When people think about ecommerce today, they likely think about ecommerce along the lines of C2C (consumer-to-consumer), B2C (business-to-consumer), or B2B (business-to-business) – in other words, classification by type of buyers and sellers.
Or perhaps people think about 1P (1st party) vs 3P (3rd party), depending on whether the ecommerce platform itself engages in the direct buying and selling of goods. Amazon is 1P and 3P while Ebay is purely 3P.
However, both of these classification methods are simply the digitized forms of long-standing offline commerce analogies. They are neither new nor native to the world of digital commerce.
Ecommerce appears to be evolving and giving rise to more native forms of commerce, which I think can be loosely classified as utilitarian vs social.
The Current Ways of Doing Things
Although ecommerce has been around for over 20 years now, it still bears a striking resemblance to offline commerce.
Consider the way ecommerce businesses/platforms are classified today. C2C, B2C, B2B and 1P vs 3P. Both of these classification systems are applicable to both offline commerce and ecommerce.
Online C2C would be Ebay, where users are largely trying to sell used items to other users. Offline C2C would be school students trying to swap cards or goods or garage sales. The offline world never really formalized C2C because, I suspect, there isn’t much money in this part of the market. The fact that Ebay took off so much faster than Amazon in the early days is simply because the offline competition was non-existent and Ebay filled a vacuum. But in the long run, Amazon was destined to outstrip Ebay because Amazon operated in B2C, a much larger part of the market.
Online B2C would include Amazon and essentially every branded/professional ecommerce business out there where consumers buy from a business. This is also how most offline commerce is conducted – in malls, on the streets, mostly everywhere.
Likewise, online B2B is not too different from offline B2B. For the most part, going from offline to online likely meant swapping phone calls for internet clicks.
In terms of 1P vs 3P, almost all offline businesses are 1P where the buyer interacts directly with a seller that owns and controls the inventory. Online 1P is the same and includes the digital channels of all of the offline 1P businesses. This includes the branded stores for Apple, Nike, Adidas, etc.
Offline 3P would be mall operators. The essence of a 3P business/platform is effectively to be a landlord. Mall operators provide a space for businesses to sell. Online 3P platforms would include Amazon, Ebay, Alibaba, and JD, all of whom are digital landlords. 3P is clearly a more commonly viable business model online because digital real estate is theoretically infinite. There can be an infinite number of online 3P platforms. And who doesn’t want to be a landlord collecting rents without having to do the branding and selling work?
So at the end of the day, ecommerce today isn’t all that different from offline commerce. They are largely direct analogies other than swapping out of physical storefronts for digital storefronts.
The New Ways of Doing Things?
What’s interesting is that ecommerce is starting to evolve in ways that offline commerce cannot follow. And this is enabled by social media, supercharged by the fact that we always have an internet-connected device with us at all times. This new way of doing things is social ecommerce, and eventually the old way of doing things will likely be viewed as utilitarian e/commerce.
Social ecommerce is just starting to take off in the West, but has been a game-changer in Asia, particularly China.
Here are some examples.
Social ecommerce includes live streaming on Taobao (Alibaba platform). This is effectively QVC for the digital age. But on steroids because you not only watch/hear from sellers, you also see comments from other potential buyers.
Social ecommerce includes WeChat (Tencent messaging platform) stores with integrated messaging. Buyers can message and interact directly with potential buyers in the WeChat messaging app – keeping them updated on new products, offer coupons, and deepen the brand story.
Social ecommerce includes PinDuoDuo encouraging you to round up friends to help you bargain for discounts.
What social ecommerce accomplishes is that it makes buying fun, all the time. Buying has always had an element of fun in the offline world, but it required coordination. For example, people (friends and/or families) go to the mall together so that you can get advice and encouragement (or tasteful critique). But that takes coordination. Ecommerce made it very easy for us to shop, but it has not made it easy for us to coordinate to recreate that level of fun. That’s what social ecommerce promises to accomplish.
Social ecommerce also connects us with opinions that we may not otherwise have in our offline lives. Perhaps you don’t have people in your life that would have the best opinion/advice, social ecommerce broadens your scope. That is something that offline commerce can never accomplish or compete with.
The benefits do not solely accrue to consumers. In fact, the benefits are probably even greater for sellers that adapt. Take Taobao live streaming for example. There are many sellers now that will livestream directly from factories to gauge what buyers are most interested in. The buyer will then purchase inventory based on the feedback with minimal inventory risk. This is a phenomenal benefit as it reduces the working capital necessary to run the business. As I’ve discussed in my previous post, the platform/player that has the greatest influence over retailer working capital will likely dominate for a very long time.
Ecommerce’s Shifting Landscape
Social ecommerce has already arrived in Asia, and it is starting to appear in the West.
For example, Apple is rolling out Business Chat, which promises to allow users to directly message businesses creating a whole new way of marketing and selling.
And the gorilla (in the West) is Instagram, which recently rolled out a “Shop Now” button. This is potentially transformative because Instagram is already a very important platform for branding and advertising. Users already follow brands/influencers with an affinity for the products and designs posted. The “Shop Now” button would close the commerce loop.
Of course, every ecommerce post is obliged to comment on Amazon, the de-facto king of ecommerce in the West at the moment. With the emergence of social ecommerce, Amazon’s market positioning appears to be weakening and is ever more dependent on its utility aspects. Amazon still dominates if you already know what you want but want it fast and at a reasonable price.
However, Amazon is not a particularly strong platform for discovery other than for a very narrow range of “similar items” recommendations. People love Amazon because it useful, not because it is fun. Unless Amazon adapts quickly, Amazon risks being eclipsed by social ecommerce players that are superior in discovery if the logistics gap should ever close.
More on this in a later post. Stay tuned.