Retail Electronics Competition Heats Up as Best Buy Raises the Stakes with Its Online Marketplace

Many online retailers, including Amazon and WalMart, allow third parties to sell products on their site for a fee.  Amazon has found this to be an extremely successful business, which accounts for 30% of total units sold on the site.  Naturally, other companies are jumping in on the action.  Enter Best Buy, who just last week launched their new program, Best Buy Marketplace.

I’m an avid Amazon shopper for obvious reasons—it has nearly everything you could possibly want in one convenient location.  All of your comparison shopping can be done in one place.  It’s also a great deal for the retailers—the third party seller reaches a new audience they wouldn’t otherwise get, and Amazon, Best Buy, WalMart or any of the other big box retailers take a cut of the revenue generated. Although Amazon doesn’t release their figures, many analysts believe that Amazon derives a significant portion of their revenue (nearly $11 billion in the 4th quarter of 2011) from Amazon Marketplace.

There are of course risks to launching a product selling third-party items.  Anytime you, in essence, are vouching for another company, a main concern must be customer service.  In Amazon’s case, they’re very free with who they let enter their third-party program, with over 2 million third-party sellers.  It appears Best Buy has taken this into account (at least to start) by only allowing a handful of approved vendors to participate in the program, which include Buy.com and BeachAudio.com.

Amazon’s program, called Amazon Marketplace, is very good.  It’s integration with Amazon is nearly seamless.  As a matter of fact, on one occasion I didn’t realize I had purchased a pair of boots from a third-party seller until I went two weeks without receiving the boots.  Only after investigating and placing a phone call did I find out that the boots were on backorder–no one had deemed it necessary to tell me.  The boots we’re a great price (a pair of Red Wing Classic Originals for the curious), this situation is a great illustration of both the upside and downside of shopping through sites that have third-party sellers.

I wanted to check out Best Buy Marketplace and see if it’s as seamless of an operation as Amazon Marketplace.  As I was in the market for a second computer display for video editing, this seemed like the perfect opportunity.  The first thing a shopper will notice is that there’s nothing to notice.  The majority of the site has remained the same as before.  The change comes when you begin to browse through categories of products.  In my case, I began browsing through computer displays. When browsing through products, you’ll notice that some products have a notice next to them—sold by Buy.com, for instance.  This is, obviously, the clear indication it’s a product not sold directly by Best Buy, but those not paying close attention could easily miss this.

After selecting a product, it’s added to your shopping cart just like any other product that comes directly from Best Buy.  Anyone who’s ever purchased something from bestbuy.com in the past won’t find any changes or hiccups.  You pay and set up shipping the same as you would normally, with almost no indication that you’re purchasing from a third-party, save for the notice letting you know that any returns have to be processed through the third-party retailer.  I expedited the shipping to see what kind of lag time we might get between my purchase through Best Buy and the shipping done by Buy.com.  There was none.  My product arrived precisely on time, no hitches.

The one question that I had through this entire process was the procedure for returning something.  As I mentioned earlier, you can’t return your item through Best Buy—all returns have to be processed through the third-party.  There didn’t seem to be any hiccups in the return process (although I didn’t have to return my product).  At least for products purchased through Buy.com, a form is enclosed with your packaging with instructions on the return process.  No more difficult than any other online return.

Best Buy Marketplace is easily in the same league as other big box retailers who allow third-party sellers, with almost complete integration into their own online shopping cart.  The question is, can Best Buy keep up with Amazon by hand selecting their partners?  Or will they continue to?  The benefit of course is the ability to curate both the products and the customer experience—the downside is that you’re limiting options for the consumer, and at the same time, potentially losing revenue to other retailers with a wider selection.  For the time being, however, it looks like Best Buy has found a way to level the playing field with Amazon.

Zack Christenson is a Chicago-based digital strategist who writes on tech policy.

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