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Your Favorite Retailer Might be Selling 3rd Party Products

What do Peloton, Express, Urban Outfitters and J.Crew all have in common? They have items for sale on their websites that aren’t actually theirs. Each of these retailers has taken a page out of Amazon’s playbook and decided to build a 3rd party marketplace of brands to complement their core offering. The main objective is twofold –  increase traffic to their site while providing an opportunity to create a new revenue stream. 

The model works like this. A retailer partners with other, often smaller, brands who are looking for new avenues of growth beyond Amazon and other large marketplaces. They then merchandise the offering and have the other seller ship the product. This enables a company like Express or JCrew to offer thousands of items that aren’t even their own, while shielding the working capital risk of having to procure all this inventory.  

What did BB Dakoka get out of this? The company received a new ave of growth outside of their DTC site and other possible marketplaces they sell on, while continuing to keep a strong contextually relevant halo around their brand. Amazon is massive, but many 3rd party sellers recognize that the brand experience is commoditized on the platform and have ultimately searched for other channels that feel more brand-aligned. 

This approach doesn’t come without potential downside, however. Many retailers have steered clear of this model for fear they will dilute their own brand value or create a cluttered shopping experience that leads to cart abandonment of their core, higher margin, owned products. 

I’m not suggesting that every specialty retailer try this, but it’s worth considering, especially for categories of products you don’t think you’ll enter on your own. At Casper, we sold 3rd party products such as pajamas and even a sound machine that helped us further accelerate our mission of becoming a sleep company.  If you decide to go down this path here are some recommendations: 

  1. Start with a small, curated set of products, that fit your brand ethos 
  2. Have an SEO/SEM strategy of how you will drive awareness of the items on the marketplace – don’t just assume you’ll get significant organic conversion.
  3. Be transparent and consistent with deal terms and take rates. Most marketplaces charge a commission of between 15-40%. You should err on the lower end if the partner is handling fulfillment.
  4. Either outsource or designate an internal team that is solely responsible for managing your marketplace efforts. I’ve seen a shared service try and tackle running a marketplace while also trying to grow the retailers own brands – there’s already an alignment mismatch here and it won’t end well.   
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