Halfords set to close its third party marketplace next month – what went wrong?

Motoring and cycling retailer Halfords is to close its marketplace business next month, following internal restructuring.

The retailer has written to all its merchants informing them that from 11 April the marketplace will cease trading and that as of now no new products will be approved for listing. Orders currently in place will be honoured.

The site has seen strong sales since it was launched in the Summer of 2015 and has been held up as an interesting business model for retailers – setting up their own marketplace to allow the sale of third party goods that augment the range of products sold by Halfords.

What went wrong?

The idea is, in theory, a good one: it allows Halfords online store to become a one-stop-shop for motoring and cycling needs and all the peripheral things that go with it, without Halfords having to shoulder the risk of stocking a massive inventory. It also gives third party vendors a leg up into a mainstream market on the back of Halfords’ notoriety and reach.

However, it seems that the unforeseen downside is that Halfords has become increasingly wary of third-parties selling goods that compete directly with its own offerings and thus cannibalising its business.

Reports from merchants have reached us that Halfords has become ever-more restrictive in what merchants can sell to avoid this competition. This inherent contradiction within the business model has clearly become unsustainable for Halfords – and probably its merchants – and so the marketplace has closed.

It’s hard not to regret Halfords decision as the ability to diversify and spread risk across multiple venues is attractive to merchants but doubtless Halfords have decided a marketplace is not in their own businesses best in interests.

One option that may be open to merchants is to apply to become a Halfords direct supplier of this would work for their business model.