

The Next Big E-Commerce Wave - bwertz
http://techcrunch.com/2012/09/29/the-next-big-e-commerce-wave-vertically-integrated-commerce/

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jfarmer
This was almost our exact line of thinking when Michael and I started Everlane
(<http://everlane.com>) in early 2010.

You must be able to answer the "Amazon question" if you're starting an online
commerce company. If your product category makes sense on Amazon, they'll
obliterate your margins the second you're successful by using revenues from
high-margin categories (think: AWS, e-books, etc.) to subsidize low prices for
products in your category.

That's when the acquisition offer comes. Just ask Zappos or Quidsi. Who has
the leverage in that situation?

It's harder, but if you sell something nobody else does† and successfully
brand it, Amazon won't ever be able to compete. If J.Crew, GAP, LVMH, Hermès,
etc. ever go out of business it won't be because of Amazon.

†: Vertical integration, i.e., "making your own stuff," is just one way to
satisfy this condition.

So far it's the only to really work, but companies like Shoptiques are trying
to satisfy it other ways.

~~~
Dramatize
If there are hundreds of these vertically integrated stores, would a major
challenge be exposure?

I've been thinking about how to bring the content of these stores together.
Sites like svpply or Pinterest get close, but they don't tell the story of the
brands (which is what people are really buying into).

~~~
jfarmer
For those reading, I haven't been involved day-to-day with Everlane since
early this year. I now help run Dev Bootcamp (<http://devbootcamp.com>).
That's just to say I'm speaking for myself only, not for Everlane.

Funny story: Everlane started off doing something similar to Svpply and
Pinterest and quickly realized the only way to win would be to catch lightning
in a bottle. Congrats on Pinterest for pulling that one off. :)

Exposure is always a major challenge and nobody's going to begrudge a new
source of traffic. Assuming a company is aiming to "go big," though, they fall
into one of two categories:

    
    
      1. They have momentum
      2. They don't yet have momentum
    

For people in (1), their inclination will be to double-down on whatever's
working today. New platform? Come back to me when you can send 10k potential
customers our way.

For people in (2), focus is the priority. You're small. You don't have much
cash. Every second counts. Opportunity cost is everything.

The "tl;dr" of everything below is this: merchants aren't interested in a
third-party aggregation or discovery service until it can delivers thousands
of customers to their (virtual) door.

Read on. If you dare.

Those people are going to focus on 1-2 highly-leveraged opportunities. It's a
classic chicken-and-egg: they won't want to devote energy to playing with a
new "product discovery platform" until that platform can return 10-100-1000x
the opportunity cost.

This is entirely ignoring the branding implications of embracing a neutral,
product-centric, third-party platform as a main customer acquisition channel,
FWIW.

Svpply tried to get around this by side-stepping the content creators and
letting their users find and post content. Pinterest got around this by having
less-strict editorial guidelines so that users could post super-viral but
less-commercial content, e.g., "Check out Lindsay Lohan's new haircut! (photo)
(photo) (photo)."

Those are thin wedges to base a whole company on, IMO, but maybe I'm just
risk-averse†. It obviously worked for Pinterest.

If I were advising someone in group (2) I'd tell them to find what networks
their current or potential customers are spending time on and focus
exclusively on those. If there's one network, all the better -- focus
exclusively on that one. Odds are "that one" isn't whatever you're building.

For Everlane, we got a lot of benefit out of focusing entirely on Tumblr
(<http://tumblr.everlane.com>).

Through a combination of well-crafted editorial (Michael) and "stupid viral
tricks" (me), Everlane's tumblr was, in late 2010/early 2011, the largest in
the men's fashion category and one of the largest in the fashion category.

Today I'd consider Pinterest a viable platform to experiment with, too, but in
2010-2011 Pinterest had no traffic at all.

†: I'm kidding. Early on at Everlane everyone and their uncle was pushing us
to be a "discovery platform blah blah blah" and when we said we thought the
opportunity was vertically integrated commerce they told us we were insane.

Well, except our seed investors and early employees. God bless them. :)

~~~
Dramatize
Thanks for the reply.

I've noticed there are three aspects in building a successful
content/aggregation sites.

1\. Provide value to businesses by giving exposure to their products. This is
the best way to make money from the service. The aspect I like about these
sites is you don't need to rely on traditional advertising.

2\. Provide a motivation for users to contribute content (mainly ego and
recognition). This is hard because you need lots of users for this to work.
Good examples are lookbook.nu, wikipedia etc.

3\. Provide a good one player experience - even if you don't have an account,
it's still worth visiting. I visit sites like fffffound, designspiration, or
dribbble every day - even though I don't have an account or know anyone else
using the site.

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ljd
In Economics we call creating a unique product and/or brand Monopolistic
Competition[1]. Almost all of our dynamic pricing ecommerce clients are
monopolistic competitors. It makes sense for them. If they are competing on
amazon, they are a price taker, if they have something that only they can
offer and it is reasonably desired then they need to discover the price point
that makes them the most profit.

I get a list of all the stores that sign up with us and go through to check
out their products and make sure they are setup and happy. During this
process, I'm always amazed at how creative people are at creating unique
products and brands, as well as differentiating on support.

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Roelven
If only someone would finally tackle the worldwide shipping problems (customs,
tracking, packaging, etc)

~~~
jfarmer
I can't imagine that business has great margins. Logistics and supply chain
management benefit hugely from economies of scale. "Worldwide shipping"
involves multiple industries and core competences, so verticalizing would be a
challenge.

A "Bank Simple" wrapper-as-product strategy might work, but you're operating
in a smaller and more fragmented market than personal banking.

