I have just a couple of links below centered around e-commerce that I found highly interesting and think worth your time.
I think the narrative around Amazon is starting to shift, not just from a regulatory perspective, but from a dominance perspective. Betting against Amazon has been a loser’s bet, but I think betting that Amazon needs to evolve is a clear one. I think this is worth reiterating even at the risk of sounding like Captain Obvious. Amazon’s e-commerce platform today really only serves the utilitarian part of the market well. But that leaves it at risk as the market bifurcates with the lower end of the market likely better served by AliExpress (especially since Alibaba dominates over the Chinese supply chain where the vast majority of cheap/low-end goods originate) and the higher end better served by, perhaps, Instagram with its emerging focus on e-commerce.
When consumers transact, there are always two parts to the whole – the pre-transaction experience (e.g. product discovery, marketing, buying experience, etc) and the post-transaction experience (e.g. product delivery, maintenance, return service experience). Amazon’s entire advantage has arguably been built on the post-transaction experience and singularly about getting the product as fast and as conveniently to you as possible. Sooner or later, Amazon is going to exhaust the latent demand in products where all you care about is speed of delivery. This mode of operation works best for commoditized/standardized products (toilet paper, books, household goods) but Amazon needs to get better at the pre-transaction experience if it wants to become more relevant for the categories where the buying experience matters (e.g. luxury, apparel, cosmetics).
Adam Mosseri, the head of Instagram, has laid out his long-term vision to ramp up retail and tap the desire of the photo app’s 1bn users to indulge in “window-shopping”. In his first interview about Instagram’s business strategy since taking over last October, the 36-year-old former Facebook executive said he was aiming to “connect the dots thoughtfully” between shoppers, sellers and the app’s huge number of “influencers”.
He said that by introducing functions such as “native checkout”, where shoppers can buy goods on Instagram without leaving the app, and “shopping bags”, where they can hold items in a cart, “we can unlock a lot of value from everyone involved”.
It’s a shame that it has taken Facebook this long to realize the shopping potential of Instagram. It is likely the single best positioned asset for e-commerce on a global scale when it comes to brand building, product discovery, and marketing. Most of the things you buy and love likely fall into a category where branding and marketing is essential to the experience and differentiation. A Nike shoe isn’t that much different from Adidas, New Balance, etc other than branding and marketing. A Louis Vuitton bag is not that different from a Coach bag, dare I say, other than branding and marketing. These are the things consumers care about and Instagram is better positioned than Amazon.
Shopify has investors excited because it is increasingly seen as the most likely challenger to Amazon’s ecommerce dominance. While many retailers, both traditional and online, have tried to tackle Amazon’s “everything store” head-on, Shopify has succeeded by arming individual merchants with the same technology and capabilities, but with more control.
Retailers from Kylie Jenner’s multimillion-dollar make-up venture to the online equivalent of mom-and-pop stores can use Shopify’s tools to build a website, list their products and take payments — all under their own domain and brand. Most of the shoppers who spent more than $40bn across 800,000 Shopify merchants last year would have had no idea they were transacting with the Canadian company.
Shopify continues to surprise me with what they can accomplish. Whereas Instagram can potentially threaten Amazon by providing a differentiated experience, Shopify is democratizing the back-end. I think this positioning makes a lot of sense. At a very basic level, Amazon’s whole strategy is around commoditizing and democratizing products and preferring to differentiate through efficiency (which can be protected through a moat of money). But most products shouldn’t be commoditized. Shopify is coming from the other end – let brands and companies do their thing and differentiate their products and differentiate the experience, but commoditize the back-end (e.g. website building, payments, e-commerce functionality, and soon fulfillment). In many ways, Shopify is the anti-Amazon. I cannot wait to see what Shopify accomplishes over the next 5-10 years.
What exactly is Amazon?
This is the question that has consumed me for the last ten years.
This is from a few months ago, but I’m very glad I finally got around to reading it. Worth every single minute.
Zach makes an interesting argument about how Amazon’s growing advertising business will eventually lead to a deterioration of Amazon’s business, but as a counterexample, Alibaba has found incredible success with an advertising driven strategy from the start.
Disclosures: I do not own shares in AMZN, FB, or SHOP at time of publication and have no intention to transact within the next 48 hours.