Sizzle/Fizzle

Marketplace Merchants Sing The Blues

There’s a lot of sizzle in marketplaces. In fact, they have made tiny businesses into big ones, as even the tiniest one-man operation can gain the chance to jump from a hyper-local stage to a global one — with access to professional supply chain management and logistics skills, payments simplified to one click and, most importantly, the chance to increase their world audience.

This week, some of those sellers felt a bit of a fizzle — not much different from the marketplace sellers who, some 378 years ago, set up shop in Istanbul’s Grand Bazaar. A funny thing happens when the marketplace brings eyeballs, distribution and buyers by the way of a seller — it gets to make the rules. Sellers who don’t like those rules can go somewhere else.

In the case of the Grand Bazaar, for example, all jewelry sellers had to set up shop on the same street and sell their products for the same price. Jewelers may not have liked it, but  as Karen Webster pointed out — it didn’t much matter. The merchant guilds that organized trade inside the Bazaar set the rules of engagement for the merchants that wanted to be part of it. If merchants didn’t like those rules, they could forego selling in that primary trading hub point that connected Europe to Asia.

Though the discontents of modern commerce don’t have quite the same intensity in grievances that the bazaar sellers may have had (those merchant guilds were tough operators and were not above negotiating with retailers at literal knifepoint), it has been a fizzly few weeks for marketplace sellers for a familiar reason: new rules that sellers don’t think are in their favor.

Amazon Sellers

Amazon’s marketplace sellers have been the loudest grousers this week, deeply dissatisfied with a new payment method that has appeared on the site. Launched earlier this month, Amazon’s Pay by Invoice gives companies a credit for selling their merchandise on Amazon accounts, but buyers don’t have to make a payment when they hit the Buy Button. Instead, they’re invoiced and have the option for an extended payment due date.

According to Jerry Kavesh, CEO of 3P Marketplace Solutions, a consulting firm for marketplace sellers on Amazon, this presents a problem mostly for smaller sellers who rely on fast payments to buy inventory and fund their operations.

“Cash is always tight and challenging for small companies,” said Kavesh, according to CNBC. “This policy could put sellers in a cash bind, where they may not be able to pay suppliers and employees, which is problematic at best, and [at] worst could put them out of business.”

Sellers have received assurances from Amazon that it will credit payments on all invoiced orders “as soon as the customer payment is processed, and no later than the seventh day past the due date of the customer’s invoice.” Moreover, Amazon offers invoices to sellers as a faster payment option — though that option can come with an additional charge at 1.5 percent of the invoiced payment. Kavesh noted that this solution may not work well for tight-margined small businesses (SMBs) that are surviving on net profit margins of 2 percent to 5 percent. Sacrificing 1.5 percent of an invoice might be an unrealistic solution for a cash flow problem, he noted.

“This might work for big distributors with enough budget to cover any terms, but not for me or any small business owners,” said one unhappy merchant on social media.

Another seller pointed out that “just a single order for $5,000 of gear not paid for 30 days is enough to put many small businesses in a cash flow pinch with their suppliers, who are not going to wait 30 days.”

Kavesh agreed, noting that, due to the thin margins SMBs routinely face, this new approach will likely put some players out of business.

“This new policy at least doubles the cash a small seller needs to have on hand in order to operate, which many small firms simply do not have and do not have the ability to access,” he said.

While Amazon sellers have been the loudest merchants as of late, they are not the only marketplace players complaining of the recent squeeze, nor are they the most upset. That honor goes to the merchants on eBay’s marketplace this week — a group with two different lines of complaint.

eBay Merchants

The first issue eBay merchants currently have is about margin pressures and the amount they are under.

eBay sellers have noted that when their items don’t sell at the listed price, the marketplace begins to actively encourage them to lower their prices. The emails even include a built-in button that lets a user drop their price by $25 and re-list the item.

That feature itself has not garnered all that many complaints — what has is the new eBay Easy Pricing. The feature, designed to keep items selling quickly, starts lowering the item’s price by 5 percent every five days once an item has been on the site for more than 10 days. Every time the price drops, eBay emails customers who have already looked at the item.

Sellers can switch off Easy Pricing, but it is a default, meaning it takes an extra step. Some merchants have complained that because eBay does not know what they paid for the items, its pricing suggestions are often far afield of fair value. Also, having to actively manage their listing to turn off Easy Pricing is an unpleasant point of friction in interaction with the service.

The bigger, second complaint eBay merchants have (again) springs up around invoicing.

According to some sellers, eBay has been sending payment reminder notices to sellers about money they have already paid. Reports indicate that eBay has since sent apologies for the erroneous emails and said that any seller who is worried should check their My Messages for proof.

“That email was inadvertently sent to you,” eBay wrote in a follow up note to affected sellers. “We’re sorry for the time you may have spent reviewing and responding. We value your time and we apologize. Your account is in good standing and there is no action required by you.”

There have also been indications that the problem was fairly widespread, affecting sellers in the U.K., Europe, the U.S. and elsewhere.

On the upside, this invoicing issue seems to be a bug, not a feature, and one that eBay is looking to wipe out.

Walmart Marketplace

Then there’s Walmart and its marketplace for third-party vendors, many of whom have found something to complain about this week: a new upgrade. That’s not an upgrade for merchants, but a consumer-facing upgrade that has made merchants nervous.

Starting this fall, customers buying items on Walmart’s website from third parties will be able to print shipping labels and see the return policies for individual items online, according to CNBC, which obtained a memo that Walmart sent to sellers. That got sellers’ attention, but is all fairly standard issue. However, the part of the memo that did grab their attention was that part that Walmart is ready to consider launching an option for marketplace returns in Walmart stores.

Details were not included, but the memo said that with over 4,700 locations across the country, in-store returns could become the game changer for “our joint customers.” It’s not just not a game changer that Walmart’s marketplace merchants were looking for, according to sources.

Offering in-store returns for marketplace items may be a winning move for Walmart, merchants complained, since the customer, once in the store, is already likely to purchase something as they are making a return. But the third-party seller just loses their sale, and possibly their customer, to Walmart.

Will sellers leave their marketplaces? Likely, no.

Etsy Sellers

Earlier this summer, Etsy sellers complained bitterly when the marketplace raised its fees — and threatened to leave en masse. Then … they didn’t, and Etsy reported one of its strongest quarters recently. They may not like the fees, but Etsy’s rather niche sellers discovered that they liked the idea of losing their audience much less.

However great the gain, there is something distinctly fizzly about not getting one’s own way. As sellers across the web’s biggest marketplaces have spent the last few weeks learning, the marketplace that they call home will get its own way a lot more often than they will.

Sizzle

The “Amazon Effect” worth $2.5 trillion: Things are sizzling when people start quoting things in trillions — of dollars, that is. The Amazon effect is a heady one, a sizzling one. Forget Apple and its “puny” $1 trillion market cap. That’s so 2018. An MKM analyst sees the eCommerce giant sporting a $2.5 trillion market cap on the heels of growing Amazon Web Services (AWS) and fulfillment efforts — and an ever-expanding slice of the retail pie.

Gig economy: The latest Gig Economy Index shows that gigging is becoming a way of life, as the path once seen as a pit stop is now a career path well-traveled. Turns out that 58 percent of gig workers surveyed (10,000 of them) say they neither want nor need a “regular” full-time job. One of the key lures is flexibility, cited by 25 percent of workers, and a chunk of those surveyed — at 42 percent — got 40 percent or more of their income from gig work this past quarter. Digital marketplaces, it seems, have made it easier for workers to find work and for employers to find workers.

Customer self-service: DIY, indeed. Research from Monitor Intelligence indicates that the global customer self-service software market is slated to grow by nearly 17 percent annually, from $5 billion now to $13 billion in five years. That software helps underpin the market itself, of course, and recent findings from PYMNTS and Diebold Nixdorf found that 95 percent of Americans encountered at least one form of self-service in retail and 49 percent one weekly at the supermarket. Merchants should take heed: As many as 28 percent of shoppers would frequent a non-grocer more frequently if, well, it had self-service checkouts.

Fizzle

Sears: Searing news, again, a familiar refrain as the beleaguered retailer is to close an additional 46 stores, on top of the previous 72. The Amazon Effect continues to have an effect. Sears has about 900 locations nationwide, down from about 1,200 at the end of 2017. The same-store sales declines continue to be down double-digits. At this pace, how long will there be stores left to see same-store declines?

GDPR compliance: The deadline came and went, and now some numbers show a fizzly embrace of data privacy rules. Dimensional Research said only 20 percent of firms are fully compliant, and as many as 90 percent of firms state they will be compliant at the end of this year. However, in the meantime, big firms with critical masses of users, such as Facebook and Google, should weather any blips to user count, even while smaller brethren in the online and media spaces feel pain from finding data harder to obtain.

U.K. SMBs: In the U.K., SMBs grapple with Brexit and fear of failure, especially amid smaller firms, according to Hitachi Capital Business Finance. The shudder over shuttering comes as 17 percent of retailers fear they will go out of business, up from 12 percent a year ago. As many as 10 percent of the roughly 1,200 businesses surveyed fear they might close within three months, up from what is the typical percentage of 4 percent to 5 percent. The portion of smaller firms that expect growth in the coming quarter have hit their lowest point in a year, Hitachi said.

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