When Walmart (WMT) announced yesterday that it was opening up its Walmart.com site to third-party retailers, most eyes turned to Amazon (AMZN), since its marketplace appeared to be the most exposed to the new competitor.
But, this morning JP Morgan analyst Imran Khan said in a research note that eBay is the online retailer most at risk.
Here is how he gets there:
Third-party sellers are distributing their wares on a greater number of platforms, which will hurt eBay the most, since third-party sales are its core business. eBay makes the lion’s share of its money from selling third-party goods versus Amazon’s more diversified revenue streams, so a secular shift toward selling goods across multiple sites will hurt eBay the most. Walmart’s entrance only accelerates this shift. Khan points to comparison shopping sites and search engine referrals as drivers of this trend.
Amazon’s fulfillment service will help it compete better against Walmart. Amazon’s Fulfillment by Amazon service is a big draw for third-party retailers that want to outsource the billing and shipping around their sales. Neither Walmart nor eBay offer the same service.
Amazon customer service is better than eBay’s. While Khan says an inferior site experience is only partly to blame for eBay’s recent woes, he touts Amazon’s excellent site experience, while pointing out that one of Walmart’s initial vendor partners, eBags, is one of the lowest ranked top 100 e-commerce sites in terms of customer satisfaction. Meanwhile, he says that Amazon was ranked in the top three online vendors in terms of customer satisfaction each of the past three years (Netflix has been the consistent leader). All of this leads Khan to conclude that Amazon is in a better position to compete against Walmart when it comes to user experience.
What company is most at risk aside, a site with the brand recognition of Walmart entering the third-party e-commerce space could be viewed as a secular shift in itself. Walmart is the 13th largest internet retailer currently, so there is a lot of upside to its e-commerce efforts. By opening its platform to third parties, it will earn increased marketing as these retailers likely promote their stores on the Walmart site. And the company could use its 4,000-plus stores in the U.S. to promote its new online initiative, and in turn its overall site.
In addition, it already is a leader in electronics and general merchandise sales, which are gaining share in the e-commerce industry, as media sales start to suffer from an increasing preference for digital delivery among consumers and content owners. Amazon and eBay have both been impacted by this transition.
So, while it will surely take time for Walmart.com to establish itself further and grow, all online retailers should take notice.
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