Marketplace Briefing: Inside the marketplace strategies of Target, Best Buy and Nordstrom
This is the latest installment of the Marketplace Briefing, a weekly Modern Retail+ column about the ever-changing e-commerce marketplace landscape. More from the series →
Executives from Target, Best Buy and Nordstrom say their marketplaces are playing a bigger role in how they choose products, make money and help shoppers find what they want, both online and in stores.
That was the takeaway from a panel discussion at the National Retail Federation’s Big Show conference in New York on Tuesday, where executives described how their companies are refining their third-party marketplace strategies after several years of investment.
The marketplace model, first perfected by Amazon, has become common among large U.S. retailers. While marketplaces are no longer new for many retailers, executives said the focus has matured toward how those platforms fit into broader decisions around assortment planning, store space, profitability and online discovery.
How Target Plus refines assortment and strengthens margins
Sarah Travis, Target’s executive vice president and chief digital and revenue officer, said the company’s marketplace, Target Plus — launched in 2019 — plays a key role in helping the company experiment with new products and categories before committing to owned inventory.
“Marketplace plays an enormous role in helping us to identify trends and bring products on much more quickly,” she said.
That strategy has increasingly influenced how Target thinks about its physical stores. Travis said slower-moving categories like home furnishings and bulky goods make more sense on the marketplace, freeing up store space for categories that drive more frequent trips, like décor and seasonal displays.
Travis called Target Plus “a massive traffic driver,” with 10% of the company’s external traffic coming specifically because of marketplace products sold by third-party sellers. Those same visitors often end up buying both third-party and company-owned 1P goods. In the third quarter, Target said its marketplace saw nearly 50% growth in GMV.
“We are able to reach more guests and bring new guests to the platform,” Travis said during the panel. “All those rise when you have a marketplace.”
Behind the scenes, Target runs its marketplace through a dedicated Target Plus team that works closely with traditional merchants. Travis said the close pairing is critical to maintaining consistency across the customer experience. For instance, Target has expanded promotions to include third-party products, allowing customers to apply sitewide discounts — say, 30% off kitchen appliances — across both owned and marketplace inventory. Previously, such promotions only applied to first-party items.
“That might sound like a simple thing, but it really does require a significant amount of tech and process to get that done,” Travis said. “That’s how we’re thinking about making sure that we’re giving visibility to those items within the platform.”
Best Buy Marketplace, five months in
Best Buy Marketplace, having launched in August, is one of the newest retailer-run marketplaces on the block. But the company is seeing early payoff from its marketplace.
Frank Bedo, Best Buy’s chief marketplace and e-commerce officer, said the retailer now works with about 1,100 sellers, and its SKU count is roughly 11 times larger than before the marketplace launch. The focus, he said, has been on complementary categories, including accessories, refurbished products, seasonal décor and licensed merchandise.
“If you’re going to Best Buy to buy your TV for the Super Bowl, you can now walk out with a Chicago Bears speaker or even a Chicago Bears Snuggie,” Bedo said.
Early results suggest the strategy is paying off. On its most recent earnings call, Best Buy executives said the marketplace had already delivered a “positive impact” on the company’s third-quarter gross profit rate, with categories like accessories and small appliances seeing “high unit sales.” Best Buy expects its marketplace to positively impact its fourth-quarter gross profit rate, as well. Customer return rates for marketplace items have been running lower than those of Best Buy’s first-party business, and more than 80% of marketplace returns are handled in stores.
Executives also said the marketplace is ramping up traffic, conversion and sales, while creating new opportunities for Best Buy Ads, the company’s retail media business, as more third-party sellers join the platform.
For Best Buy, the marketplace is ultimately about keeping customers within the company’s ecosystem for more of their purchases, according to Bedo. “It allows us more eyeballs, giving our existing customers more than they expect, and then bringing in some new customers along the way,” he said.
How Nordstrom is expanding selection without becoming ‘The Everything Store‘
Nordstrom’s marketplace strategy, now nearing its two-year mark, was designed from the outset to feel like an extension of the retailer’s brand.
“We launched Marketplace to serve more customers in more occasions,” Almeida said, adding that the company was “very, very deliberate about not becoming The Everything Store.”
Instead, Nordstrom has used Marketplace to fill assortment gaps, particularly at lower price points, and to offer more options from its strongest brands. Almeida said that for some of Nordstrom’s top brands, 30-40% of inventory remains owned, while the remaining styles, sizes and colors are offered through third-party sellers, allowing the retailer to broaden selection without taking on inventory risk.
Nordstrom has also worked to ensure Marketplace integration across channels. Store associates receive full commission on Marketplace sales completed in-store, and the company has aligned Marketplace success metrics across digital, merchandising and store teams.
From a financial perspective, Almeida said that retailer-run marketplaces should be evaluated differently from traditional wholesale businesses. While contribution margins may look lower, he said, the absence of inventory ownership and markdown risk improves free cash flow and return on invested capital. “These are sales that are literally risk-free,” Almeida said.
Nordstrom has also used its marketplace as a testing ground for future wholesale relationships. Almeida said some third-party sellers have already graduated into owned inventory and physical store distribution.
“Our customers get better choice, our sellers get national distribution and physical presence that still matter as a multi-channel retailer, and the company wins with all the financial outcomes.”
What brands are saying
Megan Potts, founder of Triforce Digital Partners, an agency that works with brands across marketplaces run by retailers like Target, Walmart and Home Depot, said many brands see these platforms as a way to balance out some of the trade-offs that come with selling on Amazon, which has a bigger but also more competitive platform. Retailer-run marketplaces tend to have a more limited, curated selection.
“On Amazon, the competition is very, very fierce, whereas on a marketplace like a Walmart or a Target or even Wayfair, it’s a smaller amount of traffic, but it’s a lot more focused,” Potts said. “The competition is still competitive, but you’re not just sitting next to competitors that all look the same at the same price point.”
Jay Antokol, senior marketplace manager at Tiger Companies, a portfolio company with a wide array of business and consumer products from office furniture to home decor, said margins are another reason brands are paying closer attention to retailer-run marketplaces. “Off the bat, your margins are going to be higher than Amazon per store,” Antokol said, pointing to lower fees on many retailer platforms.
Tiger Companies, which sells several hundred SKUs of commercial cleaning and furniture products, launched on Best Buy Marketplace a few months ago. Antokol said performance has been stronger than expected, with sales growing steadily since launch, especially given that Best Buy is not traditionally associated with those categories. “They have a very loyal customer base,” he said. “They will buy things that are not electronics because they have that trust with Best Buy.”
Those differences can impact what sells best on different platforms. One premium personal care brand she works with sees its core $30 wash product dominate sales on Amazon. On a retailer marketplace like Target Plus, however, higher-priced fragrances became top sellers instead because Target leaned into gifting and lifestyle merchandising. Roughly 98% of those purchases on Target Plus came from new customers to the brand, and repeat buyers spent an average of 126% more on their second purchase.
How brands think about these marketplaces is also changing. Amazon, Potts said, is often used for scale and efficiency, while retailer marketplaces are used to build brand value, test premium products and reach new customers.
“A few years ago, most brands treated retailer marketplaces as experiments,” she said. “Today, the brands seeing success treat them as strategic channels with distinct roles.”
What I’m reading
- Amazon is pressuring some of its suppliers to agree to price cuts of up to 30% and absorb future tariff costs as it reverses earlier concessions ahead of a key U.S. Supreme Court ruling on trade levies, the Financial Times reported.
- Amazon is planning a 229,000-square-foot big-box store in the Chicago area, its first crack at a supercenter-style retail format, per Bloomberg.
- TikTok told some U.S. employees that they will work for a new global entity that is not a part of the new joint venture that includes Oracle and others, according to Business Insider.