The End of the Algorithm

When I started in e-commerce the algorithm was akin to a secret. It was immovable nor helpful but eas needed to be respected as it could hurt businesses.

Over the last 18 months, it has become clear that we are at the beginning of the end for the algorithm. Regulators are no longer satisfied with companies negatively impacting businesses, sellers, or customers. Self-regulation failed as platforms could grow revenues through the use of an algorithm without oversight, nor were there any consequences for anomalies that benefited one side of the platform partnerships.

Increasingly, European regulators are asking platforms and marketplaces for data and explanations of recommendation services or their algorithms that determine search results. What data is being used to calculate the location of listings (never mind relevance or accuracy), or how are recommendations being developed to drive additional consumer purchases? As artificial intelligence gains momentum and usage by platforms to drive personalization across various parts of the web, e-commerce, as we know, is likely ending. Bias, inaccuracy, and irrelevance can negatively impact platforms, consumers, and brands. Regulators want transparency to offer a level environment as competition intensifies in all e-commerce markets.

the end of the algorthim driven by Europe
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Learnings from the Last Two and a Half Years

It has been two and a half years since my last newsletter. The e-commerce world increasingly feels equal to dog years – a lot has changed. What are the major learnings I have had.

Learnings A to Z

Amazon is still a misunderstood channel for brands. Yes – you read that right. There are still brands that either are unaware of the channel or are just not interested in selling on the marketplace. A decade ago, I was one of those idiot consultants who thought that brands should not be on the channel. Really? Over the last two and half years – the numerous times I saw Amazon being the largest and fastest-growing channel for brands. Consumer packaged goods believe that the deck is so stacked against them that Amazon is not worth the effort. Really? What are we doing here?

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The E-commerce Stepchild – Logistics

I have spent a large amount of time in 2020, researching and writing about logistics. In a recent project, I have had a front-row seat to see its strain on brands. The stepchild of e-commerce is not flashy and visible by consumers but can make or break customer perception. The final mile has an enormous impact on consumers’ experience, and in Q4 2020, it will become more critical.

Logistics is somewhat opaque currently, and in most cases, it can lead to many breaking points. Amazon has changed customer perceptions based on speed. On-demand startups such as Darkstore, FLEXE, and Flowspace also add complexity, which the customer does not see.

The sector is a low margin, capital intensive part of commerce that is due for innovation. It’s a topic that is not cool, nor does it get the attention it deserves.

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Why I am changing my thesis on Chinese ecommerce

Over the last 18 months, I have been reading, researching and talking to ecommerce investors about China. Why? I am fascinated by the market as Chinese ecommerce is both unique and a look to the future.

China is unique

GDP growth

Economically China in my mind is bordering on a miracle. 6% growth consistently over 25 years which some years growing even more. I have realized that China has moved from being a factory based economy to a market that is reliant on consumption. The consumption has lead to the creation of businesses that are huge economically and only focused on creating wealth for their shareholders and the Chinese population. These businesses have to toe the line with the Chinese government.

If the GDP growth slows, Chinese consumption would have grown $2.3 Trillion by 2020.

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Alibaba vs Amazon – 2014 Edition

When I wrote my first post on Amazon in which I looked at the competitors it will face; back 2012, I had 7 major ecommerce businesses that could destabilize Amazon’s domination in ecommerce:

  1. Amazon is and still is it’s own biggest concern
  2. Apple
  3. Alibaba
  4. eBay
  5. Walmart
  6. Rakuten
  7. Regional players (Netretail, Ozon, MercadoLibre)

Fast forward 2 years and a variety of changes (global economic changes, investments and the rate of offline and online retail convergence) – the above list changes considerably. The growth in single global brand ecommerce businesses has grown remarkably primarily through the globalisation of ecommerce.

Let me be clear – I am of the opinion that regional ecommerce competition is a less of a factor now as the global competitors can at any time launch in a market.  Global ecommerce businesses (Amazon, eBay, Rakuten etc) have the potential to invest significantly in a market through funds and staff.

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