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What is a marketplace? I’ve asked that question a dozen different ways in this newsletter, primarily when discussing Amazon. But there are two distinct trends on the web, and they are both worthy of discussion.
First, there was the ‘frictionless’ approach. In the early years of online commerce, transactions were clunky. eBay and Amazon did well simply by removing the friction and making it easy to buy.
From the eyes of economists, we saw the benefits of:
- Speed to market
- Low cost of acquiring new customers
- Low cost and ease of delivering
But eComm tools matured, and now (thanks to folks like Shopify), frictionless transactions are a norm.
With the benefit of hindsight, it is easy to also see the pitfalls:
- Commoditization of technology (frictionless platforms).
- Authenticity and product safety concerns that abound with scale.
- Back-end and up-sell potential: The platforms lack functionality that allows brands to shine. The focus has primarily been on low-cost products and (increasingly fake) reviews instead of repeat purchase potential and value-add services.
We are watching as eBay slowly sells itself off for parts (PayPal, StubHub, & Classifieds), and it is hard to wonder if the same fate doesn’t fall Amazon in the coming years, especially if they don’t continue to innovate.
Second, there is the ‘house of cards’ approach. Envision a marketplace on top of a marketplace on top of a marketplace. Recent examples include Facebook Shops, Instagram Shopping, or Shopify’s new Shop app. The channel provider sees transactions flowing across their servers and tries to step in between the buyer & seller, taking a cut of the revenue, and intercepting the purchase data.
Although this is the ‘new hotness,’ I have yet to see examples of this approach gaining traction. Surely there is resistance from retailers with thin margins, where one more player taking one more cut is economically untenable. It is also difficult to manage dozens of micro-stores for every conceivable traffic channel.
Interestingly, one of the core flaws of the internet-based marketplace is the absence of ‘perfect competition.’ Almost every marketplace provider has an ulterior motive. We’ve talked about sharecropping before. Retailers are becoming wiser, and there is a broader recognition of the value of data lost when introducing intermediaries.
This week Google took an interesting move with Google Shopping. For some time, Google Shopping has offered ‘Shopping Actions,’ a way for customers to directly purchase a product from the Shopping ad, with limited interaction with a seller’s site. For reasons that are now obvious, that feature has struggled to gain a foothold in the market.
This week, Google announced a revision of that feature, where they would no longer be taking a cut of transactions that resulted from Shopping Actions. Additionally, sellers now have control over which payment platforms are used for the transaction and the checkout takes place on the seller’s site.
Although the sellers of smart home devices and low-cost laptops may still disagree, for most other markets, this step by Google is moving towards a true market. And just as importantly, away from the two negative trends we outlined above.
It is certainly far from perfect, but I am fascinated to watch the change that results. Google is the great aggregator. If they can bring together products from around the web and remain (relatively) impartial, they could reclaim the product searches they have lost to Amazon in recent years.
New 0% commission fee for selling on Google through Shopping Actions in the US - Google Merchant Center Help
In April, we made it free to list your products on the Shopping tab, and last month, we announced that free listings are coming soon to Google Search in the United States. Now, we’re making it free to sell your products directly on Google — Google will no longer charge you commission fees for purchases made through Shopping Actions. This new model will allow you to use your own payment provider, manage your customer service, and manage more of your processes, like returns. We're sending more and more invites each day — keep your eyes on your inbox — and later this year, we'll open sign-up to everyone.
Commentary from SEORoundTable.com:
As Ginny Marvin wrote Amazon's "fees typically ranging from 8 to 15% per item sold." So this can be a huge blow to Amazon - but we will see if Amazon reacts or just waits it out.
Google is also going to promote this by adding a new small business filter on the Google Shopping tab to highlight these businesses.
Bing is launching a new plugin for WordPress that is designed for getting content immediately indexed in search results.
The whole process is done automatically. All site owners have to do is install the plugin.
Once installed and configured with an API key obtained from Bing Webmaster portal, the plugin detects new pages as well as updates to existing pages.
Walmart, McDonald's, Kellogg's, Allstate, Dell, Geico, Ikea, Kohl's and Peloton quietly stopped advertising on Facebook without officially announcing participation in an advertiser boycott of the social network, per an analysis by watchdog group Media Matters for America (MMA) that was shared with Mobile Marketer.
The nine brands cited by MMA spent more than $335 million combined on Facebook advertising last year, per its analysis of data compiled by researcher Pathmatics. Walmart was one of the biggest advertisers on Facebook with media spending of more than $145 million in 2019, but its last ad appeared on the social network on July 1, the report said.
An interesting choice by these brands to quietly boycott.
What DTC fashion and apparel brands need to do now is chart a new course of action that will lead to sustained business success. Well-capitalized retailers, manufacturers and DTC holding companies present strategic partnership opportunities and a more realistic path to profitability for these brands. Founders and executive teams at DTC brands should not underestimate the know-how that leaders who have managed through past crises can provide, the scalability of established operating infrastructures or the force of robust balance sheets.
The few founders who still control the destiny of their own brand, even if they own only a small fraction of the company, should be willing to fight like hell right now to find a solution for achieving sustainable growth. If they exit to, or strategically partner with, a well-capitalised, experienced and stable company earlier than perhaps they initially envisioned, they should view it not as a failing, not as merely survival, but as a definitive success.
That, in a nutshell, is the formula Shopify has been slowly building on for years: trying to grow its presence as an e-commerce powerhouse by playing nice with as many companies as it can, but also trying to grow its own suite of premium products. The company grew by positioning itself as a facilitator of an ecosystem — a great facilitator. Now that it’s growing even more powerful, Shopify is quietly trying to control more of its domain while creating an even bigger ecosystem of large partners.
If someone can create similar products with lower quality, no advertising and beat you, then is that their fault…or yours? Amazon didn’t kill name-brand battery sales, a lack of differentiation did. “Innovation” and “differentiation” are critical qualities of any successful brand to win against competitors.
Amazon spent nearly $7 billion on U.S. advertising in 2019, making it the top ad spender in the country, according to a new analysis from Kantar featured in AdAge.
It wasn't that long ago in 2009 that Jeff Bezos triumphantly declared that "Advertising is the price you pay for having an unremarkable product or service.”
Amazon has increased the number of ads allocated to promoting its brands. Out of the standard twelve ad spots on its website and six on its mobile app, three feature its private label products. Amazon is giving up advertising revenue it would have made otherwise by selling ads to brands to promote products which profit is unlikely to offset the loss.
Because Amazon features its products by adjusting the sponsored products system, which reduces the number of ad slots available for brands on the marketplace, for search keywords where the company features its products, the ad price has increased. Finally, when the company highlights its products, it always takes the first sponsored product slot. Thus not only the price brands have to pay for ads is higher, but the most visible ad slot is unavailable.
Kabir bought his first pair of birds from the 3,000-person Facebook group A.S.ককাটেল পাখি হাত বদল — “A.S. Cockatiel changes hands.” For that purchase, the seller delivered the birds in person to collect them, and Kabir paid in cash. He was so pleased with his decision that he bought 24 more pairs over the next two weeks, including breeds such as Gouldian finches, Bengalese finches, and crested Bengalese finches. Each pair cost anywhere between $15 and $60, depending upon the breed and its age. “At one point, I started running out of space to accommodate all the birds, and sent about half a dozen Bengalese finches, along with some Gouldians, to my fiancee’s place,” he recalled. Finally, he gave in and bought a large birdcage.
From discovery to delivery, this whole process happened on Facebook.
Kabir’s story is reflective of how the majority of e-commerce now happens in Bangladesh. In the absence of giant online marketplaces like Amazon, thousands of bespoke Facebook pages and groups have been created to meet customer demand for ornaments, apparel, cosmetics, mobile accessories, and, of course, birds.
The phenomenon has grown so much over the years that the number of stores on Facebook now eclipse the number of sellers on local e-commerce websites like Evaly, Ajkerdeal, or the Alibaba-acquired Daraz. No one knows exactly how many of these businesses exist, but the most recent estimates suggest that Bangladesh has over 300,000. The low barriers to entry — all an aspiring entrepreneur needs is an internet connection and around $350 to cover startup costs — present a tremendous opportunity for a generation of young Bangladeshis reeling from mass layoffs and fear of rising unemployment rates, which are projected to impact at least 15% of the working population. It also has opened other doors: in a country where just over 15 percent of women have mobile internet access, half of Facebook sellers are female.
By and large, these Facebook stores are usually window fronts for click-and-order shopping. Unlike in formal marketplaces, most sellers are not licensed, store their inventory at home, and partner with third-party logistics companies for last-mile delivery. It’s all very simple: after a buyer makes a selection, payments are arranged via off- or online methods, and items are delivered by mail. No equivalent exists in the West, where Facebook’s forays into commerce have been met with a muted response. For a 162-million-strong country struggling with poverty and limited job growth, this new model of business is illustrative of the South Asian concept of jugaad — making do with what’s available. And it already has a name: F-commerce.
🏬 Brick & Mortar
Google is now trying a subscription billing model for Google My Business, something Google has explored doing in the past, and is now actively pursuing. Google sent Tom Waddington an email asking him to "upgrade" his business profile for $50 a month.
The $50 monthly subscription upgrade gives you the Google Guaranteed badge and helps you "stand out with an upgraded business profile.
Another, potentially larger, implication for marketers will be the need to redesign shopper journeys for consumers who may be in a different state of mind. At home, shoppers are comfortable—they want to see loungewear options in their recommended products, they want to spend time browsing through add-ons. They’re in no rush—they can “add to cart,” then go back for more. They may be shopping at different hours during breaks from their remote-work schedule. They may be shopping for their whole family across multiple product categories.
Foot traffic in stores—as well as travel and events—will only return when people trust that spaces are safe and virus free. Increased cleaning and disinfecting as well as a mandate that all customers and employees wear masks are the top reasons consumers give for deciding whether or not to go to a store. On top of this, millennials and Gen Z, in particular, are more widely adopting contactless activities, such as curbside pickup and self-checkout, which all ages indicate they intend to continue.
Marketers will therefore need to think through a much broader range of shopping experiences, which will require greater coordination with sales and operations teams across the business. The preference for self-checkout or scan-and-go behaviors may also change traditional store boundaries and layouts. Consumers may be more willing to shop display walls, for example, where items are shown and can be scanned for delivery.
🛠 Tips & Tools
Your social design sandbox
Shopify made a Canva.
🤷🏻♂️ Just For Fun
At its core, Misfits Market looks at any structural inefficiencies in the food supply chain and capitalizes on them, getting the product at a discount and passing those savings on to the customer. These inefficiencies may include issues with sell-by date — some products must be on store shelves nine months before their sell by date — or an ineffectual mistake (like the olive oil company that works with Misfits Market and has a bad habit of attaching its labels upside down on the cans).
Where timing is concerned, Misifts Market doesn’t have to play by the same rules as a distributor or grocery store, as it sends products directly to consumers, benefiting from a much faster logistical operation.
Today’s eCommerce business is done in the niches.
The US government has gained custody of a Nigerian man who is accused of participating in a massive fraud and money laundering operation. The defendant, Ray "Hushpuppi" Abbas, has amassed 2.4 million followers on Instagram, where he flaunts his access to luxury cars, designer clothing, and private jets. The feds say that he gained this wealth by defrauding banks, law firms, and other businesses out of millions of dollars. He was arrested last month by authorities in the United Arab Emirates, where he had been living.
The FBI's criminal complaint details how the government obtained a wealth of information tying Abbas to his alleged crimes. Abbas was an avid user of American technology platforms, including Instagram, Gmail, iCloud, and Snapchat. Accounts on these platforms were all registered using a handful of common email addresses and phone numbers. Abbas's main email account—email@example.com—included a copy of Abbas' lease at a luxury hotel in Dubai and scans of various government-issued photo IDs under Abbas' name.
Abbas is accused of participating in a number of "business email compromise" scams. By posing as trusted employees or customers of a target organization, Abbas and his fellow fraudsters allegedly tricked employees into sending large sums to bank accounts they controlled.
Questions, comments, inquiries? I’d love to hear from you! Email firstname.lastname@example.org.