Electric Thoughts in a Digital Era

Category: eCommerce

  • Amazon’s Jeff Bezos looks to the future

    It is Cyber Monday – the biggest day of ecommerce in North America and the main benefactor of press coverage is Amazon.com. After watching the 60 Minutes interview that Charlie Rose did with Jeff Bezos, a few things come to mind. It is clear that Bezos is trying to do so PR work after the Everything Store written by Brad Stone made him seem to be a draconian leader. I dont believe in coincidences as the timing of this interview just seems to good to be true.

    Timing is everything

    As I have mentioned today is Cyber Monday and the 14 minute interview that Charlie Rose did can be seen as an advertorial as Bezos mentioned the normal lines “customer centric”, “we like to innovate” etc.

    If you look closely at the video then Amazon fashion gets a favorable amount of time. AmazonFresh is also given some airtime and I must be honest – after giving it months of thought the fact that Amazon took 5 years to figure out a business model for the grocery business, that should scare competitors. AWS is a dark horse for me at the moment as Amazon has been reluctant to mention the size of the business and their partners that use the software platform.
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  • Is fab.com really that fab?

    Fab.com has been on my mind the last few weeks as I wanted to have an indepth look at the company after I wrote about the refocus in May 2013. I don’t know whether I got bitten by all the hype but the fab.com story is beginning to feel like never ending story. At the momment the fab’s story goes like this:

    Raise funding – Unveil a new feature – do Press ->  lay-off staff  – do press on the future of the company and then restart the process.

    Pre-face

    Fab.com is a business that started as a gay social network. Went nowhere and then pivoted to a flash sales business. Many iterations later and $300 plus million raised fab.com is now in a critical phase of its lifecycle. Why? The fact that they have raised hundreds of millions of dollars from investors (like Andreessen Horowitz) and for all intensive purposes have not a lot to show for it. Thus it will make raising money in future more difficult. What happened to all the raised money?

    Acquisitions

    Fab.com has been in my own opinion way too aggressive regarding acquisitions. They have acquired competitors in Europe over concerns that a investment accelerator called Rocket Internet may hinder their growth in Europe.  The businesses they acquired:

    January 2012 – FashionStake (US)
    February 2012 – Casacanda (Germany)
    June 2012 – Llustre (UK)
    November 2012 – True Sparrow (India)
    May 2013 – MassivKonzept  (Germany)

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  • The ShopRunner story – and why it is important

    It is not often that an entrepreneur has a successful business twice. Most entrepreneurs have one major exit and then they  become Angel investors. While they are building their business for the second time they either take money off the table from investors or the take their companies public. Michael Rubin in my opinion is one of the most unmentioned commerce entrepreneurs there is currently. However don’t let the lack of press coverage fool you – he is a serious heavyweight from Philadelphia.

    Rubin sold his enterprise commerce business to eBay for $2.4 billion. GSI commerce as it was called then had some serious retailers as clients. eBay had a massive weakness in the enterprise space and fixed that by acquiring Magento and GSI Commerce.

    Rubin pioneered an innovative pay-for-performance business model that fueled GSI’s organic sales growth, which he then complemented in recent years with 11 strategic acquisitions. GSI became one of the largest publicly-traded Internet companies, facilitating billions of dollars of merchandise sales for its customers, with 2010 revenues of $1.4 billion and more than 5,000 employees. As part of the transaction, eBay divested certain assets to Kynetic, specifically all of GSI’s online licensed sports merchandise business (Fanatics) and 70% ownership in Rue La La and ShopRunner.

    Magento for me is the trojan horse for eBay as that business is used globally and has commerce partners in emerging markets. GSI Commerce was and still is the big success that Michael Rubin had. How he convinced eBay to spin ShopRunner, Rue La La and Fanatics into a new business (Kynetic) is worth a book. I hope Rubin decides one day to write a book..

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  • The week in News for Amazon (AMZN)

    The week that ended was one that had the entire digital industry looking at a Seattle, Washington company. Amazon and its founder Jeff Bezos had quite a bit of ink, pixels devoted to them. There is such a lot to think about, it kinda lead to one post on the topic (The 10 stories post is going to be written as soon as this is done).

    Washington Post

    When I read about Bezos selling his stock, my attention got diverted into “I wonder what Bezos has in mind..” and then I got busy at work. When Bezos sells stock (which generally occurs very seldomly) generally it means cash is needed for something (normally an acquisition). The fact that he spent $250 million to buy the Washington Post and made it clear that the acquisition is in his private capacity for me are clues that this purchase was long time in the works. No-one saw this coming which communicates just how close Bezos keeps his cards to his chest

    Why?

    Bezos has bought the Washington Post to save a business that is facing extinction. The long term thinking that Bezos has shown will ensure that Washington Post survives. There are a few things that Bezos has shown me with this purchase:

    1. He loves content. May it be books, e-books or news, he has a love for knowledge. The Washington Post is another platform that creates thousands of words and articles per year. The need for news will always be a factor in newspaper’s long term future. You cant create algorithms for that – human editors and writers are needed.
    2. If an opportunity arises that leads to an acquisition – Bezos will take the chance but it will be on his terms. There is a reason why he purchased one of the most historical newspapers in the US. It may be influence, the opportunity to change the newspaper industry, potentially have another business that he can leverage to provide sales to his day job (Amazon.com) – may it be a Kindle etc.
    3. The Washington Post provides another data set for Amazon to potentially incorporate into their algorithms. (I wonder if the Washington Post will be seen on Google news when the sale completes?)
    4. The Washington Post is Bezos second news related investment. Earlier in the year, Bezos invested in Business Insider.

    The Washington Post under Bezos’s ownership is going to be something worth keeping an eye on.

    Amazon – The Art Gallery

    Amazon has also announced that is selling art. Needless to say this news will concern art gallery owners. It is becoming clear that Amazon wants to be the “Walmart of the web”. Being able to buy whatever you need, Amazon is to be your starting point towards a purchase.

    Amazon.com, Inc. today announced the launch of Amazon Art (www.amazon.com/art), a marketplace that gives customers direct access to more than 40,000 works of fine art from over 150 galleries and dealers. At launch, Amazon Art will showcase artworks from more than 4,500 artists. The store is one of the largest online collections of original and limited edition artwork for purchase directly from galleries and dealers.

    The art space will be disrupted by Amazon or it might be another story as seen with Amazon’s struggle with wine selling.

    Amazon moves into Russia

    Amazon has started to hire for staff in their Kindle division in Russia. The Kindle Store is the trojan horse for Amazon as that is normally the first path to market entry. We have seen this same behaviour when Amazon entered India and Brazil.

    When I first heard about this news, I thought Amazon was going for a strictly digital play. But if the detail about the trademarks is true then the Kindle Store is but the tip of the spear. Amazon is probably repeating the strategy they used when they launched in Brazil. Their first operation in that country was the Kindle Store, which launched in December 2012. So far as I can tell Amazon has yet to launch a retail operation in Brazil, but it is probably in the works.

    The emerging markets are steadily getting more attention from Amazon. Brazil, China, India and now Russia is seeing more investment from the Seattle company. Ozon.ru has been placed on notice, Amazon is on the way.

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  • Additional Trends In Early-Stage eCommerce Markets

    Yesterday, Forrester analyst Zia Daniell Wigder wrote a very interesting and thought provoking post on Early-Stage eCommerce Markets. I agree with Zia on her 4 main points for an early stage ecommerce market:

    1. Purchase decisions are made largely based on price
    2. Online purchases are dominated by consumers in tier one cities.
    3. Cash on delivery rules.
    4. Mobile phones are many consumers’ first point of connectivity.

    On the point over mobile – I am torn as early adopters in general will first visit a website via their desktop but with the early-stage markets (Pakistan, Sri-Lanka, Uganda, Ivory Coast) mobile is the way in which all users access the web. However, truth be told mobile commerce is ultimately a player in all markets (early-stage, developing and mature) as the technology is still an unknown for most businesses.

    After thinking about those 4 initial themes, there are a few themes I would add to her post:

    1. Low user trust – In early stage ecommerce markets, user trust of platforms is low thus escrow and cash on delivery is used. This is seen in both India, Russia and China.
    2. No clear defined market leaders in horizontals or verticals – In all early stage ecommerce markets I note that there is no local defined market leader that all users are aware of. Thus the ability to enter the market exists and this is where Rocket Internet aims there efforts.
    3. Logistics is a challenge – Initially all users are needed to use a handful of logistics providers as the global players (DHL, UPS and Fedex) may not to be an option for merchants due to high costs.
    4. Low credit card penetration – I found this to be the case in most early stage ecommerce markets with Turkey being the exception to this. India, Africa and the Middle East are currently battling this specific market growth deterrent. I am fully aware that this point is not new but ecommerce and online commerce is ultimately built on the premise that you can transact over the web via bank issued cards.
    5. Not many Global ecommerce investors are seen in these markets – MIH/ Naspers, Tiger Global, Rakuten and others are not really seen in these early  stage markets as they believe that the markets are investment heavy. They wait for further growth before starting to invest. Rocket Internet is the counter argument here (with all of their multiple rounds of investment).

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