Tesco’s highly anticipated launch of its marketplace last month may have been a quiet internal affair but it’s likely to set off a number of waves across the online retail market. The store’s decision to compete with the likes of Amazon and eBay may have come as a surprise to some but at eSellerPro, we expect to see more retailers’ following in Tesco’s footsteps as the online market becomes more saturated.
Established retailers to join the Marketplace.
Marketplaces offer retailers an attractive alternative to diversify their online revenue stream and reach millions of potential customers. With low entry costs, broad support mechanisms and minimal risks involved I am not surprised that more brands are now choosing to develop their own marketplace.
For brands, such as Tesco who already have a large customer base, introducing its own marketplace is likely to be the next natural step to grow the business. Not only does this enable the company to sell a broader range of goods through third party sellers, but it is likely to increase traffic to the website and ultimately sales of the company’s own products.
Of course, as with any business change, the move comes with risk. Instantly it puts Tesco’s in competition with two heavy hitters within the space - Amazon and eBay, and with both players dominating the industry for a number of years many have questioned whether Tesco’s really stands a chance at competing against two well-established names.
However, what many are forgetting is that Tesco has a number of unique attributes that are able to differentiate it from the competition and more importantly pose a serious threat to both Amazon and eBay.
Take the company’s Clubcard for example. This will most definitely offer the brand an added advantage, providing customers an added incentive to shop at TescoDirect as opposed to the other online marketplaces. With customers now able to redeem extra points from purchasing non-Tesco goods, this could be a deciding factor for many buyers leading them to purchase from Tesco rather than traditional marketplaces.
Clubcard: differentiating Tesco from other Marketplaces.
Also let’s not forget Tesco’s vast network of stores. With over 6,000 physical stores around the world the potential for 'click and collect' is huge. Currently 770 stores are part of the scheme, but with an additional 700 more collection points planned to be introduced over the next year this is likely to act as a major draw for many customers looking to purchase goods online. Not only can customers collect items at their convenience, but they can also save on postage costs.
However, what is likely to be the main threat for Amazon and eBay is the company’s extensive distribution network, which will no doubt act as the biggest draw for smaller retailers to use the marketplace. As a result we are likely to see competitors increase investment in their own distribution centres in order to compete with the supermarket chain, to the point where same day delivery will become a key differentiator.
With the company’s profits taking a hit recently it is clear that Tesco is banking on this new initiative to make up for its recent losses. Even though it’s still early days there are clear indicators that show Tesco should be able to compete successfully against the likes of eBay and Amazon.
In my opinion, if they are able to harness these key attributes and use them to their advantage, I will be extremely surprised if this new venture does not result in success for the chain.
Keith Bird is CEO of eSellerPro