By Viv Craske, E-commerce Consultant at Grace & Co.
The opportunity for Tesco.com’s third-party seller marketplace is huge. If we compare to Walmart, a larger store might carry 140,000 SKUs, but there are 75-100 million SKUs online. Tesco currently offers 300,000 SKUs in its marketplace, so there is huge potential for growth into millions of products. Tesco can increase revenue without taking up store space or increasing distribution of warehousing costs.
However, Tesco’s marketplace comes with increased friction for shoppers. We can look to B&Q’s DIY.com for the likely success and challenges. Marketplace sales on DIY.com make up more than 40% of sales. But a browse of Reddit threads shows some common frustrations:
- Concerns about quality control or vetting of marketplace sellers
- Additional noise on the site (this is lessened on Tesco.com with the marketplace and grocery offering being on different menu tabs)
- Frustration of having to wait for longer delivery times and having multiple items delivered at different times by multiple sellers
- Frustrations with exchanges with third-party sellers
Marketplaces are becoming increasingly popular, with grocers in particular, looking to expand into new categories without holding stock. However, there are alternative models emerging that are worth retailers looking at. Technology solution provider Deliverider, for example, enables retailers to expand into new categories through retailer partnerships, with couriers moving stock across a town between retailers to fulfil a customer order in a single delivery.
Amazon is under threat in key areas:
- Temu – while Amazon has launched its own low cost service – Amazon Haul – sourcing from China, Temu’s growth and pricing is incredible. However, the Temu experience is also different to Amazon as it is very mobile-friendly and highly gamified with a strong focus on bright design to attract younger consumers.
- OnBuy – the UK’s marketplace has international expansion plans and has differentiated its model by offering cashback on all purchases
– Tesco’s huge market share could also be a threat to Amazon in the UK, particularly if it uses its data and insights capability to reach Tesco shoppers with relevant marketplace offers and advertising. - TikTok Shop – finally social commerce done right! Great content with useful products, where the ad content is often as engaging as the non-ad content. This makes Amazon’s catalogue website look distinctly 20th century.
