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Loblaw Companies Ltd. L-T is shutting down its e-commerce Marketplace platform for third-party sellers, three and a half years after the retailer launched the broader assortment of products to compete with the likes of Inc. AMZN-Q and Walmart Inc. WMT-N

The appeal of such online marketplaces for brands is that they provide a platform to reach customers through a familiar retailer. For retailers, they are a way to advertise a wider variety of items without having to take on additional warehousing and distribution costs. (Retailers generally charge a commission on sales, while sellers are responsible for delivery. Loblaw does not disclose the financial terms of its relationships with sellers.)

But the downside of these e-commerce offerings is that they can be a relatively low-margin business for retailers, and may not be worth operating if they fail to pull in additional customer traffic and relatively healthy sales volumes.

Loblaw’s marketplace appears as a tab on the retailer’s PC Express online grocery site, which also offers products from third-party sellers in search results. Those include items such as patio furniture, baby strollers, cooking supplies and small appliances. Most of those items are shipped directly from sellers to customers’ homes.

According to a memo obtained by The Globe and Mail, which Loblaw sent to those sellers last week, its marketplace will shut down for orders on June 14, and will stop processing customer returns on July 31. A notice also appears on the company’s e-commerce sites, informing shoppers of the change.

“We launched the online marketplace in late 2019 to understand how complementary products could extend our aisles online,” Loblaw spokesperson Catherine Thomas wrote in an e-mailed statement. “While we’ve learned a lot about what customers are looking for in their online assortment, given the rapid change in e-commerce over the past three years, we’re winding down our marketplace and focusing on our core grocery and pharmacy online shopping experiences.”

Loblaw faced stiff competition in operating a marketplace from other retail giants that offer products from third-party sellers, including Walmart and Amazon – both of which also sell groceries. A number of other retailers, including Best Buy Co. Inc., eBay Inc., Wayfair Inc. and Hudson’s Bay Co., also operate marketplaces.

“People are really busy. Instead of going to five different places to serve all their needs, they really want to go to one place. … That’s why we’re seeing a lot of these marketplaces grow,” Hesham Fahmy, who was then vice-president of Loblaw Digital, said in a 2019 interview about the launch.

Loblaw is not the only Canadian retailer re-evaluating its marketplace strategy: Hudson’s Bay has temporarily suspended its marketplace as it conducts a site audit, with plans to weed out underperforming sellers. “We anticipate there will be some streamlining of sellers,” Kristina Cartmill, deputy vice-president of marketplace and dropship for Hudson’s Bay and Zellers, wrote in a recent memo obtained by The Globe.

The review began on May 11 and is expected to continue for about four weeks. When it began, Hudson’s Bay’s marketplace had roughly 715 sellers. Hudson’s Bay spokesperson Tiffany Bourré declined to specify the scale of the reduction, but said that the audit “in no way reflects performance” and the retailer remains committed to the strategy.

“Marketplace is an asset to Hudson’s Bay,” Ms. Bourré wrote in an e-mailed statement. “It creates an extended assortment that complements our own and elevates performance overall.”

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