Staples, second only to Amazon in online sales, recently announced it’s expanding its online catalog of 200,000 SKUs to a goal of more than a million, branching out into garden supplies, power tools and medical devices, incorporating third-party sellers to lengthen the tail, along with sourcing and stocking its own inventory along with drop-shipping arrangements.
Staples follows retail giants Best Buy, Sears and Walmart, all running third-party marketplaces of their own. And it’s EVP of online ecommerce is no newbie to the marketplace model – Faisal Masud spent 9 years at Amazon and designed and implemented eBay’s global shipping platform.
While marketplaces built on the backs of strong brands can add additional high-margin revenue, they also carry potentially costly risks to the brand. What must Staples do to mitigate these risks, and is becoming an “everything store” really the way to grow online business in an Amazon-dominated world?
That was easy?
The Staples brand stands for “easy office supply shopping,” characterized by its famous big, red Easy Button, and backed up by hassle free customer experience. Even the name Staples implies office supplies.
Expansion into new categories dilutes Staples’ focus, and inevitably will impact its brand, not to mention complicate its already complex category navigation:
Unless the marketplace is packaged as its own subdomain, it could end up looking like this:
Amazon, Walmart and Sears’ marketplaces all require a “view all departments” link – they can’t fit all categories into one menu. But Amazon is the “everything store,” and Walmart and Sears are department stores – a large number of departments is not a departure for them. Staples will need to figure out a way to deliver on its easy office shopping promise whilst presenting additional category options.
Expanding the catalog has an even bigger impact on mobile shopping. Menus are harder to present, and category results harder to weed through on smaller screens. More selection isn’t better for mobile usability and conversion, especially for click-and-mortar sites, which must support cross-channel shopping. New category and marketplace items will not be available in physical stores, yet they will likely be mixed in with core product on the mobile site.
When it comes to product recommendations, should Staples cross-sell marketplace items with core office supplies? How should it merchandise home pages and emails? Pushing unrelated items introduces customers to the depth of the catalog, but sacrifices relevance and could hurt attachment rates for shoppers who are loyal to Staples because it’s their go-to office supply source.
Though high margin, drop-shipping and seller fulfillment carries risk. If the customer has a bad experience, the negative vibes come back to Staples, which may impact its core business and customer loyalty. Staples has to start from scratch building out its ecosystem of third party sellers, and may initially attract sellers who have been forced to leave other marketplaces for poor service records, or otherwise.
In time, Staples may inevitably have to join Amazon and Sears in offering fulfillment service to sellers to keep them happy and on-board, which requires warehouse space – overhead that eats margin. (Amazon has already invested billions into hundreds of fulfillment centers).
Without tight monitoring, gems like the anabolic steroids I spotted on Sears’ marketplace and inappropriate children's clothing can appear. Staples risks damaging its brand by association with products that slip through approval cracks.
What should Staples do instead?
I’m not a Staples insider, and I may not have the complete picture regarding this strategy. I question whether this was a customer-driven initiative (is this something Staples customers expressly want?), or whether it’s really an attempt to stay afloat in a world of Amazonian dominance. From the information I’ve gathered about the move, it’s the latter. And in my opinion:
- Staples should not try to be an everything store.
- Staples should not aim for 1 million SKUs.
- Staples should not alienate its B2B and brick-and-mortar customers by convoluting their desktop and mobile experiences.
- Staples should not risk weakening its brand position in an attempt to slightly close an online revenue gap between itself and Amazon, at the expense of profit.
- Staples should not forget it has what Amazon can never have – a brand that still owns the “easy office supply shopping” experience, and physical locations.
- Staples should not miss the opportunity it has to grow, keep and win-back customers through new and innovative digital experiences that continue to make shopping for office supplies easy and enjoyable.
What is the adjacent possible? What is the next innovative thing that solves an articulated customer need that can be integrated to the cross-channel experience, that will reinforce “easy” shopping, delight customers and keep them loyal? How can Staples be a digitally disruptive brand, rather than a follower?
Staples will not attract new customers because it carries more products that are already available everywhere. It risks losing existing customers who don’t want their familiar buying experience to change.
How Staples can mitigate marketplace risk
Regardless of what I think Staples’ digital commerce strategy should be, marketplace is going forward. For Staples to hedge itself against potential damage, it needs to:
1) Stay as closely aligned to its core customer and brand as possible. Opening up a long tail is fine, so long as it’s categories customers want. Start with a few aligned categories – no need to roll out everything all at once. #failfaster
2) Have a rigorous seller approval program. Ensure all sellers are well-established and reputable. Put in safeguards against rogue products like steroids and counterfeit items. Best Buy only works with "trusted" partners, evaluating new sellers against a set of requirements such as business tenure, overall customer satisfaction, order cancellation history and back-order history.
3) For users, clearly indicate when products are marketplace vs. Staples’ own inventory. Enable category filtration, like Walmart. Make it explicit on product pages, like Best Buy.
4) Avoid cannibalization. Walmart doesn’t duplicate products with marketplace sellers, nor does Best Buy. For example, Walmart.com products are the only option in the Fashion Jewelry category.
5) Consider running marketplace on its own subdomain. Marketplace.asos.com is an example. While it’s understandable why Staples would want to integrate all products under one domain (like Sears, Best Buy and Walmart), giving it its own home ensures marketplace doesn’t convolute the easy office supply shopping experience, whilst offering customer choice and a universal shopping cart / checkout across domains.
6) Offer loyalty rewards. Best Buy's electronic marketplace items compete directly with the Big 'Zon, but customers can earn Best Buy loyalty rewards on all marketplace purchases. This may be Best Buy's only value prop against its marketplace competitors. Staples needs to incentivize loyal customers to buy as much as possible from the site.
What do you think? Is Staples’ marketplace a brilliant move or a bust? Drop us a comment.
If you missed our webinar on digital disruption with Forrester's James McQuivey, catch it on demand: Monetizing Content in a World of Digital Disruption