is running a marketplace right for me?

IS RUNNING A MARKETPLACE RIGHT FOR ME?

Rick Watson

June 6, 2012

1

A LITTLE ABOUT ME

• GM, Marketplace for Barnes & Noble.com

• Software / Technology Background

• 13 years in ECommerce Industry

• Twitter: @rickwatson

• Website: http://rickwatsonsblog.com/

2

OVERVIEW

• What?

• Why?

• How?

• Why Not?

3

WHAT?

4

MARKETPLACE: VIRTUOUS CYCLE

5

Expand Selection

More Buyers

DC WORKFLOW

Customer

Ship

PurchaseSearch / Browse

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MARKETPLACE WORKFLOW

Customer

Inventory

Feed

Search / Browse Purchase

OrderInformation

Ship

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ENHANCING SELECTIONDC Products Dropship Products Marketplace

Vendor Type Manufacturers Distributors Online Retailers

Vendor Count Hundreds Hundreds /Thousands Thousands/Millions

Selection Profile Narrow and Deep Variable Broad and Shallow

Gross Margin 40 - 60% ~30% ~12%

Inventory Risk High None None

Inventory Title Owner Flash Title Seller

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WHY CONSIDER A MARKETPLACE?

• Expanded pool of products, promotions, pricing, options, availability

• Improve unit economics

• No cost of goods

• Shipping can become a revenue source

• Lower inventory risk

9

OPTIONS TO CONSIDER

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• Product Posture:

• Promotional

• Non-overlapping

• Fully overlapping

• Seller Posture:

• Closed/Gated

• Open

MARKET LANDSCAPE

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HOW?

12

THE ESSENTIALS

• Legal Terms, Taxation, and Data Ownership

• Product Creation, Categorization & Cross-Linking

• Listing Data Model

• Seller Recruitment & Onboarding

• Buyer & Seller Service

• Site Merchandising & Promotions

• Seller Metrics Plan

13

DATA OWNERSHIP

• Right to use, modify, combine, display and retransmit a seller’s data

• Survives contract termination

14

LISTING DATA MODEL

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Product• SKU• UPC• Title• …

Applies to:• Products/Listings• Orders• Analytics

Listing• Seller• Seller SKU• UPC• Quantity• Condition

SITE MERCHANDISING & PROMOTIONS

• Sellers expect proactive promotion & exposure

• Examples

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AMAZON – CATEGORY PAGE PROMO SPOT

Featured sellers/retailers on AMZ. When buyer clicks on the logo, they are taken to that retailer’s listings on AMZ. AMZ offers this positioning to retailers as part of the contract negotiations.

BUY.COM’S DAILY DEAL

Buy.com also has a daily deals slot for retailers.

SEARS – SHOP BY MARKETPLACE SELLERS

BUYER SUPPORT

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First-LevelFirst-Level

Second-LevelSecond-Level

Buyer Support Organization Seller Support Organization

Seller Support Team

Seller Support Team

Third-Party Merchant

Third-Party Merchant

Customer Request

SAMPLE ORGANIZATIONAL MODEL

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Function Merchandising Team

Marketplace Team Seller Support

Seller Acquisition & Onboarding

Coordination Ownership

Seller Management & Support

Key Accounts Coordination Ownership

Site Merchandising & Promotions

Ownership Coordination

Feature Development Ownership

WORRIES

22

MERCHANDISING ALIGNMENT

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ONGOING PRIORITIZATION

• A Marketplace puts you in the software business – sellers expect you to execute on some of their ideas

• Merchants have choices – why are they with you?

• Prefer fewer, long-term resources over larger #s of temporary resources for “launch”

24

WHAT “NO” LOOKS LIKE

• Most projects in perpetual 1.0 stage

• Top vs bottom-line focused

• Internal teams not easily aligned

• Rigid/inflexible systems

• No clear differentiated value proposition for merchants

• Internal conversations often not data-driven

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WHAT “YES” LOOKS LIKE

• Clear business owner

• Unique customer base

• Goal to improve selection & profitability

• Willingness to see merchants as customers

• Good traffic acquisition strategy

• Invest in platform/software over long-term

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SUMMARY

Long-term commitment

Contact Rick Watson at:

• Twitter: @rickwatson

• E-mail: rwatson@book.com / richard.m.watson@gmail.com

• Web: http://rickwatsonsblog.com/

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REFERENCE MATERIAL

• How to Build an Online Marketplace• Brian K. Walker, Forrester, May 8, 2012

Why Every Retailer Needs an Online Marketplace• Sucharita Mulpuru, Forrester, May 9, 2012

Company to investigate:• Merchantry / Rakuten: Build marketplace platforms

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