Strategies for Curating Marketplace Supply with Jason Leung

When Jason Leung was handed the keys to Best Buy’s marketplace launch, he didn’t know he’d take the company from selling smart TVs to scooters. As senior marketplace manager, he only knew this: the marketplace model offered Best Buy the best path to the assortment needed to serve customers better. 

While most marketplaces have to build trust and brand recognition from scratch, Best Buy embarked on its marketplace from a unique vantage point.

“[Other] operators were working on a strong hunch or some data knowledge that there was a market there, but then they still had to go out and find customers, right? We didn't have that problem with Best Buy. We were dominant [in] traffic share and consumer electronics—like upwards of 60%.”

Every consumer knows about Best Buy. Demand wasn’t the issue. Instead, Jason’s challenge would come down to mastering marketplace supply. 

How Best Buy’s marketplace fits into its overall strategy

Jason and his team launched the marketplace with one primary goal: to ensure that all website visitors always had something to buy. Confident that Best Buy could leverage its existing demand, Jason kicked off the marketplace with three modest sellers and conventional electronics categories, like laptops and cell phones. 

But then, as Jason says, “We went a little crazy with it.”

Following customer demand took Jason and the Best Buy marketplace into two unexpected but lucrative directions: 

1. Wide-ranging assortment

Best Buy didn’t just expand into core-adjacent or ancillary products. The company expanded into an endless aisle of entirely new markets. Three sellers turned into 5000. The marketplace grew from electronics to include furniture, sporting goods, jewelry, and watches — products you wouldn’t typically associate with the Best Buy brand. 

“We were doing pet supplies, and we were—and still are—doing furniture. We tried a lot of different things at that point in time. The thinking was that the marketplace would hyper-accelerate that expansion, right? Because we can only inventory so much. We only have so many buyers to select these narrow and curated assortments—and it absolutely did.”

2. Certified refurbished products

Jason didn’t intentionally set out to sell refurbished items, but as the marketplace’s electronics sales entered hypergrowth, it became evident that customers wanted products from the “non-new space,” which includes refurbished and open-box items, and helps the company tap into the circular economy. 

“It was not part of our original vision as a marketplace to become a destination for certified refurbished electronics. But the customers loved it, and they saw the value in the pricing that was in that market. Once we recognized that, we started to turn our eye to developing those experiences.”

How Best Buy Selects Successful Suppliers — and Supply That Sells

There’s no shortage of sellers that want to join Best Buy’s marketplace. Thus, they had to develop a system for selecting suppliers and products to meet Best Buy’s customer needs and service standards. 

Jason uses the following strategies to set the marketplace up for success:

All suppliers are highly vetted

While Best Buy’s marketplace never had a Wild West era — account managers managed quality from the beginning — it took some time before the company formalized a compliance team.  

“I won't sugarcoat it. We've found some lemons along the way. And we had to make lemonade, but you learn. When we first started the marketplace, we didn't have a compliance team; it wasn't probably until two and a half years in that we discovered that we needed it.” 

Despite its large size, Best Buy’s marketplace consists of highly curated products and highly vetted vendors. 

Today, Jason’s team evaluates sellers based on:

• Where they’re selling right now
• Current customer ratings
• How they maintain customer experiences
• Existing return and shipping policies
• Their investment in customer care associates

Importantly, Jason’s team must ensure the sellers remain a good fit once onboard. They pay close attention to the following criteria to determine if sellers continue on the platform: 

• How much does the seller engage with the platform?
• How often does the seller update pricing?
• Does the seller use promotional pricing?
• Is the seller rotating assortment?
• Is the seller spending money on advertising?
• Is the seller conscious of and engaging with Best Buy’s events?

Only compatible products are accepted

Jason and his team refer to the ecommerce metric Failed Searches to get a sense of the products Best Buy customers look for but can’t find. They can then bring those products on. That said, not every product will be accepted onto the Best Buy Marketplace. 

“We wouldn’t bring on baby booties or something like that where you must have sizing. It's just not suitable for us.”

Best Buy will always be an electronics company at heart. But, as Jason says, “We have some side hustles.”

New product categories begin with known brands

Best Buy’s annual growth objectives set the tone for the products the marketplace will expand into. Known brands are the first to be accepted because buyers already trust and recognize them.

“Every year, we set objectives in terms of where we want to grow. This year, it's power tools, yard work, and those kinds of areas. So, we're bringing on big brands that people recognize to start off. Those are our anchors. And then, of course, we'll start to bring on other merchants that have those brands or maybe even second-tier private labels that provide value.”

With known brands, Jason and his team can adventure into new product territory with a high degree of confidence the product will sell. 

Takeaways for other businesses: Pursuing the marketplace model is worth it

The Best Buy marketplace has achieved everything it sought to do. The marketplace business model has allowed Best Buy to:

• Optimize conversion 
• Give customers access to more products and preferred buying experiences
• Generate another stream of stable, predictable operating income
• Improve efficiency with inventory dollars
• Create a more thoughtful buying experience

So where does a marketplace this successful go from here? The answer is everywhere.

“Right now, we're focused on fulfilling our destiny as that omnichannel retailer.” Jason and his team are focused on continuing to fulfill any assortment in any way the customer wants. 

For successful businesses looking to rocketship growth, there's no better alternative than the multi-vendor marketplace. As Jason said:

“The economics of [marketplaces] are fantastic, especially when you have a built-in audience and traffic that you can that you can tap into. What we've seen in terms of the proof of performance is that it's delivered incredible growth that we could not reach or achieve through any other means except for using the power of our sellers and that economy.”

Transcript

[00:00:00] Jason: When we first started the marketplace, we didn't have a compliance team. You know, it wasn't probably until two and a half years in that we've discovered that we needed it. But over time, you know, we've, we've, we've, we've learned the hallmarks, the triggers, the red flags that we need to avoid most of all.

[00:00:12] I think what we want is a alignment with that customer focus. And that's pretty easy to tease out, you know, early in the conversation, to understand, okay, well. Where, where are you selling right now? You know, what, what kind of ratings do you have? How do you, how do you focus on maintaining the best customer experiences? What are your return [00:00:30] policies? How do you treat shipping? How much do you invest in, in customer care associates on your end of things? These are all, you know, sort of prodding questions that give you an indication of whether these sellers are going to be good.

[00:00:40] Niklas: Welcome to Operation Marketplace, a series where we talk to the people behind marketplaces, we dive into their mission, how they found success, and talk about the hurdles that they faced along the way.

[00:00:51] I'm your host, Niklas Halusa, co founder and CEO of Nautical Commerce.

[00:01:02] Hello and welcome. Today, I'm sitting with Jason Leung, who's a senior manager at the Best Buy and, uh, among the many roles he is had over the last, I think 14 years at the company, um, uh, what he currently specializes in is being able to translate what the marketplace is doing, how it's operating into something that turns into a long-term product and technology roadmap.

[00:01:30] Um, for Best Buy Canada and Best Buy. Uh, as a, as a whole. So it really has a, has a, a very strong abstract understanding of what matters around what needs to be built and, and where to invest time. And what really hurts to come, you know, a marketplace and what really makes them successful and things like this.

[00:01:46] Um, so without further ado, I'd love to, uh, introduce you to Jason Leung. Welcome to the podcast.

[00:01:53] Jason: Hey, Niklas. Uh, thanks for inviting me to join you. Uh, I would have to say that's. One of the better descriptions of what I've, what I do [00:02:00] better than I usually do for myself. So thank you for that. Uh, and I'm looking forward to the conversation.

[00:02:04] Niklas: So how did you tell us a little bit of the story? How, how, first of all, did you land at Best Buy? And second of all, how did you become the, you know, the, the eminence grease, the, the, the, the, the, the guru of, of, of what technology needs to be built?

[00:02:26] Jason: Well, that's, that's very grand, but, uh, I'll, I'll, I'll take it as, as far as I can tell my story.

[00:02:32] Um, and I have to admit, I'm a little self conscious, uh, with the other company of your previous guests, founders and CEOs, and, you know, industry, industry luminaries, I'm, I'm just here as a lieutenant, you know, but I hope that I can give you guys more of a perspective from the ground level of what it feels like in the trenches to, uh, to start a marketplace and figure out how to run one, uh, you know, midstream.

[00:02:51] Um, I'll give you the short version of my, my journey as well at Best Buy as you asked. Um, I started basically fresh after completing my business master's. Um, and I was an analyst in the buying division basically. So, um, that, that's the core of Best Buy's, uh, Best Buy's, uh, uh, enterprises. Picking the right products, getting it to our customers.

[00:03:10] And that was a lot of fun, right? And, and I built, and I did that for six years. Building product assortments and, um, uh, developing relationships with our vendor partners, learning how to run a PNL and, you know, most years hitting budgets. Um, and then, uh, in 2015, you know, uh, we started hearing rumblings that the company was going to start a marketplace [00:03:30] and, uh, and on our website.

[00:03:32] Uh, at that point in time, I'm, I'm completely detached from the project. Right. Um, and, uh, I'm just working on my own little business, managing our networking and gaming categories. And, you know, again, it's like trying to pick the right assortments and, and address customer needs. But I thought to myself, that sounds great.

[00:03:47] It sounds like extra profit for my portfolio. Not a whole lot of work that's required of me. They weren't asking me to do anything. So, you know, go ahead and run your.

[00:03:55] Niklas: Was not a whole lot of work, uh, did that end up being true? [00:04:00]

[00:04:00] Jason: Well, you know, if I'd stayed where I was, it would have been, it would have been true.

[00:04:03] Uh, but, uh, but yeah, that's, that's a good segue to the next part of the story, which is a year later. Right. Um, uh, it's, I think it was beginning of 2016. And my director, Sherry Zha, who, um, has like always been a mentor and one of my greatest supporters in the company since, since I got there, um, she got tapped to move to the e commerce team and, and basically be the one to launch and then run the marketplace.

[00:04:25] Um, you know, just a really savvy business operator, uh, and, uh, and [00:04:30] totally the right, the right choice, uh, at that time and still. Um, uh, and, and, and at that, at that stage in time, I think we were maybe 30 days, 60 days out from, from launching in the marketplace, the first seller on, on our, on our website. And, uh, and for myself, you know, I've, I was like, okay, well, I mean, I don't get to work with Sherry anymore, but I was already kind of feeling a bit of the, like the eight year itch, you know, I never six year issue, whatever it was in market and merchandising, but I didn't want to leave Best Buy, right.

[00:04:55] I just, I loved it there. And the culture is great. Um, and they've always been very good to me. [00:05:00] So I thought to myself and Sherry and I had conversations that it was the perfect time, you know, for me to maybe start a different journey and start learning again, uh, you know, within the company. Um, and, uh, I guess like almost nine years later, I'm chatting with you, reflecting on the, on, on, on where we've come from.

[00:05:16] So that's, that's how I got to the, to the marketplace team. And, um, and, uh, yeah, it's been quite a ride.

[00:05:21] Niklas: And, and when you were starting there, what was kind of the story for why this was [00:05:30] necessary? In other words, what carrot were they dangling in front of you saying, you know, this is a cool, exciting opportunity, you've got your six year, your eight year age.

[00:05:41] You know, what was the story for why this is a reason to recommit to Best Buy? In other words, what was the vision?

[00:05:47] Jason: You know, to be honest, speaking for myself, um, I didn't, I didn't know, I didn't know the vision. I just thought it seemed exciting and new. Right. And, uh, and, and like I said, I wanted to start learning again and I want to get to a [00:06:00] place where I was, you know, the, the dumbest person in the room and, uh, and, and, and, and see how, see if I could work my way through, obviously I was interested in.

[00:06:08] Uh, in in participating in the digital economy there, you know, that was 2016, right? So, you know, we're on we're on one of many waves. Um, and I think that was the main impetus for for myself, but in terms of the company, you know, I think we just saw so much potential in our ability to expand our reach and our service for our customers.

[00:06:27] Uh, and that was always exciting. And then, and as I said, you know, it was the right leader, uh, for, for me to go and go and work with and work for. Uh, so I was excited about that.

[00:06:35] Niklas: That makes sense. And so how has anything about that changed now that you, you know, you spent so many years in there, um, you know, maybe you didn't come in with a view of what, you know, best Buy marketplace adds to the organization.

[00:06:55] Mm-Hmm. . But, you know, what's your, what's your take on that today? What's the. You know,what does the marketplace aspect mean to the organization?

[00:07:03] Jason: Oh yes, it's changed a lot. It's changed a lot. You know, the, um, you know, as I, as I've moved through this, this, this journey on the marketplace, you know, I've, I've become quite evangelist for it.

[00:07:15] Right. You know, it just, The economics of it are fantastic, especially when you have a built in audience and traffic that you can, that you can tap into. Um, and, uh, and, and, and obviously I think that what we've seen in terms of the proof of performance is that Um, it's delivered incredible growth that we could not have reached or achieved, uh, through any other means, uh, except for, you know, using the power of our sellers and that economy, uh, to, uh, uh, or so that ecosystem, I should say, to, uh, to help, you know, uh, flesh out, you know, our offering on, on our website and then, you know, even expanding beyond that and potentially in the future, uh, there's so much, there's so much development and tech innovation that's happening in the marketplace space.

[00:07:57] Um, you know, I think that was, that's the main thing I learned is that there's almost no limitations when, when, when it comes to, when it comes to that, the digital platform, whereas, you know, in my previous life, you only have so much shelf space. You only have so many inventory dollars. You know, you have a lot of limitations, but you learn how to play the game and then hopefully you get very good at it.

[00:08:16] Uh, the marketplace is like, it's everything you dream up, right? And, uh, and, and, and, and as, as you said it before, right now, I'm looking, I'm focusing on our long term roadmap in terms of technology and product. Um, and, uh, and, and the challenge is almost like, what do you, what [00:08:30] do you do? Because there's, there is so much that can be improved and enhanced, uh, uh, you know, across, uh, across the different, the various, uh, features we have built and want to build.

[00:08:40] Niklas: And since you are specifically from a merchandising background, do you particularly focus on the supply side and, and, and, and figuring out, you know, the, it's called the vendor experience or is it across the board? You know, all the way from, [00:09:00] you know, how people buy all the way through to, to, to the operation or operating a bunch of vendors.

[00:09:06] Jason: Well, I think when, when we first started, when we first launched, um, you know, Sherry and I, or, uh, and the rest of the team primarily were, were, were, we came from a very merchandising merchant DNA. So we were very focused on the supply side. Right. And, and, and, you know, and so, and fair because. We only had three sellers at that time, right?

[00:09:26] So it was all about growth, right? You don't have a marketplace unless you have sellers. So we were really focused on the, on the supplier side. And, and as I said, we, we, we knew, um, that we had, uh, we had an audience. We had, we had traffic to our site that was shopping for certain types of things. Um, and you know, listening to some of the previous episodes that you've had, uh, with other startup marketplaces, you know, Some of those operators, you know, they were, they were working on a strong hunch or some, some data knowledge that there was a market there, but then they still have to go out and find the customers, right?

[00:09:57] They still have to go out and generate the demand. We [00:10:00] didn't have that problem with, with Best Buy, right? We were dominant traffic share and consumer electronics, like upwards of 60%. So, you know, we knew the customers are going to be coming and we wanted to know how, how can we serve them better, right? How can we optimize the conversion?

[00:10:13] Uh, but by providing, you know, a more robust and, uh, and broad assortment to them. So, so we didn't focus so much on that, uh, in the early days of the marketplace, we were focused on, uh, getting the right suppliers, getting the right products on the site, and then we knew the customers would be there to find it.

[00:10:30] As we evolved, obviously you start to think about the customer experience, right, from, from finding products to converting, adding to cart and the aftercare, you know, of, of, of the customer as well, you know, because not all sellers are, are, are made equal and not all sellers care about customer service as much as Best Buy certainly.

[00:10:48] Or even the best, the best version of, of this other population. So, um, yeah, we've had to, we had to wear a lot of hats, especially when you start, uh, and, and, and, and we learned along the way and certainly end to end, the marketplace businesses is a fairly self contained. We partner with, with adjacent departments to, to make sure that we, uh, you know, we're, we're aligned with the best by values, but we have to, we really have to take care of our, our own housekeeping for the most part.

[00:11:14] Niklas: That makes sense. Now, one of the things you said earlier is that you only had three sellers at the time. Um, can you share how many you have now?

[00:11:23] Jason: We, we have, uh, over 5, 000 sellers that have been signed. Yeah, so, so it's good growth and we're a gated marketplace too, [00:11:30] right? So, you know, of course we could open up the floodgates and we just have a free form submission.

[00:11:34] Uh, we, we'd have tens of thousands, hundreds of thousands maybe even, right? But we, every single seller that comes onto our platform speaks to human being, is vetted, right? Yeah. Uh for compatibility and obviously quality, uh, so these are carefully selected sellers Um, and uh, and obviously they have ranges of engagement activity and there's there's there's churn along the way as well Uh, but yeah, we've we've come we've grown a lot and we've uh, and we learned a lot and we've uh We found a lot of really good partners.

Niklas: [00:12:00] That's a good lesson to anybody who's Right now at a stage where they have three setters This goes to show you can get from three to five thousand and even uh accompany the scale of best buy You Has to start somewhere, starts at three and, and makes it work along the way. And I assume evolves the playbook and the technology and everything else, um, along the way.

[00:12:21] Now, one of the other things that you've, you've, you've briefly landed on a couple of times here in your answers is about the [00:12:30] economics of, um, of, uh, of, uh, the marketplace angle and how that plays into best by strategy. Can you, um, unpack that a little bit around, you know, what. What are these beneficial economics that you're, that you're, that you're talking about?

[00:12:46] And, you know, what's the sort of, you know, what's the math behind it that incentivizes, you know, Best Buy to invest in you and your team and, and, and, you know, continues to invest in, invest by Marketplace.

[00:12:59] Jason: Well, I think that the most compelling, uh, financial, uh, uh, calculation is, is, is that it's highly predictable profitability, right?

[00:13:08] Um, once you, once you have your, your, your fixed expenses, um, sorted out, um, obviously you can lever up and lever down. Uh, but, but by and large, we, we have a stable commission rate, uh, based on the categories we focus on and the sellers that we, that we bring in. Um, and, um, and, and, uh, you know, the initial investment cost is amortized.

[00:13:28] So. Um, yeah, we were just able to, we're able to grow with a sustainable and predictable, uh, operating income. And, and, you know, our, our finance team loves that. Um, and, uh, and, and makes things easier to model to going, going forward. And, and, uh, and I think that, uh, You know, uh, it's, uh, it's been something that we've taken a lot of pride in.

[00:13:50] You know, we, from day one, we've been a profitable enterprise, right? Uh, the marketplace team specifically. Right. Um, any, any other startup probably needs to, needs to be negative, right? You know, you got, you have to, you have to spend to, to grow. Uh, and, and, and we've invested as well, but, uh, but we've always been, uh, in the black with our P& L, uh, and I think that that's something that makes us fairly remarkable.

[00:14:12] Obviously, we have the, we have the backing of a major organization, uh, but, but we really strive to, uh, to be very responsible fiscally.

[00:14:21] Niklas: Uh, one of the other things that you, you, you touched on earlier is, Is maintaining a great experience. What does that mean, right? Why do you curate the sellers and what's a great experience for that you're trying to optimize for?

[00:14:36] Jason: Well, I think this is an interesting thing. It's developed, right? Obviously with Best Buy we have great brand love in Canada and North America. So we, we really cherish that. We don't want to bring a customer onto our, onto our website and have them be disappointed. That's, that's, that's the number one priority to avoid.

[00:14:58] And obviously we want to [00:15:00] delight. So, you know, thinking, just thinking back to, you know, 2015, when our SVP, Terry, his Sabrin, um, first conceived of launching a marketplace, our company, our, our organization in Canada, at least was really focused on an important strategic initiative, which was to drive. What we call expanded assortments.

[00:15:17] Um, and we were using drop ship and, you know, specific online only assortments, um, to, to, to fulfill those channels and, and start to expand it to what we call non consumer electronics categories.

[00:15:28] Niklas: If I pay that back to you, the [00:15:30] goal being somebody comes to your website and always has something to buy.

[00:15:33] Exactly, exactly.

[00:15:34] Jason: And you know, you can see some, you can see it in failed searches through it. You can kind of know, you have a sense of what people are looking for, what they thought they could find on our site, but they, they, they did, they didn't. So that gives you a little bit of a clue as to where you should expand, but we got really crazy with it, right?

[00:15:46] Like we were, we were doing pet supplies. We were doing, uh, we still, we still are doing furniture, you know, so we, we tried a lot of different things at that point in time. And the thinking was that the marketplace would hyper accelerate that expansion, right? Because we can only inventory so much. We only [00:16:00] have so many buyers to, to select these, these, these, these narrow and curated assortments.

[00:16:06] Uh, and it, and it absolutely did. Right. As soon as we launched the marketplace, you know, we, we were able to expand and onboard, you know, furniture, sporting goods, jewelry, and watches, you know, just not things that you would normally associate with, uh, with, with, with, with the Best Buy brand. Um, And in a lot of cases, coming back to your earlier question about the experience, you know, these products were coming onto our site [00:16:30] faster than we can even build hierarchies to house them, you know, like, like the navigation was always a struggle in those, in those early days, we just couldn't be as reactive as, uh, and dynamic as the marketplace sellers were, um, so, so, so maintaining that experience, we're always kind of come back to that focus and, and, and, and, uh, and as I said before, You know, it was our job as the marketplace team to think about the sellers, but also think about our buying customers.

[00:16:54] Both sides are our customers, of course, but the buying customer, and that's why we keep it curated, right? So that we can do it at a pace where we know exactly what the customer is going to experience. And it's aligned with our vision and our values.

[00:17:10] Niklas: And have you slimmed down the categories since? Or can I still sell, sell jewelry on Best Buy?

[00:17:19] Jason: Absolutely. You can sell jewelry on Best Buy and I welcome you to, I'll send you the sign up link. Um, uh, we have, yeah, we have jewelry, we have watches. Um, uh, and, uh, and, [00:17:30] uh, and yeah, we, we were, we're able to, As I said, as I was kind of alluding to earlier, um, we're able to be more dynamic with the way that we respond to, you know, opening new categories and reflecting on them, the newest ones that we've just broken into is power tools, um, and, uh, and, uh, and, you know, home do it yourself, that, that, the, those kinds of, those kinds of categories, we saw that there was a need there clearly, if I'm somebody on the Best Buy website, you know, looking at, um, you know, looking at, uh, [00:18:00] E scooter, you know, maybe I'm also the kind of person that's looking for a power drill, right.

[00:18:03] Or maybe a better, a better example of that is if I'm, if I'm buying patio furniture from you, which we do a good business there now, then I probably definitely need a power drill and why wouldn't I try and, you know, when we try to sell it to them. So yes, we do have a lot of expanded categories. Um, but the interesting thing about, you know, again, just coming back to the point about the journey and history is that, um, It became fairly clear that even though we were growing in sales in those expanded assortment [00:18:30] categories in maybe the first year or two, what the customer was telling us was that the expansion that we could do in our conventional categories like laptops, cell phones, computers, uh, it's like, uh, It's electronics, accessories, those kinds of things, uh, was, was happening even faster, like there was hyper hyper growth in those categories where we already had strength, which was an unexpected outcome, uh, specifically in like what we call the non new space.

[00:18:58] Uh, so it's like refurbished and open box electronics, which, which we didn't really see coming. It was not part of our original vision as a marketplace to become, you know, a destination for, um, for, uh, uh, certified refurbished, um, uh, electronics. Thanks. But the customers loved it, and they saw the value in the pricing that was, that was in that, that was, that was in that market.

[00:19:19] Um, and once we recognized that and we had that new insight, you know, we started to turn our eye to developing that, those experiences, right? What does that look like on our website? How does a customer identify something that's new versus non new? How do we label those things properly? How does the PDP have experience have to change?

[00:19:34] Niklas: Yeah, and has that, has that growth on the core categories as a result affected what in store? Or what inventory heavy, um, products best buy sells.

[00:19:50] Jason: Well, as I said, we're always conscientious of our open to buy and how we allocate, you know, inventory dollars. And there's a lot of factors that, that come into play, you know, between the beginning of marketplace and now, you know, you know, The pandemic and, and, you know, macroeconomic circumstances.

[00:20:05] So we're always trying to be as efficient as possible with our inventory dollars, real inventory dollars that we, that we, that we spend and how we partner with our, with our vendor partners, uh, in, in, um, in, in, in creating those buying plans and selling plans, of course. Um, so I think it does afford the business, the opportunity to be more lean.

[00:20:23] Right. Be more focused on their assortment. And I think some categories do and some categories, you know, uh, maybe they stick with [00:20:30] what's already working. Uh, but the vision is in the long run that yes, Best Buy, Best Buy's marketplace allows, um, the, the entire enterprise, you know, to be more thoughtful about how we, how we, how we invest, what we put into stores, where customers want to buy.

[00:20:46] One of the, we, we all, we call ourselves an omni channel retailer. And, and the reason for that is. We don't have a preference where, where, or how the customer wants to buy. We want to give you all the options and you choose what's best for your life and your lifestyle. You want to pick it up in the store.

[00:20:59] Do you want to order it? For marketplace, um, you know, if you want to reserve and get it later, or you want to shop around and talk to one of our blue shirt, blue shirt associates, um, we want to be able to, to, to please in, in, in all, in all scenarios.

[00:21:13] Niklas: So I can look forward to the day that I one day don't have to stand in front of a endless aisle of gold plated HDMI cables that I can't tell apart and that those don't all need to sit in the store.

[00:21:25] Uh, in the future. Um, and, uh, and, [00:21:30] uh, what does this mean around, you know, what, and, and, and maybe this is a loaded question, so you can avoid it, but, but as you turn into an everything store, right, two things I expect would happen. One. You know, what Best Buy stands for the brand, right? No longer a technology store, but a generalist retailer.

[00:21:59] It changes, right? And it changes positioning and storytelling and brand recognition and things like this. And presumably also, you know, you're now bumping up. If you're doing power drills, you're bumping up against, you know, Home Depot and Lowe's. And if you get into. Furniture, you're bumping up against, uh, uh, I don't know, Wayfair, right?

[00:22:21] You know, you're starting to, you know, there's a, there's a starting to blend the sort of clear consumer picture of where to buy what and what all these things stand for. Um, is that, uh, uh, uh, intentional? Um, or is that, uh, simply a consequence of saying, look, people like Best Buy. They trust Best Buy. They want to buy and buy more stuff and, and, and it's not our job to worry about.

[00:22:50] It's a job to sell more stuff.

[00:22:52] Jason: That is a loaded question, but those are always the funnest. Um, I think, uh, let me be clear that we are definitely still at our heart, a consumer electronics retailer. In fact, our, you know, our, our marketplace vision is. That we want to leverage our marketplace platform to entrench our position as the consumer electronics leader in this country.

[00:23:19] Um, so that's always our focus. But we have some side hustles, and I think that those, those, those adventures lead us to thinking about whether those categories are still continue to serve our customers in the way that we observe they want to be served. And I think that's, that's really our goal. You know, we're not here to try and eat anybody else's pie, you know, but only to, only to serve the customers that are already there.

[00:23:45] It affords us the opportunity to test and learn, uh, the marketplace platform that is, uh, without, without obviously, uh, inventory risk and financial. investment that would be required otherwise. Um, and, and I think that there's room, you know, for, for us to be able to [00:24:00] supply both value and assortment, um, and, and range, you know, to the, to those customers.

[00:24:05] So, um, we, we are always very, very focused on how do we differentiate, you know, our, our offering if, if, if we can, uh, and, and, and match where it's necessary.

[00:24:16] Niklas: Okay. But then the, the end goal is to strengthen the core funnel people back to best by the electronics. 

[00:24:23] Jason: I wouldn't even necessarily say that, but, but to, to maintain that loyalty and that, that, that relationship with our, with our [00:24:30] customer, right.So that they know that we got them, you know, uh, whatever that means for them.

[00:24:34] Niklas: That makes sense. Um, and then one of the other, you know, one of the things that you're obviously definitely the technology expert on is, is all things, merchandising, um, and, and supply. So, um, so maybe can you talk to us a little bit about, um, Uh, you know what you look at when you're looking for, you know, you mentioned earlier you're, you create a lot of the sellers, you know, what are you looking for [00:25:00] qualitatively from the, from the sellers to know that they're, uh, they're, they're best by rated.

[00:25:09] Jason: That's been a, that's been a learning journey as well. Right. Uh, and you know, I won't, I won't sugar coat it. We've, we, we found some lemons along the way. Uh, and we had to make lemonade, you know, a lot of times. Yeah. Um, but you learn and, and, um, and, you know, when we first started the marketplace, we didn't have a compliance team, you know, it wasn't probably until two and a half years in that [00:25:30] we've discovered that we needed it.

[00:25:31] I mean, at that point, the account managers were also managing quality and, you know, you need to terminate or suspend somebody, you make sort of an ad hoc decision. Um, but, but over time, you know, we've, we've, we've, we've learned the hallmarks, the triggers, the red flags, uh, uh, that, that, that, uh, that, that we need to avoid most of all.

[00:25:48] I think what we want is, uh, alignment with. Uh, with, uh, with, with that customer focus, and that's pretty easy to tease out, you know, early in the conversation, uh, even at the business development [00:26:00] stage and prospecting stage to understand, okay, well, where, where are you selling right now? You know, what are, what kind of ratings do you have?

[00:26:06] How do you, how do you focus on maintaining the best customer experiences? What are your return policies? How do you treat shipping? How much do you invest in in customer care associates on on your end of things? These are all, you know, sort of prodding questions that give you an indication of whether these sellers are going to be good.

[00:26:22] And the next is obviously just assortment compatibility, right? We can, I can bring on, you know, Uh, you know, a million listings of sunglasses, [00:26:30] but, uh, or, you know, maybe a crazier idea would be, you know, um, like, uh, baby booties or something like that, where you have to have sizing. It's just not suitable for us.

[00:26:37] Right. And, and, and a seller might be doing millions of dollars on some other platform, but it's just not going to work for us. So we don't want to necessarily. Waste their time and obviously consume our own resources either. Um, so I think that's, that's how we've learned is, is to be very focused on who we bring on.

[00:26:53] Does it align with our own goals? Because every year we have, we set our own objectives in terms of where we want to grow this year. It's power tools and, uh, and yard work and those kinds of areas. So we're, we're bringing on, um, Big brands that people recognize to start off. Those are our anchors. And then of course, we'll start to bring on, you know, either, you know, other merchants that have those brands, or maybe even, you know, um, more of your, you know, second tier private labels that provide value, uh, for, for the same function.

[00:27:18] Uh, and, uh, and, and, and we're, we're, we're very mindful of, of, uh, of, of whether or not, you know, the, the, the pool of the next cohort of sellers that we bring on aligns with where we want to [00:27:30] take our marketplace, uh, because we want them to come along for the journey.

[00:27:34] Niklas: Yeah, makes sense. I mean, how about, you know, at your scale, you know, qualitative is one thing, but you don't, can't manage, you can't manage 5, 000 sellers.

[00:27:45] Um, just personally, what about quantitatively? You know, what are you looking for, for your sellers? You know, what's the, what are the reports you're running? What's the, you know, how do, how do you keep on top of seller health and making sure everybody hits their, it's their KPIs?

[00:28:01] Jason: In terms of, when you ask that question, do you mean in terms of, um, of, of, of compliance and quality control or, or just markers of future success, that kind of thing?

[00:28:12] Niklas: Actually both, right? You know, what's the, what's a health from a, you know, they're just, they're doing a good enough job. Right. And also health of these people are winning on on or Best Buy is winning because they're on the platform and they are winning because they're on Best Buy.

[00:28:26] Jason: I guess, you know, in a way, as you're explaining that so well, I think they're kind of one in the same, you know, like a seller that's winning generally.

[00:28:34] the other things are right and we see a positive correlation between between those, those, those, those two, those two traits. Um, so I think that for us, you know, the key markers are, are, are activity, right? How, how much are they engaging with the platform to update their pricing to, you know, to use what we call promotional pricing.

[00:28:54] Obviously, Best Buy is known for our sales and our discounts, right? So you want to see a lot of red pricing on our website as much as possible. Are they rotating their assortment? Are they conscientious of the events that we're running? And then now, you know, another key marker is, are they investing in retail media?

[00:29:10] Are they spending money to get their listings seen by our customers? Because if they're investing in our platform, that means that they're motivated to succeed. So we look for those, we look for those kinds of things. And then, um, and then for the most part, you know, kind of based on, based on the various profiles of sellers that we have, um, what we want, what we [00:29:30] want to do is we always want to see them adding new, new product to the, to the site as well, right?

[00:29:34] The more, uh, the more, the more innovation and the more expansion that we can have of our assortment. Uh, we always believe that that's gonna, that's gonna delight and, uh, and, and, and, and, and ultimately, uh, deliver what the customer wants to see. It's, it's, a lot of it's trial and error, right? A lot of it is it worked here and maybe it's going to work here.

[00:29:52] Uh, but our, our, our, our team, like I said, we do have a lot of that merchant DNA still, still bred in our, in our, in our, uh, seller success group. Uh, and they have really good intuition. So they're able to help our sellers, you know, give them good advice in terms of, okay, what, what kind of products are going to work well, you know, generally what price points are, are, are we trying to hit, uh, and we give a lot of advice to, to support that kind of, uh, that kind of seller success

[00:30:15] Niklas: now switching tax a little bit, one of the things that's always impressed me, it's always stood out about Best Buy to me compared to let's call it a lot of other generalist retailers is the quantity and the accuracy. Accuracy of data, right? If you go look up a laptop, you can get everything front side bus speed and, and, you know, and, and, and, and you can filter by. Amount of ram and you can filter by cpu speed and the number and you know What level of bluetooth standard they're on? I mean, it's crazy, right? They're just you know and they're and and they are not always but nearly always correct, um, [00:31:00] and uh And uh, it's one obviously one thing that makes best buy successful Um, but it also seems like it's very hard work You To go and make sure that you keep get all this information and keep it up to date and, you know, display it in a way that the customer finds usable and not just a kitchen sink.

[00:31:24] Um, so how do you, how do you do that? How do you. You know, what kind of [00:31:30] tools and relationships have you built to make it possible to, to, to, to, to, to, to keep all this data up to date and quality

[00:31:39] Jason: that has been one of the biggest challenges, uh, of, of, of the market of our marketplace, uh, from day one content, content, quality.

[00:31:49] Um, because I think what you're referring to is, is, is the, the, the robustness of the data that are, are one P products certainly have, and we have an incredible content team that, that goes and writes and rewrites and, and researches, you know, all of those important specs. And obviously those, a lot of those details come from our vendor partners as well, the manufacturers themselves.

[00:32:13] The marketplaces, we struggle, I won't, uh, you know, I won't lie, um, with, with, with trying to match that content quality and in fact, you know, if you ask some of our sellers, they'll say that our content sheets are some of the most complex, most detailed and granular of any other marketplace, you know, some other marketplace, they just give you [00:32:30] one big, one big cell and you just, you know, plop your, your details in there and hopefully it looks, looks okay on the, on the website for us, it's like everything is individual, you know, attributes you got to fill in.

[00:32:41] Uh, and it's been a challenge for some of our sellers. Not all of our sellers own that information, I should say. Uh, and some of them, it's just, you know, trying to integrate it. Even if it's via, you know, A. P. I. Um, it's it's different, sometimes difficult to program those things. Um, so it's been a struggle for us.

[00:32:59] We've experimented various different with various solutions, you know, we we we've used our internal resources to go and rewrite and enrich content, especially when we see skews that are hitting, uh, they're getting a lot of visitation, but maybe the conversion isn't good. So we're very focused on on on doing that at a skew level, but that's costly to do at the scale of a marketplace.

[00:33:19] Um, we have, uh, you know, we've, we've, we've, we've toyed with, you know, creating incentives for our sellers, you know, to go and spend the time and their own money to, to go and enrich this. Of course, there's content syndication as well, which is, which is something that's, that's quite ubiquitous, uh, amongst, uh, e commerce.

[00:33:36] Um, and, and, and Best Buy as a, as a, as a, as a, as a business, uh, has some good relationships with those types of companies, which then, uh, sometimes bleed into the marketplace. Uh, a marketplace product as well.

[00:33:50] Niklas: And, uh, obviously since you started the, the, you know, we've spoken a lot about the supply side here, but, but since you've started, you know, a lot of the way that people buy has [00:34:00] changed and, and, and, and, and the buying experiences have changed, you know, have you seen that at, at at at Best Buy?

[00:34:08] You know, how's the, how's the way that you sell to the customer evolved? Um, especially now that you have marketplace in the storefront, you know, how is that a, how has that evolved the way that. Best player presents on the, on, on the web.

[00:34:24] Jason: You're definitely right. I mean, I think that the, the, the way that customers shop.

[00:34:31] It's constantly changing. We're always trying to trying to measure that as best we can. I mean, obviously, the most the most acute example of that was during the pandemic, right? You know, our stores were closed. We had to pivot quickly to be able to do, um, you know, curbside pick up. And so we, We've, we've, we've invested a lot in our reserve and pick up, uh, solutions, um, not, not, this isn't specific to marketplace, obviously, but just giving, giving customers, you know, the maximum flexibility to be able to, um, you know, uh, purchase or [00:35:00] secure the item, uh, on the website or the app, uh, and then be able to grab it quickly and, you know, at the local store, most, most stores here in Canada are, you know, within 25, 20 to 25 minute drive for, for any Canadian.

[00:35:11] So it's, it's, it's quite convenient. Um, and then as we as we expand as we speak to kind of marketplace and the way that that affects, uh, the customer shopping behavior or the way that the customer shopping behavior affects, uh, our marketplace assortment, I think the most interesting example of that is again, coming back [00:35:30] to that, that those non new categories, right?

[00:35:32] And figuring out, you know, how do we present these items that we didn't even know before we started marketplace customers wanted? Okay. And give them an experience where they can be where they can have an universal understanding of the quality and condition they're going to get right between refurbished, fair, good, excellent, open box.

[00:35:52] Um, you know, these, these structures didn't exist. This nomenclature didn't even exist before the marketplace. And I distinctly remember year one or year two. I had to sit down and. And write our first refurbished guideline. I didn't know what I was talking about half the time. I, most of, most of it, I was consulting with our sellers and in that space.

[00:36:09] Right. Um, these are, these are, these are massive, like tens of millions of dollars, you know, uh, remanufacturers, uh, industry experts, you know, they know what grade a means versus a grade C. They can give me very specifics around, you know, this ding or that scratch or this Nick, and we had to get very technical, uh, but trying to understand and then developing an experience on our [00:36:30] website that matched.

[00:36:31] That customer, it was intuitive for them to be able to buy and drive a pleasant experience versus their expectation. Uh, it was probably the biggest, it was probably the biggest thing that we had to, um, uh, probably the biggest change that we had to make to our, our, our shopping experience on the website that was a direct outcome of, of, of our marketplace launching.

[00:36:50] Niklas: That makes sense. Well, then I'll leave the, the, the toughest question for last, your job is to determine the future roadmap, right? In other words, your job is to figure out what's, what's, what's around the corner. Um, so what is around the corner, you know, maybe both in the frame of best buy, but also in the frame of commerce, you know, what do you see, what do you see in the future that, you know, you, you need to adapt to that, that, that you're tracking, that's going to change the way that That this industry looks.

[00:37:27] Jason: Big question. Uh, I mean, that's the hardest [00:37:30] one. I think that, um, I'll try and keep it micro, uh, because, you know, that's, that's the way that I'm thinking right now. We're trying to think about focus, uh, in our roadmap, uh, with, with marketplace we've, where we've tended to go wrong is, is trying to boil the ocean, which is, uh, you know, kind of a famous, uh, best by phrase internally.

[00:37:48] Uh, and, and, and, and right now what we're focused on is, um, Yeah. Becoming sort of fulfilling sort of our destiny as that omni channel [00:38:00] retailer, which marketplace plays a huge role in that right? The ability to be able to, uh, fulfill, uh, any type of assortment, uh, any way the customer wants, whether they want to order to the store and have us hold it for them, whether they want to, uh, Uh, buy it while they're in the store and be able to fulfill it within the same transaction as a, as a, as a one P product.

[00:38:21] Uh, we want, we want a smoother return experience in store, uh, for, for our marketplace products because, you know, uh, a high, high percentage of our products that are returned are returned in store. They're not mailed back, you know, online, online orders I'm speaking of. Uh, and the customer that is the customer behavior.

[00:38:37] That's their preference. We know that for a fact, and it's not as smooth for marketplace products as it as it can be, and not certainly not as smooth as it is with their experience with one P products. So we want to we want to. Reach our full potential as that omni channel retailer, which is going to create that differentiation between us and somebody who's more of a pure online retailer, like, like Amazon, they have others, Amazon has strengths that we [00:39:00] will never be able to match, but what can we do to make a, to build that, build and maintain that loyalty between us and the customer so that they say, okay, every time I buy from Best Buy Marketplace, it's, it's, it's super easy and it's a lot, there's a lot of trust there.

[00:39:13] Uh, and I have, uh, and I have a great experience, even if I need to return that product. But usually when I keep it, um, I'm, I'm very happy with it. I know it's well protected your warranty. Um, and, and that's actually, now that I say that, that's obviously another thing that we want to be able to focus on is be able to provide [00:39:30] the, all of the aftercare that for marketplace products that we do have for, for our one fee through our amazing geek squad brand.

[00:39:36] Um, so we're, we're, we're looking to build those things out and, and, and Best Buy has other options. Initiatives like our Best Buy membership, which is, which, which is a subscription program that gives you many, many benefits and leveraging that, uh, to help, uh, help support marketplace growth, uh, is also an area of focus.

[00:39:55] I didn't say AI there, so I think that that was already a win.

[00:39:58] Niklas: Of course. But AI [00:40:00] is in all of it, right? That's we all know that, right? As long as it's not crypto. There's no, uh, Best Buy coin. Best coin. Uh, that's what I don't want to see. I like Best Buy. I don't need to see an SEC, uh, trial for Best Buy. Um, but, uh, I think the experience has been, I mean, I'm a Best Buy, uh, uh, user, both company wise, commercially, and, uh, and privately.

[00:40:29] I think, [00:40:30] uh, I think what you're doing is working. So, uh, so keep it up. It's been fantastic having you on the, on the podcast and thank you for sharing your expertise. Um, and, uh, we wish you the best of luck. Uh, making the giant container ship, uh, follow the roadmap that you build.

[00:40:50] Jason: Yeah, it's a, it's a big ship to move.

[00:40:52] And, uh, we do it incrementally a bit by bit before we go. I feel like maybe your audience would like me to ask you a question. What do you think? Do you have time for that? Yeah, me. Yeah. So as I said, you know, right now my focus has been on my fo my, I guess my, my, my role has been on focus, focus around problem statements, um, clarifying those things, not jumping to solutions, typical agile mindset.

[00:41:20] I'm curious, in your experience with nautical, do you believe that it's very important to get down to a single one sentence problem [00:41:30] statement? If you, if you really, if you truly want to build something that is going to address a need at the scale that you, that you need it to, um, and if so, then what was that problem statement that, that, that you, that you and your, your, your, your co founders thought of that, that stuck out the ball, got the ball rolling?

[00:41:52] Niklas: Yeah, yeah, I think maybe the one sentence can be a little bit of a red herring in part because I think people put sentence in as a proxy. For a single primitive, right? And maybe, uh, you know, sometimes primitive concepts can be pithily described in one sentence and sometimes it's, it's something further than that.

[00:42:15] But there are many companies that really aren't based on, um, on a single sentence and, uh, and, uh, the sort of the short and sweet one that I like to use. Um, for nautical is that marketplaces are not technology companies, they sell things. Uh, and, uh, and that's sort of the core grain of why we exist. And to sort of unpack what that means, you know, when I was, I used to be a VC and, uh, and, uh, when I was investing, I couldn't make sense of the economics of a [00:43:00] marketplace.

[00:43:01] Um, uh, justifying having the giant. The giant, um, uh, a fixed cost of both making and then owning code, because that's expensive. Um, and it's a headache and I couldn't see the justification for why everybody should go build technology that should be a commodity in a lot of ways, right? You know, a lot of what we tell ourselves is we build the undifferentiated heavy lift, right?

[00:43:29] The, you know, the stuff that every marketplace is going to have to build. And historically that's what they do, right? When you start something. Um, you know, unless there's some options for you when you get really big and you want something custom and it fits into your composable stack and everything else.

[00:43:43] But, you know, until you're really big, the options are really limited and you end up having to become a software company and you end up having to raise money and that's expensive and you end up having to have technology skills and that's difficult. And, and not, you know, there are many people who have [00:44:00] incredible business ideas out there and they are the world expert in selling.

[00:44:07] You know, stamps, right? But they may not be somebody who has, you know, contacts in Silicon Valley, or, or they may not be somebody who knows how to build tech. And today a marketplace is thought of as a technology company, as a tech company, um, which is not true of direct to consumer commerce, um, of first person commerce.

[00:44:32] Um, and, uh, and so if I sort of were to say it in one pithy way, Right. The, the, the principal problem is marketplaces should not be tech companies or anybody should be able to build a marketplace.

[00:44:46] Jason: I, I resonate, my experience resonates with that statement incredibly. It's a, it's a 100 percent alignment. So yeah, thank you for indulging my question, but that was, that was great Thank you.

[00:44:57] Niklas: Yeah, absolutely. Thank you for the question and, uh, appreciate your time. Same. Thank

[00:45:01] Jason: you.

[00:45:02] Niklas: Thanks for tuning in to Operation Marketplace. This show is brought to you by Nautical Commerce, the end to end marketplace platform. If you have any questions about optimizing or starting a marketplace, hit the link in the description.

[00:45:14] We hope you enjoyed the show. See you next time.

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