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eCommerce Version 2.0?

March 15, 2010

Josh Kopelman recently had a fascinating post about eCommerce models and how little has changed in the online shopping market since 1999. His key findings:

  • More than half of today’s top 15 most trafficked websites today did not exist back in 1999.  That is not a surprise, as Facebook, Youtube, Wikipedia, Myspace, Blogger, and Twitter are all new — and are representative of the massive amount of innovation and disruption that has occurred in the last decade.
  • Yet, of the top 15 most trafficked eCommerce websites today, just one of them did not exist back in 1999 (NewEgg – which launched in 2001).  Which means that over 90% of the top eCommerce websites are over 12 years old!  That is pretty remarkable to me — and reflects an amazing lack of external innovation (and disruption).

While this at first seems strange, I think that it actually makes a lot of sense. There is a tremendous first-movers advantage to being one of these pioneering eCommerce sites (e.g. Amazon, eBay, NetFlix, NewEgg). These brands have huge mindshare and have become ingrained into the customer mind. When you want to buy a book online, the first place you look is Amazon. Customers have dealt with these companies, and by and large, they trust them. Add to this that these companies are already so good at smoothing out and just-in-time-ing their supply chains to squeeze out every penny of savings and pass this on to the customer, and it becomes just about impossible to beat them on price as well, leaving competitors with little way to materially compete with them.

Josh (as well as Fred Wilson, which is actually where I first read about this) believes that the place where disruptive innovation is likely to happen is in totally new models of shopping:

As I said in my last post, I believe we’ve seen more innovation (and potential for disruption) in eCommerce in the last 10 months than we have in the last 10 years — with group buying, demand aggregation, game mechanics, flash/group sales, leveraging the social graph for customer acquisition and mobile.

I’d have to agree with this–companies such as JetSetter, Gilt Groupe, and Groupon will be the new disruptive models. Fred Wilson takes it one step further, asking who the next YouTube or Facebook of eCommerce will be–but I’m not sure that these alternative models will necessarily ever take over to the extent that Amazon or eBay have. I think their specialized, exclusive models better serve the long tail, and there is more likely to be a multitude of specialized competitors here rather than a few behemoths. Certainly there will be some consolidation, with winners and losers, but I’m not sure we’ll see one stop shops like we did with the first wave of eCommerce sites.

Regardless, the statistics behind it are fascinating, and I thank Josh for doing the research behind this. I’d have to agree with him and Fred–the industry certainly seems to be ripe for shaking up, and it’s fun watching it unravel (not to mention watching the sales on JetSetter and Groupon!).


From → business, technology

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