A blog on eCommerce, Social Commerce, Comparative Shopping Engines & Business

By Hendrik Laubscher

Classifieds, Marketplaces and Comparison Shopping – The models

Last week Tren Griffin did a tweetstorm on a topic that fascinates me – Marketplaces. Marketplaces are beginning to take over from pure play ecommerce businesses. A marketplace is ultimately a network effect in a form of a platform that provides customers with large selection due to suppliers. Without either part of the equation the marketplace wont gain traction and make any headway.

“Network effects” is a frequently used term and it is sometimes confused with having a large customer base.  Network effects is more than just a large number of users – they kick in when the value of a product depends on how many other users there are.

When a new user/member is added to the network, it increases the value of the product or service to all other users. This increased value can be in the form of cost reduction (in user acquisition as an example), higher liquidity (in a marketplace), stronger community or deeper relationships (in social networks), etc. (Versionone.vc)

However marketplaces can also be seen as a solution to an offline inefficiency with technology (mobile). Once the marketplace reaches critical mass the virtuous cycle starts. Uber has now reached that stage and am able to do things that dont necessarily scale – offering loans to drivers etc.

One of the most important things you can do is identify and double down on the things that work in your marketplace. As your marketplace starts scaling, there will be many matches and transactions between buyers and sellers. But not all matches are created equal. Identify where things are really clicking (on both the supply and demand side) – this could be in certain geographies, audience segments, price points, and user behavior. (Versionone.vc)

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Marketplace challenges – reviews and counterfeit products

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.

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Flipkart is an outlier

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.

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Amazon and controversial warehouse worker non-compete contracts

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.

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An ambitious Jet.com is a dangerous Jet.com

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.

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