When I last wrote about ShopRunner two years ago, the company’s main marketing pitch was its free two-day shipping and free returns with a $79 annual membership or an $8.95 a month option. ShopRunner presented itself as an alternative to Amazon Prime for online shoppers interested in well-known brands.
Earlier this year, when Amazon announced a $20 increase in Amazon Prime membership, ShopRunner launched a campaign to lure discontented Amazon Prime customers. For a month the company offered one-year free membership for those Amazon customers who switched.
ShopRunner has added to the 60 retailers it had in 2012; it now boasts 95 online merchants. The company expects to have two million members by the end of 2014. The ShopRunner website is integrated with participating merchants’ websites and there is a single sign-on so customers can move seamlessly between websites. The merchant is responsible for the actual shipping. ShopRunner takes a percentage of each sale — usually 2 to 5 percent — but the fee can range from 1 to 10 percent depending on merchant size and margins.
A Prestigious New Partner
Last October, Alibaba Group Holding Ltd, the parent company of Chinese ecommerce giant Alibaba, invested $202 million in ShopRunner, gaining a 39 percent stake in the company. In May of this year, the two companies announced that they would be joining forces to sell goods from U.S. companies to Chinese consumers via the ShopRunner website. The initiative is slated to begin before the end of the year.
ShopRunner will use Alibaba’s Chinese logistics infrastructure to ship goods once they arrive in China. Although American goods can already be found on Alibaba’s Taobao and Tmall marketplaces, American vendors are lumped with thousands of other sellers, many of whom have dubious reputations. The new arrangement allows U.S. brands, to stand out in a less cluttered marketplace. As I stated in my article about Alibaba’s pending IPO, Chinese consumers are brand-conscious and eager to purchase genuine foreign products because the domestic market is filled with poor quality and counterfeit goods. Currently, the selection of foreign goods is limited.
At the same time it is partnering with ShopRunner, Alibaba is trying to entice luxury brands to sell directly on its Tmall marketplace by removing gray market resellers of luxury brands from the marketplace in exchange for the brand opening its own store. Alibaba is also increasing its efforts to remove counterfeit luxury products from the Taobao marketplace, which is similar to eBay.
Alibaba is in a quiet period because of its IPO filing and cannot make public comments, but it is likely that the company is taking these actions to try to increase its value prior to the IPO. It is unlikely that luxury brands would sell on both ShopRunner and Tmall.
Who Uses ShopRunner?
In the United States, “ShopRunner targets people who do all or most of their shopping online,” says Megan Hanley, ShopRunner’s chief marketing officer. “They tend to have higher household incomes, with dual earners, and people tend to be more urban than suburban or rural.” Hanley says that the typical ShopRunner customer spends more than twice as much online annually as the average ecommerce customer. The customers appreciate the convenient free return feature and retailers like it because it helps to differentiate their online presence. Membership is about 50/50 male and female. Sixty three percent of members are between 25 to 44 years of age and 85 percent are smartphone users.
As for the Chinese market, Hanley says, “We know that there is a huge unmet need in China. There is a lot of IP traffic from Chinese people trying to buy from U.S. ecommerce sites but they hit a lot of friction along the way. There is a problem with the payment because most Chinese do not have international credit cards. Web forms do not allow for Chinese characters or for Chinese addresses.” The final point of friction according to Hanley is getting items through Chinese customs. The partnership eliminates all of these problems., as Chinese consumers will get their products 10 to 12 days after ordering on the U.S. website. However, they will have to pay shipping costs from the U.S. because ShopRunner does not offer free shipping for goods shipped to China.
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Does ShopRunner Work with Smaller Ecommerce Merchants?
While ShopRunner’s focus is on recognizable fashion brands, the company does not exclude smaller resellers, according to Hanley, but the merchant should offer something unique. Examples of smaller merchants that use ShopRunner, according to ShopRunner’s site, include Birthday Express (party supplies and decorations for children’s parties), Buy Costumes (Halloween costumes), and The Organized Parent theorganizedparent.fcorgp.com (time management accessories for busy parents).
The opportunity to sell to the enormous Chinese market without having to worry about logistics, payment options, and currency conversion is an additional incentive for smaller online sellers to consider ShopRunner.