Third-party marketplaces are becoming a more powerful force in retail. Many leading major retailers, ranging from department stores to grocers to big-box electronics and home-goods brands, have launched a marketplace (or put doing so on their strategic priority list).
Amazon popularized a model in which third-party sellers—a mix of manufacturers, distributors, and resellers—own the product assortment, selection, and pricing on the retailer’s platform, rather than the retailer. According to McKinsey, marketplaces could account for 50 to 60 percent of retail revenue growth over the next three years.
The appeal is straightforward: consumers enjoy a diverse range of goods, and third-party sellers can vastly expand a company’s assortment without incurring the inventory and carrying costs associated with doing so independently. Department stores, grocers, and big-box retailers
However, there is a catch to this expansion. To navigate marketplaces, retailers must balance new considerations with marketplace pricing, which poses a challenge. Although retailers may operate the third-party platform, sellers typically control the pricing. If they are not managed properly, what they charge can vary significantly across channels.
These disparities pose potential risks for both customers and retailers, who are already feeling the pinch of rising inflationary costs. According to our research for one client, 70% of its customers would only buy an item on a marketplace if they believed they would pay the same or less than if they purchased it directly from the seller.
With so many competing offerings to choose from and inflation on the rise, it may only take one unsatisfactory offering.