple terms:

REACH: The attention of buyers and sellers. Very simple.

RELEVANCY: Is it filling a gap for consumers or better suited to provide a service than existing competitors? Do they have the right concept, right products, right tools, etc?

TRUSTWORTHY CONNECTIONS: Connections can’t be made without reach. And once you have the reach, you still need to connect buyers and sellers for a marketplace to be effective (or really to even be a marketplace at all). Trust needs to be built between buyers and sellers, buyers and products, marketplace and buyers, AND marketplace and sellers. Trust takes time (sometimes a long time) to build. All existing marketplaces have a different approach to building trust. Whether it’s expansive user-reviews on products, seller and buyer ratings, or retail scorecards, all of the leading marketplaces understand the concept of building trust between connections.

USER-CENTRECITY: The user-experience is the glue that holds it all together. The experience has to cater to all parties and can make or break it all. Amazon has created a user-experience that may not be best-in-class (please someone debate me on this), but they’ve built something that works really well for their customer base.

Over the next week, I’m going to spend some time examining and sharing my thoughts on how the marketplace landscape maps to my framework taking a look at some of the leaders – eBay, Craigslist, Etsy, Amazon, Walmart – and some of the newbies – Groupon and Sears, which will launch it’s new marketplace in the next couple of days.

Happy Cyber Monday!!!!

Most people think that I’ve been MIA because I’m out covering and/or participating in Black Friday events. Wrong. I’ve been listening to some of the analysts calls and tracking reports as they come in, but not as much as I usually do. Why you ask? Well, it’s because this is the first year in my ENTIRE professional career that I haven’t worked in retail, worked for a product company that supported retailers, worked for a digital marketing company with a large retail client, or run a retail group for a brand. So I decided that my Black Friday gift to myself was going to be to let myself enjoy the weekend after Thanksgiving for the first time in 12 years. 

But it’s Monday and it’s back to the grind. I’m multi-tasking in California –  preparing for meetings at Facebook and following the events of Cyber Monday, a shopping holiday invented by Shop.org. According to comScore, online retailers in the U.S. saw an 11% (2008’s Black Friday activity only saw a 1% increase over 2007) increase in Black Friday activity over last year with $595 million in sales. And these same retailers are hoping to see even larger increase over last years’ Cyber Monday sales. 

While anxiously awaiting the updates, I paid a visit to the top 30 retailers and the 80+ others that send me emails. There was a clear winner and loser. 

And the first place ribbon goes to AMAZON!

Not only did Amazon have tremendous offers, but they organized those offers on a Cyber Monday page as well as featured the Cyber Monday deals on the relevant category pages. For some items, shoppers could take advantage of “lightening deals” in which products of limited quantities were available during a specific time at an even further discount. Sound confusing? Well, the user experience was very intuitive, but just in case Amazon created a special FAQ page outlining the dos and don’ts of the program. I was lucky enough to grab a lightening deal for my sister’s Christmas present as well as pick up a little something for myself.

My favorite thing about the program was Amazon’s use of proactive communication. Some people aren’t able to sit around trolling for deals and waiting for them to be announced. Some retailers solved this problem by sending multiple (read three to four) emails reminding consumers of the deals they may be missing. But Amazon created a Twitter account where interested consumers could follow to be notified when new deals were being posted and lightening deals were beginning. 

Again, Amazon brings it as a service company that retails products. 

And in last place we have Neiman Marcus. 

I saw some bad offers and poor execution of Cyber Monday programs, but the worst of the worst award goes to Neiman Marcus. Earlier this month I wrote a post about my concern for what the increase in NM’s gimmicky marketing tactics. But today’s offer was the most gimmicky of them all. Check it out:

Really? The Butterfly Game? Neiman Marcus’ best idea for a Cyber Monday program is to have a one day event where consumers hunt all over the site to learn how to receive a gift card with the purchase of regularly priced items. This might be interesting to consumers on days when other sites are discounting their inventory up to 75%. But I can’t see a huge percentage of consumers spending the day clicking around on Neiman’s to find a deal only valuable in the future while there are bigger and better deals TODAY at other sites – even competitive retailers that sell the same higher end brands. 

Suffice to say, I was really disappointed. 

 

 

 

 

 

Why Amazon’s new PayPhrase checkout process could really pay off

I’m a huge fan of Amazon. As a consumer I feel the shopping experience leaves much to be desired. But as a former retailer, I’m constantly impressed with Amazon from an infrastructure perspective – specifically their payment and fulfillment capabilities.

I’m surprised more retailers don’t take advantage of Amazon Payments’ solutions, specifically the Checkout by Amazon™ service, which includes tools for businesses to manage shipping charges, sales tax, promotions, and post-sale activities including refunds, cancellations, and chargebacks.

In my opinion, online payments are the most tedious part of a retail operations business – zzzzzzzzzzzz! But more importantly online payments pose the biggest hurdle for consumers when completing transactions.

Amazon gets online payments and the Checkout by Amazon™ service allows retailers to offer a consistent, low-friction checkout experience for Amazon’s customer base which includes over 94 million shoppers. If my math is right that is approximately 30% of the US population. (Note to Retailers: Don’t you want to offer an easy, affordable checkout process to 94 million people?!?)

Amazon has taken much of the pain out of payment for both consumers and retailers. And with last week’s launch of PayPhrase, a new checkout process, they’ve made the payment process even smoother and added some features that could be a game changer when it comes to capturing a larger share of wallet among the Gen Y population.

PayPhrase, which is two or more words and a 4-digit PIN, is an easy-to-remember shortcut to shipping and payment information associated with your Amazon.com account to make purchases at Amazon and across the web without sharing their credit card number.

Why this is a winner for consumers

Using PayPhrase on participating sites allows you to bypass registration and enables payment from one specific credit card that is stored at one location. The program also lets you create up to 20 phrases associated with various credit cards, shipping addresses and even people. For instance, I have one Amazon payment account. And now I can easily shop  using one phrase to pay for an order with my corporate card and shipped to my corporate office.  And use another phrase on an order shipped to my home and billed to my personal credit card from that one account. It’s a well designed parent-child relationship.

Speaking of parent-child relationships…

Everyone know about the buying power of Gen Y population and enabling teens to buy has been a challenge among ecommerce retailers targeting that demographic for some time.

PayPhrase addresses this challenge by allowing parents to set up phrases for teens and students. Parents can control the amount spent as well as require approval for each order. And each PayPhrase can be configured with additional controls, including monthly spending limits and e-mail alerts. They can even determine if the remaining balance “rollsover” each month.

This feature alone is changing the game. As Amazon’s marketplace expands and more retailers add Checkout by Amazon™ as an option, this gives even more buying power to an already powerful subset of the consumer population. And that’s all before Amazonpayments launches this on their mobile payments system.

How much do you really want that new book/video game/fill-in-the-blank?

In a press release distributed today, Amazon.com announced the launch of “Local Express Delivery,” a new shipping option giving customers same-day delivery in seven major cities including New York, Philadelphia, Boston, Baltimore, Las Vegas, Seattle and Washington D.C., extending to Chicago, Indianapolis and Phoenix in the coming months.

I get the fact that Amazon is trying to address a major point of friction in the shopping funnel, but I just don’t see myself paying an extra $10 to have something delivered the same day – especially when I have to place that order by 10 AM. Introducing Amazon Prime memberships was a very good business decision because it resulted in a significantly increased order volume among members. (side note: I’d love to know how profitable Prime members are to Amazon)

I’m not sure this is going to produce the same results. But if the offering doesn’t require significantly augmenting Amazon’s distribution network then it really doesn’t cost them anything to test out the idea. But other retailers should keep an eye on how the service performs.

You never know. One may wake up one day and feel the need to have some new shoes or a new handbag waiting for them when they get home.