C2C marketplaces, the new logistics providers

The latest retailer to introduce a C2C (Consumer-to-Consumer) marketplace is that of Sears Holding – Fulfilled by Sears – which will enable SMEs to fulfil online and bricks-and-mortar orders in the US through Sears’ warehouses and stores.  The programme will compete against the largest of such marketplaces, Amazon, who has been providing this service since 2002.

The story of Sears is more than the usual decline in brick-and-mortar sales due to e-commerce. It is also the story of a retailer that has struggled to redefine itself because of changing retail trends. Founded in 1893 as a mail-order catalogue, it sold off this business, acquired numerous retail name brands such as Land’s End and then agreed to a merger by Kmart, another struggling retailer. Today, Sears Holding is among the top 20 largest retailers in the US, and like many of these large retailers such as Target, Best Buy and Walmart, e-commerce is of great importance to generate revenue growth.

The marketplace concept is global – China’s Alibaba Group offers such services via its Taobao subsidiary and the UK’s Tesco introduced its marketplace concept in 2012. Financially, it has become a successful platform for Amazon which noted in its fourth quarter 2012 earnings, its operating margin growth in North America was driven in part by an increase in sales on its website by third parties, which made up 39% of units purchased compared with 36% a year earlier.

In China, the marketplace concept is estimated to make up 90% of total e-commerce sales with most of that coming from the Alibaba Group.

Having only been in operation for about a year, Tesco, should benefit from the concept as well, particularly as Tesco allows shoppers to earn Clubcard points on every purchase they make, even if the product is supplied by a third party merchant. In 2012, Clubcard membership in the UK was about 17m and 35m worldwide. Members can earn points that can be exchange for money off products in-store, or redeem with one of Tesco’s many
partners, for things like day outs and hotel stays.

Start-up costs for many small-to-medium sized businesses are reduced when utilising this type of platform. Payment services and tools to create and customise seller websites are usually provided. Sellers usually pay such fees as pick and pack per item, storage and
a commission on sales as well as paying shipping costs; however, they are able to take advantage of lower shipping costs that are negotiated by the likes of Amazon, Alibaba and Tesco with their delivery partners.

While sellers gain visibility via marketplaces, valuable data is being created and shared with the owners of these marketplaces – customer information, types of goods sold, pricing etc. – which can be used to both company’s benefit.

For the logistics industry, these C2C marketplaces increase the competition for fulfilment and other distribution services. Also, transportation profit could possibly be reduced for providers as more SMEs utilise the marketplace group discount for such services.