How the pandemic helped Walmart battle Amazon Marketplace for sellers

CHICAGO (Reuters) – Between 2009 and 2014, Walmart’s Marketplace business, where outside merchants hawk everything from baby blankets to power tools, counted no more than six sellers, and was described by one expert as “in limbo.”

But what was treated as an afterthought for years has emerged as an important leg in the world’s biggest retailer’s long-term strategy to take on Amazon Inc, which it is battling for advertising and ecommerce dollars.

Walmart Marketplace grew to an estimated 70,000 sellers in 2020, fueled by a surge in online shopping due to the Covid-19 pandemic and a series of investments in technology and vendor relationships reported here for the first time.

That is expected to rise 146% by the end of 2022, according to projections by data firm Marketplace Pulse that have not yet been published.

The rapid growth is starting to stress the system, some merchants said, a growing number of whom worry that if the pace picks up, Walmart risks damaging its reputation as a haven for quality sellers. Reuters spoke with vendors from Walmart.com and Amazon, analytics companies that help merchants sell on both marketplaces, industry experts, consultants and executives.

“A year or two ago, every brand on Walmart.com would be trustworthy but now it’s getting very similar to Amazon and that’s a huge risk,” said Cal Chan, who sells supplements and skincare products on both Walmart and Amazon. “Amazon let everyone under the sun in – that helped them grow, but now they’re trying to clean up the riff-raff and it’s very hard to close Pandora’s Box.”

Amazon disputed the characterization by merchants and said it has a thorough vetting process designed to help honest sellers set up accounts quickly. The company employs more than 8,000 people to remove counterfeit products, false listings and identify intellectual property theft. In 2019, Amazon stopped over 2.5 million suspected bad actors from opening Amazon selling accounts, and blocked more than 6 billion suspected bad listings, an Amazon spokesman said in an email.

Walmart has distinguished itself as a safer, less crowded marketplace than rivals like Amazon, making it easier for merchants to stand out and sell products. But it is now expected to see a surge of new vendors after it said last month it will open its online store to international merchants, which are less accountable to U.S. consumer protection laws. Walmart has already added over 130 new Chinese sellers, Marketplace Pulse said.

(Graphic: More Chinese merchants join Walmart Marketplace – )

Reuters Graphic

The retailer said it is actively courting foreign vendors including from ecommerce giant Flipkart, which is bigger than Amazon in India and in which Walmart holds a 77% stake. It vowed to maintain quality control.

“We do not plan to lower our bar or change our vetting standards, our monitoring or management of sellers,” Jeff Clementz, Vice President of Walmart Marketplace, said. “We are aiming to attract the best from around the world.”

Walmart said its sourcing teams in other countries have begun vetting potential sellers by their reviews, licensing permissions, reputations and items.

The business of providing a storefront for outside sellers is, as one analyst called it, a “secret weapon” for Amazon and a major growth engine that has caught the attention of Target and big tech rivals Google and Facebook, which are eager to expand similar businesses.

Sales generated by Amazon’s third-party vendors totaled $189 billion last year in the United States, or nearly 60% of the company’s total U.S. retail ecommerce sales, according to eMarketer data from Insider Intelligence.

Amazon, which declined to verify these numbers, dwarfs Walmart’s marketplace and is estimated to have more than 3 million sellers on its U.S. third-party store at the end of 2022, and 7.5 million globally, according to Marketplace Pulse.

But the lure of Walmart’s over 5,000 stores and clubs – more important than ever as pick-up and delivery hubs take off due to the pandemic – is a big attraction for many vendors.

“Walmart has something Amazon can’t match: brick-and-mortar stores. If you do well on Walmart.com, there’s potential you can get into a regular Walmart,” said Bradley Sutton, who works at third-party seller consulting firm Helium 10.

“It’s like the Holy Grail for vendors. That’s way bigger than Amazon.”

(Graphic: U.S. third-party merchants’ sales surge – )

Reuters Graphic

‘STRATEGIC PRIORITY’

Marketplace’s elevation to what Clementz in June called a “strategic priority” tracks Walmart’s reinvention from digital also-ran to the No. 2 spot behind Amazon.

The transformation began with the 2016 addition of serial entrepreneur Marc Lore to lead Walmart’s U.S. ecommerce business. That year, it agreed to spend $3.3 billion on Lore’s less than three-year-old Jet.com.

“This company, over time, is going to look like more of an ecommerce company,” Walmart Chief Executive Doug McMillon said at the time.

By early October 2016, 17 days after joining Walmart, Lore laid out a strategy that included a plan to not only lure hipper, urban, millennial shoppers to Jet.com and Walmart.com, but also to make both sites attractive to smaller merchants.

Lore eyed an opportunity to lure sellers of “more premium-type brands that don’t typically want to sell on marketplaces” of rivals.

(Graphic: Walmart Marketplace vendors seen rising sharply – )

Reuters Graphic

Some vendors described a rigorous process to get on Walmart Marketplace that can take weeks and includes submitting bank account information, sales records and social security details.

When Clementz, previously COO of Walmart.com, was put in charge of Marketplace, the first order of business for the veteran of PayPal and Intel was to improve “glitchy,” complicated software for listing products and simplify the process of connecting analytics and delivery firms for vendors, said sellers.

Walmart spruced up its advertising platform, rolled out software to protect sellers’ intellectual property, launched a delivery and logistics service, and introduced its version of Amazon Prime, called Walmart+, a membership program that “100% boosts sales,” according to fitness equipment merchant Michael Lebhar.

Hoping to address complaints from sellers, Walmart hired “strategic account managers” who cater to top vendors. On Tuesday, Walmart emailed vendors to apply for “a chance to win the opportunity to sell” U.S.-made products in stores.

To sweeten the pot, Walmart has also undercut Amazon on the commission it takes on sales of some items. Walmart takes a 3%-20% cut of items sold versus Amazon’s rate of 6%-45%, depending on the type of product.

The month Walmart opened its market to international sellers, new vendors were told they would not have to pay a commission at all for a limited time.

But concessions like this generate concern among some sellers.

“This is alarming and will end up with Walmart having similar counterfeit or quality issues like Amazon is having,” said Ryan Ebel, 30, a third-party seller from Las Vegas.

Lore, who left the company at the end of January and remains an advisor, said he is “not worried” about Walmart’s expansion to foreign sellers.

“The magic is finding that white line, the right balance between adding more assortment but not going down a path of letting anybody on the platform,” he said.

Reporting by Richa Naidu in Chicago; Editing by Kenneth Li and Nick Zieminski

Egypt seizes ship that blocked Suez Canal over $900m compensation claim

Egypt will impound the giant container ship that blocked the Suez Canal last month until its Japanese owner pays $900m (£652m) in compensation.

One of the Ever Given’s insurers, UK Club, said the Suez Canal Authority had rejected its offer to settle the claim.

It described the claim, which includes $300m for a salvage bonus and $300m for loss of reputation, as “extraordinarily large” and “largely unsupported”.

The Ever Given is anchored in the Great Bitter Lake, the canal’s midway point.

The 400m-long (1,312ft), 220,000-tonne ship became wedged diagonally across the waterway on 23 March after running aground amid high winds and a sandstorm that affected visibility.

It was freed six days later, after a salvage operation involving a flotilla of powerful tug boats and dredging vessels that shifted an estimated 30,000 cubic metres (1.1m cubic ft) of mud and sand.

More than 400 vessels had to wait to pass through the 193km (120-mile) canal, which connects the Mediterranean Sea to the Red Sea and provides the shortest sea link between Asia and Europe.

The chairman of the Suez Canal Authority (SCA), Osama Rabie, said on Tuesday that the Ever Given had been “seized due to its failure to pay $900m” in compensation, Egyptian state media reported.

The figure was based on the “the losses incurred by the grounded vessel as well as the flotation and maintenance costs”, he added.

UK Club – which insured the ship’s owner Shoei Kisen Kaisha for third-party liabilities, including damage caused to infrastructure or claims for obstruction – said in a statement that it had been negotiating in good faith with the SCA “despite the magnitude of the claim”

“On [Monday], a carefully considered and generous offer was made to the SCA to settle their claim,” it added. “We are disappointed by the SCA’s subsequent decision to arrest the vessel.”

“We are also disappointed at comments by the SCA that the ship will be held in Egypt until compensation is paid, and that her crew will be unable to leave the vessel during this time.”

A handout satellite image made available by Maxar Technologies shows the excavation and dredging operations around the Ever Given on 28 March 2021
image captionThis satellite photograph shows how the Ever Given was wedged across the canal

UK Club said the SCA had not provided a detailed justification for its claim, noting that the grounding resulted in no pollution and no reported injuries.

It also said the claim did not include the fees of the specialist salvage company brought in to help refloat the Ever Given, which the owner and another insurer expected to pay separately.

A spokeswoman for Shoei Kisen Kaisha confirmed to Agence France-Presse that the Ever Given’s fate was “in the legal arena”.

Map showing Suez Canal and location of Ever Given in the Great Bitter Lake (30 March 2021)

The Ever Given’s technical managers, Bernhard Schulte Shipmanagement, also expressed disappointment with the decision on Wednesday in a statement confirming that inspections by the American Bureau of Shipping, the vessel’s classification society, had been concluded.

“The vessel has been declared suitable for onward passage to Port Said where she will be assessed again before departing for Rotterdam,” it said.

The Ever Given’s 25 Indian crew members had been co-operating fully with the Egyptian authorities and their investigation into the grounding, including granting access to the vessel’s voyage data recorder and other materials and data, the statement added.

“The crew on board remain in good health and good spirits, fulfilling their duties to the highest of standards. BSM is in regular contact with the crew and has offered support to the seafarers’ families.”

Coinbase listing marks latest step in crypto’s march to the mainstream

LONDON (Reuters) – Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, will list on the Nasdaq on Wednesday, marking a milestone in the journey of virtual currencies from niche technology to mainstream asset.

The listing is by far the biggest yet of a cryptocurrency company, with the San Francisco-based firm saying last month that private market transactions had valued the company at around $68 billion this year, versus $5.8 billion in September.

It represents the latest breakthrough for acceptance of cryptocurrencies, an asset class that only a few years ago had been shunned by mainstream finance, according to interviews with investors, analysts and executives.

“The listing is significant in that it marks the growth of the industry and its acceptance into mainstream business,” said William Cong, an associate professor of finance at Cornell University’s SC Johnson College of Business.

Bitcoin, the biggest cryptocurrency, hit a record of over $63,000 on Tuesday. It has more than doubled this year as large investors, banks from Goldman Sachs to Morgan Stanley and household name companies such as Tesla Inc warm to the emerging asset.

Coinbase’s direct listing – which means it has not sold any shares ahead of its market debut – is likely to accelerate that process, those interviewed by Reuters said, by boosting awareness of digital assets among investors.

“This is a very positive thing for bitcoin in itself, as it proves the bridge that has been built from an esoteric, left-of-field arena, full of cowboys, to mainstream finance,” said Charles Hayter of data firm CryptoCompare.

Still, some institutional investors voiced caution over long-term prospects for Coinbase and the crypto sector.

Swiss asset manager Unigestion said it was wary of the hype around cryptocurrencies, and as a result would not be buying Coinbase stock.

“We think there is a lot of frenzy and exuberance in everything that looks like crypto,” said Olivier Marciot, a portfolio manager at Unigestion, which oversees assets worth $22.6 billion.

“Hedge funds and retail will probably be the early birds in these new stocks – probably buying into them pretty heavily – which shouldn’t be a clear indication of how they will be in the longer term.”

BEHOLDEN TO BITCOIN?

Others experts said risks included Coinbase’s exposure to a highly volatile asset that is still subject to patchy regulation.

Founded in 2012, Coinbase boasts 56 million users globally and an estimated $223 billion assets on its platform, accounting for 11.3% crypto asset market share, according to regulatory filings.

The company’s most recent financial results underscore how revenues have surged in lock-step with the rally in bitcoin trading volumes and price.

In the first quarter of the year, as bitcoin more than doubled in price, Coinbase estimated revenue of over $1.8 billion and net income between $730 million to $800 million, versus revenue of $1.3 billion for the entire 2020.

“The correlation to bitcoin will be very high after the stock stabilizes after listing,” said Larry Cermak, director of research at crypto website The Block.

“When price of bitcoin goes down, it’s inevitable that Coinbase’s revenue and inherently price of the stock will decline as well.”

Regulatory risks also loom, others said, as Coinbase increases the number of digital assets users can trade on its platform.

Coinbase last year suspended trading in major digital currency XRP after U.S. regulators charged associated blockchain firm Ripple with an $1.3 billion unregistered securities offering. Ripple has denied the charges.

“Given the expansion of assets covered by Coinbase it’s almost inevitable that other listings will come into question,” said Colin Platt, chief operating officer of crypto platform Unifty.

Coinbase declined to comment.

Reporting by Tom Wilson and Anna Irrera; Editing by Nick Zieminski

SolarWinds dealing with hack fallout cost at least $18 million

WASHINGTON (Reuters) – Texas-based SolarWinds Corp said the sprawling breach stemming from the compromise of its flagship software product has cost the company at least $18 million in the first three months of 2021.

In preliminary results made public on Tuesday, the company said it spent between $18 million and $19 million in the first quarter of 2021 to investigate and remediate what it described as “the Cyber Incident.”

SolarWinds has been working since December to deal with the fallout of a series of intrusions blamed on Russian hackers across the U.S. government and scores of private companies. In many cases, the hackers compromised their targets by piggybacking on a subverted version of SolarWinds Orion, a widely used network management tool.

SolarWinds has hired cybersecurity company CrowdStrike Holdings Inc and professional services firm KPMG to help it investigate the intrusions. The company said its costs were likely to grow.

“We expect to incur significant legal and other professional services expenses associated with the Cyber Incident in future periods,” it said in a note.

Solarwinds shares gained 2.1% in Tuesday trading on the New York Stock Exchange.

Reporting by Raphael Satter; Editing by Dan Grebler

Russian opens case against Yandex over alleged competition law breach

MOSCOW (Reuters) – Russia’s Federal Antimonopoly Service (FAS) on Tuesday said it had initiated proceedings against internet giant Yandex over alleged competition law violations on the company’s search engine.

The state agency told Yandex in February it had created unequal market conditions for general online search services, that it was preferentially promoting its own products and asked it to stop. Yandex asked for extra time to respond to the accusations earlier this month.

The FAS said it would investigate possible anti-competitive practices and assess their consequences, adding that Yandex could be subject to a fine should evidence it was restricting competition be found.

“We do not agree with the accusation of restricting competition and are ready to defend our position,” Yandex said in a statement.

Yandex said it was using the global practice of enriched search results to enhance the user experience.

“Over 30,000 companies already use our enriched search technology for free,” Yandex added.

Reporting by Alexander Marrow; editing by Barbara Lewis

Apple backs wide emissions disclosure rules

(Reuters) -Apple Inc on Tuesday called for the U.S. Securities and Exchange Commission (SEC) to require companies to disclose far-reading emissions information such as how customers use their products, according to a tweet from Apple Vice President Lisa Jackson.

The comments by the iPhone maker mark the most specific prescription to date from a large public company about what disclosures are needed, said Veena Ramani, senior program director for Ceres, a Boston-based climate advocacy group.

The SEC last month said it will seek input on how companies might report on their greenhouse gas emissions and other climate factors.

Investors have poured money into funds that use environmental, social and governance factors to pick stocks, but a lack of common standards has made it hard to compare issuers’ operations.

Jackson, a former U.S. environmental regulator, in her tweet included a statement that Apple “believes that the SEC should issue rules to require that companies disclose third-party-audited emissions information to the public, covering all scopes of emissions, direct and indirect, and the value chain.”

An Apple spokeswoman confirmed the phrasing referred to so-called Scope 3 emissions like those resulting from the use of a company’s products by other parties. While that can be simple for technology or finance companies to provide, calls to publish the data can be controversial for other industries.

In reporting its Scope 3 emissions in January for the first time, oil major ExxonMobil Corp wrote that the data “is less certain and less consistent because it includes the indirect emissions resulting from the consumption and use of a company’s products occurring outside of its control.”

Various other business leaders have previously called for mandatory climate disclosures including Larry Fink, CEO of top investor BlackRock Inc. In February, BlackRock also urged heavy polluters to disclose their Scope 3 emissions to investors, like the Task Force on Climate-Related Financial Disclosures has also recommended.

In addition, Apple was among hundreds of companies that on Tuesday pressured the administration of U.S. President Joe Biden to slash greenhouse gas emissions.

Reporting by Ross Kerber in Boston Additional reporting by Stephen Nellis in San FranciscoEditing by Bill Berkrot and Matthew Lewis

Nornickel to boost nickel production in Finland for EV battery market

MOSCOW (Reuters) – Russian metals producer Nornickel said on Tuesday it will boost output of nickel products at its Harjavalta plant in Finland as it bets on the expanding market for battery materials needed for electric vehicles (EV).

Finland’s state mining investment firm Finnish Minerals Group, German chemicals giant BASF and Finnish utility Fortum are among companies currently forming an EV battery cluster in Finland.

Nornickel, one of the world’s largest producers of nickel, wants to meet rising demand from those companies in coming years, its head of sales, Anton Berlin told reporters.

Its Harjavalta refinery will expand production of nickel sulphate solution, which is used for the manufacture of intermediate products for lithium-ion batteries.

Being close to customers is vital for this product as long-distance transport eats up the bulk of its profitability, Berlin said.

“We are confident that this market will be rising,” Berlin said. Estimates of nickel consumption by the global electric and hybrid vehicles sector vary from 400,000 tonnes to 700,000 tonnes a year by 2025, he added.

Harjavalta currently produces 65,000 tonnes of nickel products a year, of which 10,000 tonnes comes in nickel sulphate solution.

It plans to raise production of nickel products to 75,000 tonnes by 2023 and to more than 100,000 tonnes by 2026, including at least 40,000 tonnes of nickel sulphate solution.

This solution would be enough to produce 1 million of electric vehicles, based on the current nickel per car usage.

Despite its expansion of raw materials production for the EV sector, Nornickel does not plan to move into actual EV battery production as it believes that “is a completely different business” to its own, Berlin added.

The Harjavalta project will cost the company several tens of million dollars, he added.

Reporting by Polina Devitt and Anastasia Lyrchikova; editing by Susan Fenton

Brexit: JD Sports to open Dublin warehouse

Retailer JD Sports is to open a 65,000 sq ft warehouse near Dublin to tackle post-Brexit trading problems.

Goods which JD imports from East Asia to GB now incur tariffs when they are distributed onward to its stores across Europe.

To deal with this JD has already opened a warehouse in Belgium but says it needs a specific facility for Ireland.

The company says the Irish facility will become operational in the second half of this year.

It is also considering a bigger facility elsewhere in the EU from which it would process all EU online orders.

In a trading update the firm said: “We continue to review opportunities for a larger permanent facility in Europe which can process substantially all of the volume required for stores and online orders in mainland Europe although it will likely be Autumn 2022 before an enlarged facility would be available for use.”

In February the chairman of JD told the BBC that Brexit had turned out to be “considerably worse” than he feared.

Peter Cowgill said there was no true free trade with the EU, because goods that JD Sports imports from East Asia incur tariffs when they go to its stores across Europe.

“I actually think it was not properly thought out,” he said.

“All the spin that was put on it about being free trade and free movement has not been the reality.”

By John Campbell
BBC News NI Economics & Business Editor

Air France-KLM prices capital hike at 4.84 euros per share

PARIS (Reuters) – Air France-KLM on Tuesday launched a capital hike at 4.84 euros ($5.76) per share as part of a 4 billion-euro recapitalisation to shore up its finances amid the COVID-19 crisis.

The airline said in a statement it could raise up to 1.036 billion euros if demand was sufficient to exercise an option to increase the size of the rights issue.

It added that the subscription pricing amounted to an 8.85% discount to Monday’s closing price.

Shares of the Franco-Dutch company were down 4.33% at 5.08 euros at 0810 GMT, the worst performer on France’s French SBF 120 index.

Air France-KLM said on Monday it will expand its partnership with China Eastern Airlines, as the Chinese carrier committed to subscribe to the issue. It will hold less than 10% of the firm’s capital.

The French state will cover as much as two-thirds of capital increase.

($1 = 0.8404 euros)

Reporting by Matthieu Protard; Editing by Kirsten Donovan