Over the last 3 months I have been looking at marketplaces in-depth. They deeply fascinate me and at the moment is the most dominant part of ecommerce retailing. There are still more intricate differences between the various different dominant marketplaces. Amazon, Alibaba, JD.com, Konga and Souq are just a few of these 2 sided marketplaces that are creating network effects for both the platform and the sellers.
However, if you look closely there are some challenges for these software platforms emerging that should have their founding companies concerned. Untruthful reviews and counterfeit products are becoming problems that provide start ups with opportunities to be acquisition targets.
Outlier – “a person or thing differing from all other members of a particular group or set.”
A week ago ZDNet broke the news that Flipkart was removing its mobile website and requiring users to use their apps to make purchases. The news actually started 2 weeks ago when Myntra (Flipkart’s first acquisition) announced that they and Flipkart would be turning off their mobile websites.
There are a few things that need to be mentioned before we delve into this decision. Flipkart is an outlier and to be quite honest unlike anything I have seen in ecommerce. They have raised an enormous amount of funding from a lot of investors. To be precise they have raised $2.5 Billion in 11 rounds from 16 investors.
The last 24 hours is the reason why Amazon has hired Jay Carney, a former Obama spokesperson to be responsible for global corporate affairs. Amazon has seen a fair share of controversy over the warehouse workers and working conditions. As usual the company has largely remained quiet and I believe this is one of the areas in which Carney will be more verbal.
The issue is in my mind – the technology chameleon that does ecommerce (Amazon) is still very reliant on human intervention when packing of purchases are done inside Amazon warehouses. Speed and efficiency which is sold to customers lead to very harsh working conditions for seasonal and temporary workers. Robots who don’t have unions can only work for so many hours until they need recharging. Also sometimes logic is needed for packing which cannot be seen inside a robot.
I have been thinking about Jet.com ever since returning from my 3 week US trip. Clearly they are a top of the hype list before any sale of merchandise has occurred. Marc Lore is an operator with a very successful past and someone that is clearly deeply in touch with ecommerce. Is jet.com a dot.com bust in the making or a potential game changer that will effect change in the ecommerce landscape?
Jet.com is an ambitious concept that is aiming at a part of the ecommerce landscape that has no clear market leader. It is not a marketplace – it is subscription based membership driven ecommerce business. The digital version of Sam’s Club / Costco that has a lot of technology under the hood to drive sales for merchants. It has been designed to disrupt these 2 large wholesale shopping clubs without the need for volume sales.
Alibaba’s IPO was one of the headline stories of 2014. The Chinese ecommerce business raised record amounts of cash that will allow them to pay shareholders back for showing faith in them. Alibaba is also in a position unlike any of their global competitors to aggressively acquire companies that will put them in good stead for the foreseeable future.
Alibaba has one major weakness and it is quite apparent in their M & A (mergers and acquisitions) strategy – they have done very little outside of China. It is understandable pre-IPO that they wanted to focus on China only and ensure that they are the undisputed market leaders in their home market. Post IPO they have to start looking at business outside China and ensuring that they are creating a sustainable business. I believe that in 5-10 years’ time that Tencent and JD.com would have made significant inroads on Alibaba.