Tesco must adopt Amazonian approach for online marketplace, say consultants

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Géhin: Marketplace allows Tesco to offer its customers much greater choice without the downside of stock-holding costs and complexity

Géhin: Marketplace allows Tesco to offer its customers much greater choice without the downside of stock-holding costs and complexity

Siobhán Géhin, associate partner at global management consultancy, Kurt Salmon, considers the prospects for Tesco’s new online marketplace, which will open its website to third-party retailers, and compares it with Amazon across four key criteria 

Tesco: partnering with sellers of scale in categories such as plants

Tesco: partnering with sellers of scale in categories such as plants

“Since Amazon launched its Marketplace on 2006, many retailers, including Wal-Mart and ASOS have followed suit. Wal-Mart has many parallels with Tesco:  the dominant force in grocery retailing in its home market, struggling to reverse the fortunes of its bricks and mortar business and working in parallel on an e-commerce growth strategy. 

However, Wal-Mart’s marketplace has not been significantly expanded since its 2009 launch, and Wal-Mart has been mute about the success – or lack of it – of its e-commerce business. 

“Wal-Mart’s US store sales have not grown in the past year, and its US revenue has barely increased. This is despite the fact, after Amazon.com, Wal-Mart’s sites are the second most visited e-commerce sites in America.”

Will Tesco’s marketplace fare differently? Géhin takes a look at how Tesco marketplace stacks up versus Amazon:

1. Range

Amazon’s approach is also to allow any third party seller (within certain legal guidelines) to sell on its site – in many cases competing directly with Amazon’s own product – so it is in fact a true, open marketplace insofar as anyone can sell there. Tesco’s approach – insofar as it has been made public – seems to be to partner with sellers of scale in categories where Tesco itself might find it difficult to build an online business, for example, plants and DIY. So it is in fact so far a very limited marketplace and in the mould of Wal-Mart rather than in the mould of Amazon – so far.

Scores: Tesco 5 out of 10, Amazon 9 out of 10

2.  Customer friendliness

Tesco has tailored its product description layout to work perfectly for plants: there’s a nice box showing soil type, flowering period etc – so a tick in the box straightaway for its customer-focused approach. And it seems to have adapted this for Maplin products – a potential customer win in an area which Amazon has struggled.

However, Tesco’s execution (at time of going to press) has some basic errors which are blindingly simple – on a laptop screen (admittedly a shallower screen than a typical PC but nonetheless used by quite a few people no doubt) the Amazon “buy box” is right in the centre of the screen – where it should be – while on the Tesco website there are a couple of  boxes telling the customer “this product is only available on Tesco.com from the sellers below” and an advertising pitch for Clubcard points… which means if you want to buy you have to scroll down.  A cardinal sin for any e-commerce site.

Also at time of going to press, no fewer than 15 products on one page of plants were marked “currently no seller available” –  hopefully to be rectified… but the Amazon platform would not allow products which don’t have a seller to be displayed.

Scores: Tesco 4 out of 10, Amazon 9 out of 10

3. Click and collect

Tesco has a potential big advantage over Amazon: deliver to store – with click and collect to be made available in Tesco’s entire 2,715-store estate (plus potentially its Express stores), this could indeed be game-changing and represents a dimension where multi-channel retailers have the edge over pure-plays. However, implementation will have a price tag and also a space requirement – particularly given the move to smaller stores.

Scores: Tesco 7 out of 10, Amazon 4 out of 10

4. Marketplace – the next generation

Amazon has been in this game since 2006 and has moved its marketplace concept forward at a pace – Amazon sellers can now make their product available on Amazon’s French and German sites, while with FBA (Fulfilment by Amazon), where Amazon handles all the stock-holding and order fulfilment on behalf of the marketplace seller, Amazon sellers have the possibility of making their product available right across Europe. With the inclusion of Amazon Prime, a one-off delivery charge which has driven a step change in frequency and average spend, Tesco or anyone else will have to run very fast to catch up.

Scores: Tesco 4 out of 10, Amazon 9 out of 10