When we talk about e-commerce, the names first coming into our minds would be Amazon and eBay, gurus selling goods in all categories. Aside from e-commerce, they have been extending their presence in other areas. For example, eBay acquired PayPal in 2002. For Amazon, it needs its own paragraphs.
In 2015, Amazon surpassed Walmart as the most valuable retailer in the United States by market capitalization. Its stock price is $718/share, and market cap. is $339 billion. eBay’s stock price is at around $24/share and its market cap. is $27.8 billion.
Though Amazon and eBay are dominating in US e-Commerce market, the popularity of mobile and social media, together with the growing millennial appeal, brings new opportunities. According to Mary Meeker in her 2016 Internet Trends report, the new trends of e-Commerce are:
Besides the trends covered in Mary Meeker's report, there are some interesting observations I have had:
1. Social media/community + e-Commerce:
We usually call e-Commerce products the transactional products which distinct from non-transactional products, e.g. social media, functional app, games. The way of categorizing is based on the fact that non-transactional products focus more on growing user base than monetization, especially at early stage. Transactional product goal is very simple and clear—sell more goods and make more money. As a company, as long as it is a for-profit business, the ultimate goal is to become profitable and provide financial return to its shareholders, regardless what products or services it provides though.
In recent years, we have been hearing more criticisms on companies focusing too much on their “change the world” vision and user base growth, but thinking too little about how to be self-sustaining. IPOed companies are under larger pressure to generate profits. The advantage of growing user base is not only about virality effect, but also about collecting and using data for better product iteration, targeting, and monetization. Monetization is the goal, and many companies have realized it. Facebook and Pinterest, are two famour social media companies, founded in 2004 and 2010 respectively. Facebook tested out Buy button starting from July 2014, which gives users a Buy button to click directly from the curated content for the users. Similarly, Pinterest rolled out buyable pins in June 2015, and 30 million pins will become buyable on Pinterest. It took Pinterest fewer years to monetize through e-Commerce, and it makes sense as users on Pinterest show their interest into certain goods in a more direct way through pinning, repining, and liking, while users use Facebook mainly for posting their status, seeing others’ status, and communicating with their friends.
Above image is obtained from https://www.facebook.com/business/news/Discover-and-Buy-Products-on-Facebook-Test
Above image is obtained from https://blog.pinterest.com/en/buyable-pins
Pinterest, however, is not the most direct one. RED, the Chinese No.1 fast-growing social commerce APP with over 17 million registered users, bears in mind monetization from Day 1. RED is like the combination of Instagram and Pinterest. It allows users to post pictures of the goods they have owned, the places they have visited, the food they have had, etc. Basically, everything you enjoy in life can be shared as a picture. Users can also create boards for a certain topics. Other users can follow the user and also the boards he/she creates. The RED team curates content for users based on fixed topics, such as traveling, lifestyle, and skin care, recent hot topics, such as sun screening in summer, European cup, and users' preferences, such as top 20 most recommended makeup brands, top shopping list for moms. The biggest difference between RED and either Instagram or Pinterest is the tag function. When user uploads a picture, it automatically asks users to provide information on brand, price, and where to purchase. Users create tags for the goods once uploaded. Numerous tags got captured, and RED further tracks the virality of each picture uploaded and defines the popularity level of the goods. Once RED gets to know which goods are popular among users, especially the goods users don’t have yet but have shown interests intog, RED sets up partnership with the retailors directly and sells on RED’s platform. Quite smart, isn’t it?
RED's Item Tag
Another way of doing e-Commerce through social media is becoming a popular fashion/lifestyle icon on social media. Once there are enough followers, icons can make money from advertisement and selling goods under their own brands. However, it's uncertain what the conversion rate and final profitability of it.
2. Niche market and private labels
Amazon and eBay are too big and complicated. Users sometimes feel overwhelmed shopping there. If they know exactly what they are looking for, a niche e-Commerce marketplace could be a better choice. We are familiar with at least one type of niche e-Commerce—fashion. In recent years, companies focusing on niche markets other than fashion got increasingly popular. For example, the Honest Company emphasizes on non-toxic household products to supply the marketplace for ethical consumerism. Another example would be Thrive Market which sells only non-perishable items on health and wellness vertical. With annual membership fee of $60, users can buy Whole Food type of goods at Costco prices. It also plans to have 100 private labels by the end of first half of 2016.
As a product manager, I am always interested in how the product design drives user experience. The discovery boards of both Honest app and Thrive Market app are particularly interesting to me. The normal user story of an e-Commerce product is: Jane realizes she has to buy certain things, and opens the app., looking for the goods she needs to buy. She searches for it, sees the results, compares different ones, and clicks into some to read the details and reviews. She makes a decision and puts the goods into shopping cart. Before she pays, she clicks to see some of the recommended goods, and maybe puts more into shopping cart. She finishes shopping and pays for the goods in the shopping cart. With this story in mind, we can see how Amazon and eBay sometimes are too overwhelming--they have too many goods that are not relevant to what user needs to buy at that moment. Amazon curates mainly based on users’ past purchase history. Does purchase history really matter to users? In most cases, I would argue no, as current moment shopping interest normally is not related to what you have purchased before. Of course, you can use search function, but it is much more direct if users can find the goods they are looking for on discovery board directly--a much better user experience. On the contrary, both Honest and Thrive Market do a better job than Amazon. They curate based on Best Seller/Top Recommend, Shop by Value, and Shop by Category, which is highly relevant to and more convenient for users' current needs.
Thrive Market's Curation
Niche market e-Commerce provides a lighter, more direct, and different shopping experience than those large and traditional e-Commerce gurus. How well are they doing? For Thrive Market, they have 200,000 members and 20,000 new paying members every month. In February 2016, there were approaching $100 million run rate. In March 2016, they had 10 million in sales. For Honest, their sales in 2014 totalled $170 million.
3. Amazon's new threat:
After Marc Lore sold Diapers.com to Amazon in November 2010, he decided that users may be willing to pay less and accept longer wait times on obtaining online goods, so he co-founded Jet.com which uses real-time pricing algorithm. As shoppers add items to their cart, they're encouraged to build more efficient carts by selecting items labeled "Smart Cart" for additional savings.
Looking at its curation, we can see it’s very similar to Honest’s and Thrive Market’s, which has Top Sellers, Popular Brands, Jet Shops, Current Trend, and Other Category. Again, a better job than Amazon.
The most interesting part is its pricing. Jet.com leverages big data analysis to find the nearest fulfillment centers to reduce logistic costs, saving for users, and also for themselves from the construction and operations of fulfillment centers.
I personally tried it and here is what I found: After I saved Chaz Dean Wen Seet Almond Mint Cleansing Conditioner, the other items in the same category got dollars off. The dollars off are different for different items though. The calculation of the price drop is based on the location of the distribution centers. If certain goods can be shipped together, you can expect a discount. In addition, if you waive your right to return an item, the item also decreases in price. The form of payment can affect pricing too. Paying in a less expensive form of payment, for example, debit over credit, allows the price to be decreased as well.
Jet.com's Real-Time Pricing
Many of Jet.com’s goods can be delivered in two days. If a single purchase is more than $35, which seems not that difficult, the delivery fee will be 0. In this case, what is the point of paying for $99 Prime fee and purchase on Amazon? Yes, you can argue that there are more categories and more selections on Amazon. But for most cases, do we really need that many varieties? Yes, you can also argue that $99 Prime fee also includes Amazon Music, Amazon Instant Video, and photo storage for Prime members. However, are you really using them? Aren’t you using Spotify or Pandora for music, Netflix or Hulu for TVs and movies, and iCloud, Dropbox, or other cloud storage services for photos? Jet.com is definitely taking off, with more than 1 million users, projected 1 billion in sales by May 2016, 4.5 million products available for sales, 1.3 billion valuation and $820 million funds raised.
However, question remains whether or not the site is able to scale to attain significant market share and grow into a sustainable business. According to Business Insider, less than one third of purchases on Jet.com were from loyal shoppers. And according to Prosper Insights & Analytics, 81% of US consumers are unaware that Jet.com even exists. Seems that Jet.com needs to work harder on its brand awareness and user engagement. Awareness can be relatively easy to solve. Once awareness got enhanced, the impact can be exponential. The real issue could be the repeated shoppers. How Jet.com could let people realize the benefits of shopping on Jet.com during the first or the second visit, and help them form the habit of going to Jet.com whenever they need to buy anything? Since there is a strong existing habit—using Amazon.com, breaking the cycle is not easy. The user experience on Jet.com’s mobile app, its pricing, and non-membership fee, are all quite attractive. Will Jet.com be a real threat to Amazon? We will wait and see.
As consumers become increasingly demanding nowadays, and our world is getting more deeply shaped by technology and media, I expect to see more varieties in customer segmentations, marketing methods, retailing channels, and business models of e-Commerce companies,