Channel Advisor recently announced its integration with Walmart’s Global Marketplace, an expansion of Wamart.com. This could be a significant sales threat to Walmart direct suppliers.
Marketplace retailers aggregate products, many of which could include items within your catalog that you do or do not sell to Walmart. Walmart uses marketplace retailers to have increased assortment online. The process of getting more items from a single location is faster and usually doesn’t require Walmart to inventory those products. Basically, this is the same process that Amazon has been using, which allows them to have around 100 million SKUs. Walmart has had roughly 9 million SKUs, most of which are in inventory with Walmart.
Most, if not all, direct Walmart suppliers will be upset with this scenario, and rightfully so. Now brands that have been working with Walmart for decades are now competing with their own products on Walmart.com and not receiving credit of the sales.
Before we dive too far into how suppliers can react positively to marketplace retailers, let’s take a deeper look into “why” Walmart is pushing marketplace retailers.
- Walmart is 100% focused on increasing its assortment online. Marketplace retailers offer a fast way to increase assortment, versus working directly with suppliers. From one perspective, it’s all about killing more birds with one stone, as Walmart can go to one provider and have access to many more items from many brands. However, speaking from my experience with Walmart suppliers, they are very slow and hesitant to open their entire catalog to Walmart. We understand the supplier’s reasoning. It is mostly due to thinking that certain products are not designed for the Walmart shopper. This resistance requires Walmart to seek other methods of accomplishing its goal of increased assortment, thus the marketplace.
- Most marketplace retailers do not require Walmart to inventory items and usually offer drop shipping programs. This allows Walmart to carry more items faster for zero-to-little inventory investment and shipping logistics. This is very favorable for Walmart. However, most suppliers are not open to non-inventory items or drop ship programs. This forces Walmart to use marketplace retailers.
- Walmart is engaging with marketplace retailers because they have no other choice. Suppliers are not reacting quickly enough to Walmart’s call for increased assortment online. Direct suppliers are not opening their entire catalogs or participating with non-inventory items and drop ship programs. If Walmart could work with direct suppliers and have full cooperation and speed to market, they and suppliers would greatly benefit.
- Walmart must engage with marketplace retailers because of the omni-shopper. The omni-shopper wants convenience. That means they are simplifying their retailer choices by expecting retailers to carry more items they want. It makes it easier for shoppers when they can have one account with one retailer, go to physical store, use e-commerce, order online/pickup in store, or even have drones deliver products. They want the “everything store.” Walmart is not policing suppliers; they are simply reacting to their shoppers. Shoppers have demanded this for quite some time. Walmart must react quickly, as its omni-channel competitors are doing the same. This is NOT about e-commerce. This is about omni-channel retail.
Assortment growth is not going away. It’s going to become even more intense. Marketplace retailers will not go away. They will grow. The race has started and it is a full sprint to the finish.
So, what can direct suppliers do to grow their business at Walmart in the face of competing against marketplace retailers?
- Direct suppliers have a major advantage. They represent their brand to Walmart directly to the bulk of the business: brick-and-mortar. From a sales perspective, this offers them some favor to participate with Walmart’s omni-channel strategy.
- Suppliers must open their entire catalog to Walmart. Walmart will get their entire catalog eventually, one way or another. It may as well be directly from the supplier.
- Suppliers should implement processes to participate in drop shipping programs. This is not e-commerce strategy; think bigger, think omni-channel. Thinking in this way will allow suppliers to open appropriate budgets for this, versus looking only at Walmart.com sales for ROI. The reality is drop shipping will intensify in the next years for all retailers. It is better to be a leader than a follower competing with marketplace retailers.
- In our opinion, it all comes down to data and content. Here’s the deal – Walmart, all other retailers, shoppers, marketplace retailers, and even Google do not know a supplier’s products as well as the supplier. Everyone, but most importantly the shopper, is wanting to have more data and content for each SKU. The majority of all SKUs do not have adequate data and content. Even more lack optimized/searchable data and content. The manufacturers provide the best data and content for products. That’s the most critical advantage that they have over marketplace retailers. Marketplace retailers are not going to heavily invest data and content for suppliers’ products. As optimized and enhanced data and content become more prevalent in the market, marketplace retailers and other competitors may beat suppliers and manufactures to the punch. Google, who in our opinion is the greatest threat to Walmart businesses, may beat them to the punch. That’s a story for another day.
In summary, direct manufacturers have a problem, but with this comes opportunity. Manufacturers who are serious about optimized, enhanced and expanded data and content will win with omni-shoppers and Walmart, especially those that are the first to deploy.