What’s Next for Best Buy After Its Marketplace Shutdown?

Content Manager

With Best Buy shutting down its marketplace for third party sellers, two questions are on everyone’s mind: Where will the electronics and appliances retailer focus next, and was this a smart move?

Scot Wingo, executive chairman and founder of Channel Advisor, said third-party marketplaces are hard to execute on successfully if you don’t have experience building them. Unlike traditional ecommerce businesses where you are acquiring customers, you are building and serving two audiences – sellers and buyers.

“On top of that, when you marry a third-party marketplace with an omnichannel retailer you have a third challenge: How do you handle the marriage of those two business models?” Wingo asked.

He said Channel Advisor makes two recommendations: Bring in a team that has done it before, or partner with a company that has a focus on helping omnichannel and pure-play ecommerce firms add successful marketplaces.

In traditional retail, Wingo noted, merchandisers hand-pick items to buy and promote to consumers. In a third-party marketplace, you leave the door wide open and let any product in the door and buyers buy what they want.

“I don’t know the specifics,  but I imagine seller acquisition, omnichannel and traditional retail preferences all factored into the decision Best Buy made to pull the plug on its third-party marketplace,” said Wingo.

Several reports said that Best Buy cited shopper confusion regarding returns and warranties and Best Buy’s plan to invest in other areas.

Wingo said the challenge for omnichannel retailers competing with Amazon is they have an infinite number of areas to invest in, but limited funds. He speculated that Best Buy will focus on omnichannel initiatives like ship from store, buy online, pickup in store and consolidated returns. He also said Best Buy might focus on ecommerce initiatives as well.

“Amazon literally adds 10 new features a week, so I don’t know where bestbuy.com is in relation to that,” Wingo said. “You could literally spend $1 billion a year and not keep up. Amazon spends more than $10 billion a year on research and development to give you some perspective on what everyone in the industry is up against.”

Wingo said another area Best Buy will focus on is store initiatives. Omnichannel retailers are also struggling with how to transition their stores to a more modern approach. This requires major investments in point-of-sale and inventory systems, among others.

“While this may be the best move for Best Buy, we still are very strong believers in the model,” he said. “For example, Groupon blew away its Q4 results, unlike Best Buy, and announced an Alibaba investment because of its third-party marketplace.”

Wingo said Jet has gone from 0 to $500 million faster than any previous ecommerce startup, all due to the power of a third-party marketplace.

“When you look at our recent same-store sales report from January, one of the fastest-growing channels was ‘other 3PM,’ where we measure this activity,” said Wingo.

Daniela Forte is Content Producer for Multichannel Merchant

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