Walmart.com announced Monday it has begun allowing other retailers to sell on its site through a program called Walmart Marketplace. The new program kicked off with three retailers: CSN Stores (www.csnstores.com), eBags (www.ebags.com) and Pro Team, a subsidiary of Dreams, Inc., adding nearly one million new items to Walmart.com in categories such as Home, Baby, Apparel, Toys and Sporting Goods / Sports Memorabilia. The company will add additional retailers to the program over the next year.

The retailer is following in the footsteps of its larger rival Amazon.com and much smaller rival Buy.com. While third-party sellers may worry about selling on a platform that also competes with it, the upside of gaining exposure to many more shoppers usually wins out over such concerns. Amazon reported in July that it had over 1.7 million worldwide active seller accounts in the second quarter of 2009, up 21 percent, and that third-party seller unit sales made up 30% of total unit sales.

	Marketplace Competes with Retailers	Marketplace Has Brick & Mortar Stores	Unique Visitors, July 2009 (Source: comScore)
eBay	No	No	73.089 million
Amazon Sites	Yes	No	66.545 million
Wal-Mart	Yes	Yes	33.147 million

Eric Best, CEO of Mercent Corporation, said the scale of the Walmart Marketplace program with its approximately 30 million monthly unique visitors is sufficient enough that it could be an interesting channel for his clients. Mercent helps over 100 of the top online retailers place their product listings on transactional marketplaces, comparison shopping engines, and paid inclusion and affiliate marketing programs, including Amazon.com, Buy.com, eBay, Google Product Search and Yahoo.

Mr. Best said there's an opportunity for Walmart to create a branded shopping destination that has Amazon-like breadth of selection that is targeted at a more discount-oriented shopper.

Best raised the question of how separate Walmart's direct retail operation would be relative to its third-party seller program. "What we're really talking about here is the competitive dynamics between the Marketplace program and their own retail inventory. That's been a historic challenge for Amazon, but one that they have successfully addressed given the scale of their third-party seller program and the growth of that program." He also pointed to Amazon.com's 6-year head start in third-party sales.

Walmart has physical infrastructure, and Best wondered whether Walmart would open up its physical infrastructure and distribution efficiencies. There is a precedent, he said, referring to Amazon.com's Fulfillment by Amazon program. In the second quarter of 2009, sellers utilizing Fulfillment by Amazon more than tripled compared to second quarter 2008, according to Amazon.com.

Mr. Best does not see a trend in retailers offering third-party marketplaces given the need for scale as well as the challenges of balancing a retail operation and a third-party seller program. However, Google is a dark horse in the race with its product search platform and Checkout technology. Best said the growth of Google's shopping traffic relative to the other players over the past 18 months has been massive, particularly Google Product Search.

In its announcement, Walmart said all purchases from a Walmart Marketplace retailer would be managed through its own checkout process, and the retailer would then manage and support the order, including shipping and handling, customer service, exchanges and returns.

In May 2008, Wal-Mart launched Walmart.com Classifieds in beta. The classifieds are free and are powered by Oodle.com.

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