Bunnings is about to embark on a massive growth phase, as the hardware giant prepares to enter the world of “marketplace” retailing.
One of the world’s fastest-growing retail concepts, “marketplace” is the model whereby a retailer or operator sells products supplied by third parties, but holds no stock of those products itself.
Think the likes of Amazon, eBay and China’s Alibaba, which offer millions of products but hold few to no items themselves, and either take a commission on each sale or charge suppliers a subscription fee – or both.
It’s one of the hottest things in retail right now, with many of the world’s leading companies either beefing up their current platforms, or gearing up to launch their own marketplace offering.
Bunnings is aiming to launch its marketplace platform, MarketLink, in November.
While it is tight-lipped about what specific suppliers or products will be on offer, managing director Mike Schneider earlier this month referred vaguely to “indoor furniture, whitegoods and kitchen appliances, home entertainment, kitchenware and homeware” as just some examples.
But as Mr Schneider put it, the retailer is ultimately aiming to offer “everything from the front gate to the back fence”.
Tzipi Avioz, a senior executive with Mirakl, the company providing the technology and market know-how for Bunnings’ MarketLink, told The New Daily that while an e-commerce retailer can typically stock around 40,000 items within a conventional online platform, a marketplace can accommodate more like two million products.
Bunnings will begin with a modest 8000 lines, but Amazon offers about 12 million, according to US retail trade magazine Retail Touchpoints.
Ms Avioz said the growth in marketplace has been – and will continue to be – sizeable, with marketplace sales as a percentage of total digital sales globally having doubled in the past nine years.
In 2018, online marketplaces accounted for 52 per cent of global e-commerce sales and sold more merchandise than all stand-alone retail websites combined, she pointed out.
Ms Avioz added that global research firm Gartner has predicted that more than half the world’s online sellers will adopt marketplaces or include third-party sales in their e-commerce platforms by 2020, and overall, a staggering one in five companies will be a marketplace operator within the next five years.
While online sales totalled $28.6 billion in 2018, that’s expected to grow to $35.2 billion by 2021, with much of that growth originating from the marketplace sector, Ms Avioz said. And Australia is part of that picture.
She singled out online retailer Catch.com.au as an example.
“Catch Group launched a Mirakl marketplace in June 2017 and has since become Australia’s third-largest online retailer, with nearly $200 million in sales,” she noted.
“By comparison, Amazon Australia is the 15th largest. And 40 per cent of Catch’s sales are driven by its marketplace, which has grown from 35,000 products to two million … and [it has] doubled its customer base in just two years.”
Ms Avioz explains marketplace as essentially “building a business within a business … to grow their reach and number of products and services they are selling from other suppliers” that can deliver massive growth to established companies.
That’s particularly the case for Bunnings, whose digital offering has lagged the market, until it flagged a major revamp of its digital sales platform, with 55,000 products scheduled to go online before Christmas.
Ms Avioz said the marketplace model had also been found to not only add to the size of orders by 15 per cent, but also boost a company’s in-store sales by 7 per cent.
But is there a flip side to marketplace?
Online retail commentator Colin Barnard said the advantages of the marketplace model were undisputed. At least for the retailer, and for many “mom and pop” suppliers who might find it harder to access the market.
Mr Barnard, who works with online advertising company Criteo, said the mass and volume of a marketplace platform enabled companies to “get to know the customers better” because it increased the frequency of their visits to a site, more so than in the case of a specialised or single-category retailer.
That allowed a retailer to gather a huge amount of data about a consumer’s behaviour, which in turn enabled them to target customers more specifically and entice them into return visits and purchases.
“The marketplace brings a lot of benefits in that ‘customer relationship management’, whereby a buyer can be prompted with an ‘other customers also bought this’ messages, for example,” Mr Barnard said.
Certainly, Ms Avioz said that research on some marketplace platforms found that they boosted an average online sale by 15 per cent and in-store sales by 7 per cent.
But Mr Barnard said there was also a concern that the growth of marketplace might lead to an unhealthy rationalisation of the online market that could ultimately see the bulk of the world’s online transactions concentrated among a handful of players.
And in the case of high-selling lines, there was also the risk that the platform operator could begin manufacturing those products themselves, effectively cutting out suppliers or manufacturers.
Originally posted on 23 October, 2019 by Mike Bruce, The New Daily