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The Shipwire Blog/Buy.com gets bought by Rakuten, third-party seller trends continue

Buy.com gets bought by Rakuten, third-party seller trends continue

First off, congrats to the hard working teams at Buy.com (a personal shout out to Randy!) While there will likely be a lot of changes, Buy.com is merging with an e-commerce juggernaut in Asia and based on what I’ve been reading the purchase was strategic (more below). It’s great to see hard work and determination pay off, so hats off to the Buy.com team!

This is an acquisition that you should pay attention to for a number of reasons.

1. Buy.com was in “co-opetition” with Amazon.com and eBay.com. They were a major seller on Amazon and eBay, and Buy.com was a growing U.S. online shopping destination.

2. Third party sellers were a major contributor to Buy.com and there is no doubt Rakuten is valuing this asset. This will be the focus of this blog post.

3. Rakuten is clearly looking at the U.S. marketplace. Looks like the U.S. just got a major new participant in the B2C e-commerce space and with deep pockets of approximately $9.5B, a keen focus on B2C and a lot of interesting puzzle pieces like a Linkshare (the major affiliate exchange), Rakuten+Buy is looking to be a major player shortly.

Overall, this is going to be a good thing for the U.S. marketplace.

Here are a few links that you should check out for more info.

I’m not going to repeat Scott Wingo’s points; but, I will mention that I think it will take Rakuten quite a bit of time to really realize the synergies of this acquisition. The fact that Rakuten has Linkshare is very interesting; but, the lack of investment in Linkshare over the years is grounds for concern. That said, even though there have been a lot of innovations in the affiliate sphere – big traffic is still big traffic and Linkshare is a player.

Personally, I think the big value here is Buy.com’s back end for managing third-party sellers and their integrated checkout experience.

A major online marketplace today must have product depth. Think about it, the marketplace spends countless millions to attract buyers, give the buyers great prices (Amazon is losing money on some e-books to drive that market) and give the buyer an amazing experience, all in an effort to make the buyer a repeat customer. But, if the buyer searches for some random product and it’s not in the marketplace… bye-bye buyer!

The major marketplaces that carry inventory focus on top sellers. No major marketplace will stock in their own warehouse ALL the millions of products that buyers want. Most don’t move enough volume. They are too niche, unique or just plain weird to turnover enough to merit taking up the warehouse space. For the long-tail of product search, the marketplace must have niche third-party sellers (these can be manufacturers or niche suppliers).

A side benefit of the marketplace attracting lots of buyers is that the sellers want to be there! And they will pay more and more and more to have a presence on the marketplaces with the most traffic. Just like in the brick-and-mortar world it’s all “location – location – location”. It’s a symbiotic relationship. If your marketplace has buyers the sellers will want to come and they will bring their product depth. If you have product depth, the buyers will be able to buy more in one location and not leave the marketplace. Product depth just makes sense and as I’ve blogged before, the trend is that marketplaces are going to open up, cater to and make profits more and more off third-party sellers.

Which brings me back to Buy.com and what they have done reasonably well. Make buyer checkout and post sale order management easy, even when the products are being sourced across multiple sellers. This is huge! This is the platform! This is what eBay has kind of missed. (Aside: I’m reminded of a quote told to me by an eBay exec 12-13 years ago, “If we build the highest traffic block in the neighborhood then the sellers will come.” That is only half of the equation, the traffic has to convert and the buyers have to be happy). If you don’t make checkout easy, you built a bazaar and not a marketplace. (Aside, wonder if eBay was looking at buying Buy.com? According to Scott’s blog Buy.com appears to have been a pretty important customer.).

The Rakuten purchase of Buy.com was likely in major part a platform buy. Look at the Buy.com Blog:

  • The seller marketplace grew 150%: The CEO thanks the sellers for expanding their product listings. “As we move into 2010 and beyond, Buy.com has transformed from an online retailer with marketplace functionality, to a multi-category retail marketplace platform,” said Buy.com CEO and President Neel Grover. “We firmly believe that our marketplace platform is the future of online retail.”
  • On the blog post about the acquisition here: “As we evaluated how to accelerate our global expansion, it became clear that a partnership with Buy.com made perfect sense,” said Hiroshi Mikitani, Founder, Chairman and CEO of Rakuten. “As a company, Buy.com shares our vision for the future of ecommerce – as a platform to give consumers the best value no matter their location, and to merge shopping with entertainment, and to help retailers build deep and lasting consumer relationships.”

Expect more posts on this blog about marketplaces opening up and attracting more and more third party retailers. They will continue to grow in influence as the marketplace wars rage. I’m excited that Shipwire has a front row seat as our platform is already plugged into many marketplaces and e-commerce tools to help third-party sellers manage their orders.

Comments

  • johall 01/15/13
    Buy.com is terrible for sellers. They are now adding a monthly fee plus a per item fee and then a percent. They are so much higher than amazon and ebay it's unreal. Plus they can't fix your listings and photos. There is no phone communication available because they don't want to fix your problems. They are terrible and do not sell with them. Sellers will need to raise there prices to sell on here so buyers will pay more because of all the fees for terrible service and minimal exposure. They give you the run around for everything and ask them to fix a listing you must be crazy it can't be fixed. Terrible to list very difficult and no help. Unlike amazon or Ebay you get help and less fees and telephone support. Buy.com is a joke don't go there!!!!
  • Tony 02/13/11
    Kelvin, "At this time, we are not accepting sellers in the category your products would go in. If it is decided to add sellers to this category, we will notify all qualified sellers have registered with us" That message from buy.com is completely false. You can check on buy.com to see that they are accepting applications in almost all categories. That is a way for them to reject your application without being up-front about it. It's frustrating, sorry that you met their BS. On the other hand, most online retailers only have a tiny portion of their sales come from buy.com, so just focus more on amazon, man!
  • Kelvin T. 11/08/10
    Nate, Thank you for your response. I also e-mailed them after my account deactivated and this was their response: "Hello Kelvin, At this time, we are not accepting sellers in the category your products would go in. If it is decided to add sellers to this category, we will notify all qualified sellers have registered with us. Thanks Buy.com Seller Support" I'm not sure what to believe now, it seems like there is potential but it could false. What do you think? Thanks again, Kelvin
  • Nate 11/05/10
    Kelvin, Honestly, I don't know. I bumped into a few Rakuten people at PayPal Innovate a few weeks ago and tried to ask the same question; but, they didn't have an answer. That said, I brought up the blog post and asked point blank if one of the reasons for the acquisition was the Buy.com third party seller platform. They confirmed the accuracy of the blog post (I mean as much as they could in passing) and mentioned that third party sellers seemed to be part of the rational. They also brought up synergies with the link-share platform. So basically, who knows. Sorry man. I really hope to see them open up more for third parties as I think it would do them some good. In the meantime, if you are selling on various platforms and managing lots of inventory check out our new business inventory order management software. Nate
  • Kelvin T. 11/04/10
    Hey Nate, Good insight on your blog about Rakuten's acquisition for Buy.com. I was really excited at first when I found out about the news of this merger. Because of how vast Rakuten's Japanese online marketplace is and how they would influence their own ideas to Buy.com. I was however, very very disappointed that Buy.com still rejects small businesses like myself from being able to take part of their growing marketplace just as how bias they were way before the merger began. I tried opening up my seller account with them over a year ago before the merger and it was unfortunate they swiftly disabled and rejected my account. And then as of two days ago knowing about the merger and hoping that Rakuten's acquisition of Buy.com would be better for the marketplace community, I applied again but sadly for the second time they slammed me down today. Even though I am a sole proprietor of a small business, I am a BUSINESS (not a casual seller) and have been running my venture for over a year and a half selling on eBay and other marketplace sites. So my question is, do you think Buy.com will remain selfishly the same or will there be REAL changes that just needs to take its time? And if so, how long would you guess it will take? Because I know its only been around half a year since the merger but I am beginning to feel very discouraged that Buy.com will ever fully embrace the openness of the marketplace realm. I hope you receive this message timely and understand my dismay, any response and ideas will be greatly appreciated. Thank you, Kelvin T.

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