Woolworths joins online marketplace gold rush

22/04/21

Australian Financial Review

Woolworths plans to more than double the range of products it sells online by launching a virtual marketplace, enabling third party sellers such as homewares and clothing suppliers to sell through the Woolworths.com.au site.

The first seller on the site, dubbed Everyday Market, will be Woolworths’ discount department store chain Big W, which sells more than 35,000 products on bigw.com.au, including clothing and footwear, electronics and sporting equipment, books, toys and consumables such as kitchen and laundry products.

W23 managing director Ingrid Maes and Marketplacer co-founder Jason Wyatt.  

Big W will start selling a curated range of everyday needs products on Everyday Market later this year, including small appliances, cookware and kitchenware, enabling Woolworths to gauge customer demand and test delivery logistics.

Woolworths’ venture capital arm, W23, has taken a multimillion-dollar equity stake in e-commerce start-up Marketplacer, which will provide and support the marketplace platform.

The value and size of W23’s investment in Marketplacer was not disclosed, but co-founder and chairman Jason Wyatt said the investment would enable Marketplacer to accelerate expansion in Australia and overseas.

The Melbourne-based tech company provides marketplace platforms for 100 customers in 10 countries, including Myer, Metcash, Petstock, Bike Exchange, SurfStitch, Bob Jane T-Mart and Nokia, enabling them to offer a wider range of stock to customers without having to hold inventory and handle distribution.

Marketplacer recently raised $25 million from investors including Salesforce Ventures, Endeavour Asset Management, Ellerston Capital, OC Funds, Acorn Capital, Mirrabooka and Bombora Investment Management.

It plans to assess an initial public offering in the first half of 2022 and is in discussions with investment banks to gauge interest in a potential float.

Boom in online shopping

Woolworths’ move comes amid an explosion in virtual marketplaces as pure-play and omnichannel retailers take advantage of the boom in online shopping to offer customers a wider and deeper range without physically holding the stock.

Brand owners and suppliers are also setting up or joining online marketplaces to reach a wider range of consumers.

“The growth has been phenomenal,” Mr Wyatt said.

“Within our client base COVID been a perfect storm and a generational change to the way people want to connect and shop.

“What we do is power the growth, we make it easier for people to sell things they don’t own and create a scalable and profitable way to grow.”

Catch, which is now owned by Wesfarmers’ Kmart Group, transformed its daily deals site into an online marketplace in 2017. Myer quickly followed, launching an online lifestyle marketplace the same year (it has now been integrated with Myer’s primary site).

Kogan.com, Bunnings and footwear retailer Accent Group also launched marketplaces in 2019.

Last week, online shopping events company Click Frenzy, which is 30 per cent owned by John Wylie’s Tanarra Capital, unveiled plans to launch a digital marketplace called Frenz Central in the first half of 2021.

The Click Frenzy marketplace will be run by Mark Gray, the former head of marketplaces at Catch. The marketplace platform is provided by Mirakl, which also supports the Catch marketplace.

According to a recent report by Mirakl, online marketplaces such as those operated by Catch, Kogan.com, eBay and Amazon grew 81 per cent year-over-year in the fourth quarter of 2020, more than double the rate of overall e-commerce growth.

Mix of sellers to be controlled

Woolworths’ online marketplace is not aimed at taking on Amazon and eBay, as the site will sell everyday needs, rather than more discretionary goods such as televisions and trampolines. It will not be open to all third party sellers and the mix of sellers will be carefully controlled.

“This will be a highly curated marketplace focused on range extension in our core everyday needs categories and we look forward to exploring opportunities with supply partners,” said Woolworths’ director of new business, Faye Ilhan.

“As more of our customers start their shopping journey digitally and buy groceries online, we know their expectations will only continue to rise.

“As well as offering more choice to the millions of customers who visit our website each week [10 million people visit Woolworths’ websites and apps each week], our marketplace will provide existing and new suppliers with fresh opportunities to partner with us to grow their business.”

The new marketplace is in line with Woolworths chief executive Brad Banducci’s strategy of creating new revenue streams by investing in disrupters such as food delivery businesses, and building a retail ecosystem by sharing the retailer’s digital, data, logistics and marketing assets.

Mr Banducci has estimated that between one-third and one-half of the retailer’s growth will come from outside its core supermarket business, including online retailing and providing solutions to other businesses.

W23 was established by Woolworths in 2019 to invest in innovative and disruptive early-stage companies in the food and retail sectors and to accelerate the ecosystem strategy. Investments to date include Sherpa, Eucalyptus, Spoon Guru and Longtail UX.