The eBay Experiment and 21st Century Luddites

About 2 years ago, I suggested in a guest lecture at a company flogging a e-commerce platform to prospective clients that eBay was a natural platform to run an Internet retail business. There were sound business reasons to do so (although naturally the platform vendor wasn’t exactly wild on the idea).

Fast forward to the present and eBay is replete with big brands and small businesses exploiting the eBay proposition with  a great deal of success. eBay offers great coverage. It’s a site that various search engines’ algorithms acknowledge to have some clout (through all their various elements, including social signifiers) and therefore items that are offered on there can receive substantial uplift in their visibility – on eBay itself and on search engines too. Let’s say you’d be mad not to give it a go.

So think about the situation some internet retailers have found themselves in recently. Chatting with some of these entrepreneurs who are keen on British and European design, I got to find out about attitudes of suppliers to these retailers. A few years ago, they said they would find it difficult to get some suppliers to sell them stock ‘because they were not a real shop’. This, despite upfront payments and not by account. Fast forward again a few years and the situation has changed. But not in a meaningful way.

One retailer described how a supplier wouldn’t allow them to stock a product range, “because your eBay shop cheapens the brand.” This from a brand that is regularly found in TKMaxx at the end of the season (or during the season even). I’m not decrying TKMaxx because I think it serves an important purpose, but when you consider that many retailers on eBay sell their full ranges at full RRP, you have to question the currency of some product and brand owners thinking.

Another retailer was obliged to sell the goods from one brand at full price on their website (“maintains brand equity in the mind of the purchaser“) whilst the same brand owner also allowed Amazon to retail the product at one or two pennies above wholesale price, and whose products subsequently found their way into the cheap shelves at every Sainsburys. I don’t blame Sainsburys one bit for grabbing this bargain

At a time when shops are shutting down all over the UK, you have to ask why product and brand owners are stuck in this mindset. One brand claimed that web sites and eBay stores were “difficult to police compared to being able to vist a real world high street store.” Sending a rep around 1000s of little shops sounds like hard work compared to an afternoon clicking on several hundred very visible web sites and eBay stores.

We just want to support the British High Street,” claim the manufacturers and brands. Well it’s clearly worked so far. These brands clearly have no understanding about what customers really want. Plenty of research states that people defer to Internet retail and eBay not because it’s cheap but because that’s the place where the bloody goods are. It’s not online or eBay that’s killing the High Street – it’s the customer experience, including customer service, parking, product availability and so on. Comet had a web site – didn’t save them.

How about making sure your precious brands are manufactured in the UK instead if UK jobs are so important? After all – these goods aren’t cheap. Surely there’s room in your margins to have goods made here. Here endeth the rant.

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The Rumour about Amazon

I was chatting with a successful serial entrepreneur a few weeks ago about business. The person enjoys setting up businesses and running them till they a) fail or b) succeed and get sold on. He advises a lot of people on what to do when their business flops.

He had been talking to an industry contact who’d had a successful retail business and was complaining about the behaviour of Amazon. The implication was: goods that he had sold through Amazon Pro (I understood that he was effectively the sole retailer and was making a good trade) were now being sold directly by Amazon at a somewhat lower price. His complaint was that he felt that he had done Amazon’s market research for them, they had access to all of the statistics on his sales, he’d taken the risk on holding stock which head been fulfilled directly by Amazon’s advertised fulfilment service. As a result of paying for an e-commerce service, he’d effectively been undermined by the service provider who’d taken the business from underneath him. His stock ranked lower than their own on the site and in Google’s natural search.

All of this is naturally urban (digital) myth and hearsay – but looking through the circumstances there seems to be no reason why it might not have happened. If it’s true, then it’s a disappointing use of an organisation’s strong marketing position against much smaller players in the Internet Retail game. And if it is true, the warning comes – if you want to use a large organisation’s power to support your venture, you’d better be sure  they aren’t going to steal your idea.

Dropbox is a business built on Amazon’s infrastructure. Is the same thing likely to happen to them now they have proved demand for cloud storage and the competition for that industry hots up?

Where does Internet Retail Go for the Small Retailer Now?

As a casual observer and advisor to several small business who retail their wares over the Internet, this year has thrown up a few interesting thoughts that might point to the future of Internet retail for the small “shopkeeper”.

This year has already been tough on the high street, with household names as obvious casualties. Mary Portas’ recent review was perhaps a combination of “statin’ the bleedin’ obvious” combined with some less sensible ideas (Bingo? Seriously?).

But the dramatic reduction in business on the high street has not immediately translated into a boom in sales for the small retailer in the Internet retail world. A drop in sales in the high street, has anecdotally in my case, been reflected by a drop in sales online for small retailers.

This posting does not discuss the issues faced by large household names online, many of whom have seen a dramatic rise in people moving to a different channel – in particular shoppers who purchase across many different channels. In this area, one has to look at the rise in click-and-collect services made available by household name retailers and brands. But that’s a story for another posting entirely.

Casual observation of a number of small internet retailers (family operations on the whole) seems to point to a couple of things that are having a serious effect and produce difficult decisions about the 2012 trading year.

The Amazon Effect – Amazon has become the long-tail retailer of choice for many, and it’s possible to buy almost anything there.

The eBay Factor – As people become price-conscious, the apparent (yet flawed) view that eBay is where you can buy things cheaper than elsewhere, means that it’s the first point of call for many shoppers rather than using something like Google Shopping.

These two massive players have one thing in common – they have open marketplaces. It’s possible to ride on the luxurious search engine advantages of either and host one’s own business within their marketplace listings. Plenty of small businesses now pop up in Amazon as the supplier. eBay relies on eBay shops rather than just the C2C auction business. eBay isn’t the cheapest in many cases. Neither is Amazon, but both brands have a high level of trust amongst consumers. For many eCommerce/Internet retail is either Amazon or eBay, in the same way that Facebook has become the Internet for millions of people.

Anecdotally I’ve seen sales and traffic slump on dedicated eCommerce sites whilst I’ve seen a dramatic rise in sales through eBay and Amazon for small retailers. This has stark consequences for channel maintenance in 2012 – is it worth keeping a dedicated hosted Internet retail business or is it better to move the business into Amazon and onto eBay?

My view is that 2012 will be a difficult year for dedicated eCommerce Retail hosting services as many of their retail customers simply end hosting contracts and focus on the 2 channels that bring them all their business.

It will however be a good year for people who can customize eBay stores. Coding hats on!