Dive Brief:

• Walmart and Shopify on Monday announced they are partnering to bring 1,200 sellers onto Walmart.com's third-party marketplace by the end of this year. The focus of the program is "U.S.-based small and medium businesses whose assortment complements ours," Walmart Marketplace Vice President Jeff Clementz said in a company blog post.

• Activating the Walmart e-commerce channel through Shopify allows sellers to sync their assortments with Walmart.com to easily track orders, inventory and fulfillment within Shopify, and manage product information on Walmart.com, according to a Shopify press release. 

• Shopify sellers won't pay fees to list their products on Walmart.com but will pay "referral fees" when they make a sale, Shopify said.

Dive Insight:

Although as an essential retailer Walmart's stores have remained open during the pandemic, its e-commerce sales surged 74% in the first quarter. Growth in its marketplace "outpaced the overall business even as first-party sales were strong," the retail giant said Monday.

This partnership is good for both Walmart and Shopify, according to Rick Watson, founder and CEO of RMW Commerce Consulting. "But it's easy to overthink this. I don't think it will end up being particularly unique because I think Shopify wants to integrate with everyone," he told Retail Dive in an interview, noting that about a month ago Facebook and Shopify similarly announced a new tie-in. "It's not like Shopify is locked up by Walmart."

Walmart hasn't scaled its marketplace as fast as Amazon, he also said. "To me it shows that Walmart's decision-making is improving," he said. "They need more selection and better selection."

A marketplace is more profitable than first-party e-commerce sales because the retail host is able to collect money while leaving inventory and fulfillment responsibilities and costs to the seller. Amazon has also focused on its third-party marketplace, likely for those reasons, and nearly 60% of products sold on its site come from third parties. In recent months, Amazon has also made an effort to move some of its wholesale sellers to that side.

But Walmart may also have its eye on Target, according to Watson. "Twelve hundred sellers is a big number, and what's understated is I think Walmart might be trying to put some distance between itself and Target," he said. "Target has been growing, its marketplace is extremely curated and Target is also on a tear right now."

However, Target is so careful about its marketplace because differentiating its assortment is key to its strategy, which is not true of Walmart, according to Keith Anderson, Profitero senior vice president of product strategy and insights. And how big that number really is depends on how much Walmart's online assortment expands as a result, he said.

"Twelve hundred Shopify sellers could mean a lot of things, and when I hear 'small to medium,' I think maybe not so many items," he told Retail Dive in an interview. "Does this give Walmart a big increase in unique selection? They don't say it does, and they don't say it's going to lower the prices, or that they're using Shopify to improve the experience on their site. Is there a path to open this up so that there really is a viable alternative to Amazon? There's little that shows that this positions Walmart as being substantively more competitive."

Walmart didn't immediately respond to Retail Dive's questions about their expectations for the increase in or affect on their online assortment, or how many Shopify sellers might be added beyond this year.

Smaller businesses have particularly struggled during the pandemic, while large retailers, especially those like Walmart that were deemed essential, have a better chance of survival. Inviting small retail businesses to Walmart's platform could ease such concerns, at a time when Walmart and other big-box stores are seen by some as benefitting from lost business on Main Street, Anderson said.