In this series, I describe the landscape and some of the drivers as well as large problems that need to be solved making the current time in the market attractive for creating interesting ecommerce or related companies and attracting VC investments.
Well-Founded Hype: So , these private sale sites and the daily deal sites got investors’ attention. With huge success in these markets brings a lot of followers. Success or traction begets money. With a lot of followers, you can have more companies being formed in which you can potentially invest . So, now that a few have proven that there’s lots of money to be made and new companies being formed in ecommerce, VCs are interested.
Disregarding eBay and perhaps AMZN: This is a large enough market for a lot of players to succeed. It’s not a company like Google where winner takes all (Google has technological barriers to entry vs. relational barriers). Thus, despite the early fears about eBay and Amazon being the only dominate players, there are new sets of problems and consumer demands that can be addressed. . For instance, eBay’s experience sucks and the ability to get discovered is tough–not to mention the fees; hence, Etsy came about. Amazon is highly utilitarian and is more about price than an enjoyable, leisurely shopping experience. Thus, you probably go to a different website for clothing or even aspirational items. You also won’t find certain brands on eBay or Amazon due to certain rules brands put in place in how and where they are represented online–if you do find them, it’s most likely without the brands’ permission or it’s second-hand. Also, if you don’t know what you are looking for, the browsing experience is dismal for either. . . eBay’s X.commerce initiative is a question mark at this stage, but the discovery and experience problems still exist . Additionally, X.commmerce will enable other companies to have better ease getting into the game leveraging the tools and community rather than eBay fully competing with them.
Economy: Well this is quite volatile, but bargain hunting or discounting is not going to go away any time soon. The middle market is evaporating. Thus, one must tread carefully with the average consumer, whom is not so ‘average’ anymore. This drives more people online to buy because they can often find better deals online where it’s easier to shop around or find a coupon. We’ve also started to see Collaborative Consumption and rental models that decrease the cost of buying because products either have been used before or ownership expires. . Additionally, you have lots of people unemployed, so new models can leverage these people to either execute work or harness these people more cheaply to actively sell or market in exchange for discounts/deals or other incentives . Stay at home moms will be looking for ways to make a buck and ideally do so at home and thus online. With the competitiveness within eBay, all of those 25M sellers (http://cnet.co/re6bdR), might be looking for new channels to get a leg up on selling.