ecommerce » Dave Jenkins

GSI’s Rubin Keeps the Good Bits – eBay is Trying to Follow Taobao

China, ecommerce, United States 1 Response »

Mar 282011

Forrester wave for ecommerce platforms 2009

GSI announced today that it’s selling out to eBay for $2.4B, which is a lot of money for an also-ran player in the ecommerce space. But that’s not what drew my attention on this. It’s the parts that eBay isn’t buying, or maybe that Michael Rubin wanted to keep for himself: shopRunner and ruelala.

ShopRunner is essentially Amazon Prime for the rest of us schmucks that don’t work for The Empire. It’s a federation of online retailers who offer up yearly subscriptions to customers. Pay $50 once, and enjoy free overnight shipping for the rest of the year– A good deal, actually if you buy more than 6 or 7 items a year online. The subscriptions are transferable across retailers. If you’re a shoprunner member on shoes.com, then you’re also a member on sportsauthority.com or drugstore.com or borders.com (if they last through the summer). ShopRunner has a future of becoming a serious consumer powerhouse– it knows what everyone is buying across all those sites, it can bring discounts, and it can introduce new properties to consumers. It’s all about logistics and customer fulfillment now, and ShopRunner is in a great place.

RueLaLa is a private deal site. I’m less impressed about this part. I think the ‘deal of the day’ site is cool and all, but it may have run its course in terms of growth. The ‘private sale’ model likely has an even shorter half-life: once people realize that the perception of exclusivity is just that, a perception, then the passion will fall off, and RueLaLa will wind up for what it really is: a discount outlet for branded goods. Sales will be solid, but outlets are never sexy. There may be an exportable SAAS model there, and I know that RueLaLa has been trying to put that together, but I also know that converting one site into a SAAS platform pretty much requires a complete tear-down and rebuild, or starting from scratch. At that, RueLaLa is really just a cash-flow to fund something else. We’ll see on this one.

On the other side of this deal, eBay is moving up the value chain a bit, and picking up some legitimacy in the process. Let’s be honest, when you hear the word “eBay”, how many of us instantly think “beanie babies” and “random junk flea market”? eBay has a branding problem, and that’s caused a revenue problem: eBay was never taken seriously as a shopping platform for “real” companies, even though they have a huge amount of traffic and do an enormous amount of sales. Theoretically this all changes now with the acquisition of GSI: it’s a true B2C ecommerce platform and fulfillment/logistics network. (GSI always differentiated itself from the other platforms by offering not just the website infrastructure, but the fulfillment warehousing and other logistics goodies).

eBay was always a distant 2nd place behind Amazon. This doesn’t really change that, but it does indicate a different tack: rather than try to go against Amazon head on in terms of product mix and navigation and pricing, eBay is showing that its’ going for the Taobao model: build up a store from the grass roots small vendors by providing them an ever growing amount of tools and merchandising functions, then cement in the relationships with an exclusive payment method and legitimate company retailers in the mix. Taobao, for those of you who’ve never heard/seen of it, pretty much owns the China market to a level that Amazon could only dream of: some estimates put over 70% of ecommerce going through Taobao at one point or another.

eBay is looking to solidify it’s own market space. Consumer-to-consumer sales? check. B2C sales? check. In-house payment method? check. Fulfillment value chain? check. The only thing missing now is physical retail space. I used to think that Amazon would buy Sears or Target. Now, eBay may get a shot.

eBay made a smart move on this. Michael Rubin made an even smarter one.

Groupon’s Army of Bottomfeeders

ecommerce, Good or Bad, mobile, Network, Social Media 7 Responses »

Feb 102011

Marge needs a smart phone first...

Groupon, the group discount site that has spread rapidly thanks to social networks, has seen explosive growth over the last few months. the company has run extensive TV campaigns in Japan and Europe, as well as even buying some tasteless Super Bowl time last week. Many of my friends are Groupon users, some are Groupon junkies (I can tell by their constant Facebook bragging/recruiting). But what about the retailers that are offering these Groupon discounts? Is it catnip to build buzz, or carrion that invites the vultures?

A common understanding in merchandising is that offering discount products brings in the discount buyers. Unless your business is All-A-Dollar or Try-N-Save, these are not necessarily the customers you want: discount goods by their very nature have little or no margin, and discount buyers will complain, require service, and generally gum up the fulfillment chain just as much as any other customer (if not more so in some cases). The business slang for them is ‘bottomfeeders’. Insinuate whatever you want to from that. (Please note that I am not calling my good friends ‘bottomfeeders’, they are wonderful people with a savvy sense of finding deals. I am just relaying the merchandising term.)

So, when would a merchant want to deploy a Groupon strategy? Here are some points to consider:

Groupon or other clearance discounting is a GOOD IDEA if:

You have a perishable or seasonable product that otherwise will be worthless in a matter of weeks (but not too perishable– a gift food company in Japan is getting sued for using Groupon to send out rancid meats and fish to hundreds of subscribers).
You can run the math, and assuming that Groupon clears out all product, you still cover enough margin to support fulfillment
Margin doesn’t matter on this one, because the word-of-mouth provides a great marketing opportunity.

Aha! That last one is the siren song for many merchants that decide to go with Groupon. They figure that if they give away 400 teddy bears or free cocktails or back massages or whatever, the word will spread and their marketing campaign will be off to a running start. I have no doubt the Groupon salespeople only reinforce this belief. I would submit that it’s based on some faulty assumptions and likely to get many small businesses in trouble. Here’s my take on the dangers.

Groupon is NOT A GOOD IDEA for any combinantion of the following factors:

Your business requires the same fulfillment costs no matter who the customer is or how much they pay. Restaurants fit in this category: a dinner for two requires the same amount of cooking, serving, and cleanup for a couple baying the full $60 as it does for the people using the $25 Groupon. Unless your restaurant is 80% empty, this is a bad idea. And if it is 80% empty, I would guess the problems are somewhere else…
The word-of-mouth factor that Groupon supposedly provides is not sustainable or exploitable. Groupon will bring in a flash mob of a couple hundred customers, and a decent fraction of those customers will brag about the deal on Facebook. However, unless the merchant has a way to exploit and continue that buzz, the flash mob is exactly that: a flash (and gone).
The flash mob is usually trying to recruit others to participate in the deal– they’re actively telling other bottomfeeders that there is a low-margin item/service for sale at your business. This will result in bringing in more bottomfeeders as well as possibly damaging your brand.

Discounting is a hard drug to kick. Groupon is a strong one: used carefully, it can be a kick of adrenaline; used indiscriminately, it’s a quick dose of crack.

Quality Website Comments: The balance between reach, volume, and passion

ecommerce, Social Media 4 Responses »

Dec 122010

The I-Ching for comment threads - balance your reach, volume, and passion. (image source: chinesefooddiy.com)

Do you read the comments thread at the bottom of a news article? Do you ever get anything of value from it? Websites have wrestled with the ‘comments’ section for over 14 years now (since the beginning of the web, really). How to guide a comments section along to where it actually provides useful and helpful content, and not just random people throwing out grammatically-challenged non sequitur? We’ve seen sites try various methods: rating the comments, rating the raters, completely open forums, targeted censorship, random censorship, oligarchies, democracies, and anarchies.

Here are some basic generalizations that I’ve seen:

There is an inverse relationship between the breadth of topics (reach) for a given website and the cohesiveness of its audience. The greater the breadth of topics, the lower the cohesiveness of the readers. Said in reverse, the more targeted the topics of discussion, the tighter the demographic for the group of responders. For example: both USAToday.com and ForeignPolicy.com can cover the exact same issue (i.e. Wikileaks), but USAToday.com will be all over the map for comments, while foreignpolicy.com will be pretty tight. This is because the demographics for USAToday are pretty much 20M+ Americans who stayed in a hotel last night or are stuck at the airport, while ForeignPolicy.com is limited to those eggheads at Foggy Bottom and college kids wanting to sounding erudite at a local bar. We can call this ‘reach’.
There is a positive correlation up to a certain point between breadth of topic (reach) and the volume of respondents/commentators (volume). The more topics covered on a given website, the more channels of bringing in audiences for readership, and thus the more chances that people will respond. This is true to a certain point, until a website becomes so generalized in nature that the passion drops off, and ends up becoming a limiting factor on comments.
There is a positive correlation up to a certain point between passion of topic and the volume of respondents/commentators (volume), in that passion requires responses, and that requires a certain amount of volume. Overall, a wider audience means a greater stage for performance, and invokes a greater passion among commentators, up to a point.
After a certain point, volume begins to harm passion, and the discussion threads will either:
1. bifurcate into smaller groups where volume is reduced but passion continues,
2. devolve into a flame-war with eventually someone invoking Nazis, or
3. dissolve away with someone posting a bunny with a pancake on it’s head.
There is an inverse correlation between breadth of topic (reach) and passion of topic. This is likely a general sociological point, in that experts can only show their expertise among learned peers. People won’t argue the finer points of civil war reenactment accuracies on usatoday.com, but they will on history.com, and watch out if you ever find yourself at reenactmenthq.com
Quality is likely a balance between reach, volume, and passion.

Quality is a very tricky thing to define, let alone quantify. The rules laid out above all build to that last one: quality. Quality online discussion threads bring a lot of benefits to a website– they generate return visitors, they provide great Google-food, they inform the product, reduce returns, build brand value, and inform both the reader/user and the website owners about their demographics.

How to build quality online threads? Evaluate your website carefully:

How is your reach? Is it broad or narrow, or somewhere in between? You can tell by the rate of responders to other posts: too broad and you’ll see random comments without responses. Too narrow and you’ll see great passion but little cross-over and probably some flame-wars.
How is your volume? Do you get not enough comments or too many? For most of us the answer is usually ‘not enough’, and in the rare cases of ‘too many’, there are mechanisms/technologies available to guide the threads to maintain passion and thus build quality.
How is your passion? Do your commentators have insufficient passion or too much? We’ve all heard the 90-9-1 rule: 90 people will view a website, 9 will read comments, and 1 will actually write something. That makes a good guide: are you getting comments from 1% of your traffic? If not, you’re lacking passion. If you have too much passion, you’ll know it pretty clearly (see the indicators for flame-wars above).

We can see many different ways to build quality. In general, the comment thread technology out there really only kicks into gear once a certain reach, volume, and passion are already in place. There’s no default order on which one to do first, but know you have to build all three to get to “quality”: extend your reach, build your volume through incentives or questions, and then invoke that passion by personally connecting your readers/customers/users to each other and to your products.

Yahoo Japan to use Google Search Engine

ecommerce, Japan, Network No Responses »

Dec 022010

FTC says search engine alliance doesn’t breach anti-monopoly law
Google owns the search engine market in North America and most of the English-speaking world. It’s strong on the continent of Europe. Here in Japan, however, it’s still second (and spaced back a ways) to Yahoo Japan (note: Yahoo Japan is a separate organization from Yahoo US, although they started out together). In PRC China, Google is getting strangled by Baidu and the CCP– but that’s another day’s story.

I’ve always marveled at Yahoo Japan’s ability to stay on top of the game. I’ve noticed most Japanese use Yahoo for their homepage, and the mix of news, sports, weather and search make a nice jumping off place (standard portal stuff). Culturally, I can only guess as to why this is the case:

Did the Japanese embrace the web right at the peak of Yahoo’s power, who simply lucked into first place?
Do Japanese prefer clicking through to finding something instead of text searching for it? (yes)
Did the blank white abyss of Google’s homepage just not gel with the Japanese? (likely– behold the Japanese hatred of whitespace in advertising sometime)
Did Japanese cell-phone internet access initially skew them toward Yahoo? (also yes– it’s been called the “galapogos effect“)

One other smart play that Yahoo Japan did a long time ago was to launch Yahoo BB, a broadband service launched in 2001 by the communications pioneer Son Masayoshi. This likely cemented the brand for many Japanese. Just as the Internet meant AOL for many Americans in the mid- to late-90s, the Internet meant Yahoo for Japanese quickly adopting broadband.

But what happens when the dominant portal cannot get a quality search engine from the US partner anymore? Develop one in-house? [That's what the Chinese are trying-- and it's an expensive venture, made possible only by the cheap labour and lavish government funding provided by Beijing.] No, too expensive. It’s better to go shopping, but which engine to get?

The Google search engine is the clear leader– everyone knows that (even Japanese users– they simply stay on Yahoo because it’s their default homepage). The Bing engine may have been a better deal, but likely came with too many strings attached. Overall, IMHO, this deal seems to be a good idea for both partners: Yahoo gets a quality search engine and can continue to concentrate on it’s portal offerings (news, email, shopping, etc.), while Google finally gets enough penetration in the AdWords market here.

The Rise of the Internet Zaibatsu / Chaebol

ecommerce, Japan, Korea No Responses »

Nov 172010

Samsung apartment cluster in Seoul. It looks like those towers in The Matrix...

The word zaibatsu (財閥) in Japanese, or chaebol (재벌) in Korean, translates most closely to ‘business conglomerate’, but there are some important differences than what Americans or Europeans might understand: zaibatsu are very close-knit to their partner companies, often exchanging shares, emphasis is placed on vertical integration wherever possible, money can slosh around internally much more easily than modern Western law would allow. While the zaibatsu were broken up after WWII by MacArthur, their shells continue on in Japan: Mitsui, Mitsubishi, Sumitomo. (side note: Mitsui and Mitsubishi each own either side of downtown Tokyo). In Korea, the Chaebols are even tighter, usually family-run affairs, and pretty much stitch up +80% of the Korean economy. Perhaps you’ve heard of a few: Hyundai, Smansung, LG, Lotte.

We are now starting to see the rise of the Internet Zaibatsu: Amazon, and Google lead the pack, with Liberty Media, IAC, and other smalle companies following close behind. These organizations share many of the same qualities of a classic zaibatsu (that sets them apart from just being a conglomerate):

sympathetic data swapping among properties (either product data or personalized customer profiles) is a central goal in order to maximize economies of scope. This can bring great seamless integration, or it can dunk you into an opt-in email hell from “partner companies”.
IT infrastructure is shared wherever possible for economies of scale
Properties are free to do what they want to meet P&L goals, as long as part of those goals serve the larger good by extending functionality or getting new data sets into the graph.

So far so good, right? Here’s the thing: zaibatsu are simultaneously tremendous pools of capital and research innovation, but they are also desperately smothering to the environment around them. The mere hint of a zaibatsu contemplating entry into a market is enough to scare the crap out of the mid-level players. I am not stating that they are monopolists or oligarchs, just that the zaibatsu structure makes these tough companies to beat.

To a certain extent, the confidence (arrogance) that comes with being a zaibatsu can lead a company into strange directions. At the extreme edges of the vertical integration strategy, zaibatsu companies will get into businesses where they probably don’t belong. For example, Samsung specializes in heavy equipment and manufacturing, which lead them to electronics and appliances and all sorts of robots and then data control and professional services. In the process, Samsung has also bought up huge tracts of land in Korea, which in turn got them into the apartment housing and farming business. Strange bedfellows.

Google, in a search for ever-more efficient data centers, has gotten itself into the hardware business, data center construction, and overall power management. Some eyebrows went up, however, when Google started to publicly state it was investigating new ideas toward Fusion power and other nuclear designs. Is that a natural extension to address their electrical grid needs, or is it just hubris to think they’re so smart they can bring us Mr. Fusion? Most recently, Google has announced boutiques.com, which may actually put them very close to the line of direct competition with the advertisers that pay the bills. In terms of competition with Facebook or Amazon, boutiques.com makes perfect sense. In terms of ‘sticking to the core business model’ however, it may stray from the path, IMHO.

Amazon started with books. Amazon then became such a great early ecommerce store that they branched out to other forms of media. Soon, Amazon sold everything, including some things that probably don’t make sense, or didn’t really catch fire (like groceries). That was all horizontal expansion. The vertical expansion has gone both up the chain and down the layers: Amazon has spent a lot of time and effort to monetize and commoditize as much of their infrastructure as possible. Their servers, their OS, their digital storage, their shipping are all now services for sale (independent of you being an Amazon merchant). Shipping, warehousing and business metrics are all available from Amazon. I’m surprised they haven’t pursued nuclear power like their friends in in Mountain View, yet.

In the end, which model is better? One school of thought says that the Internet market loves specialization. As an employee of shoes.com, the day we saw our competitors start stocking watches and trinkets and other chotchkies on their homepages was a good day. Every day that Zappos moves more toward general merchandise is better for a shoe-only website, right? The other school (the zaibatsu school) says that it’s all about customer wallet-share. Anything an organization can do to satisfy more of the needs of their customers is a good thing.

Personally, I am not passing good/bad judgement on either model. I am just trying to re-introduce a Japanese/Korean term for what we’re seeing lately.

The Galapogos Effect in Japan Cell Phone Market

ecommerce 1 Response »

Nov 072010

A great article on the Japan cell phone market. I was about to write something similar, but my article would have been much more stupidly speculative. Kudos to Peter. Having said that, however, I have noticed many many more iPhones on the street than when I looked two years ago. Moreover, the Docomo (a carrier) Android advertising is in full court press, invoking the Sith Lord himself to show you their product is superior to those hipster brats over at Apple.

New Mobile Payment Gateway: Facebook Credits?

ecommerce, mobile, Network, Social Media No Responses »

Oct 262010

Facebook is selling credits at Target and Walmart. On the face of it, these credits are intended as Christmas stocking stuffers for the Farmville addict in your family (or your boss). However, it’s not that far of a stretch to see these facebook credits being subsumed into a new payment gateway for mobile phones.

Here’s my points of extrapolation:

Facebook has garnered a significant share of people’s online time. It’s become a default daily activity for 500M people globally. That’s one helluva marketplace.
Social Media works better on mobile devices. Said another way, more people are accessing (read: addicted) to Facebook via their mobile phone.
Mobile phones make a great way to pay for things. I’ve discussed this before.

It’s a relatively straight line to draw from those three points to having Facebook offer up a PayPal-type functionality where friends exchange credits with each other, and then Facebook then offers up some sort of payment gateway with retailers. I realize that the “credits” being sold in the stores are going the other way– from physical retail to virtual credits, but it’s easy to see that river flowing the other way once people start to see Facebook as another wallet to store value and trade/give/sell/swap with their friends.

Online gift cards have been a perennial also-ran. Gift cards are cheesy enough for a store, but coupled with the inhuman touch of an online shopping experience, gift cards have never really worked that well. However, Facebook is inherently a friend-connection system. Might that humanization be enough to overcome the inhibitions around gift cards? Let me ask the question this way: if you could simply run through your facebook friend list, and click “$5″ next to each name, then put the sum total on a credit card, would you do it?

Christmas shopping done in 10 minutes… oh yeah.

Mobile App vs. Mobile Website

ecommerce, Good or Bad, mobile No Responses »

Oct 152010

The Elvis app from Elvis.com. Yeah, okay-- I might download that...

I’ve often thought about getting a paying job as ‘buzzword compliance officer’ in a tech company, where I could constantly correct people on using the wrong term, but I realize that I would have to be a jerk to everyone around me, and my winning personality wouldn’t be enough to win them over. Lately I have noticed an increasing intermixing of people saying “mobile app” when they really mean “mobile site”, and visa-versa. No. They are not the same. They often try to accomplish the same end, but there are clear differences, and those differences are important. Just so we’re clear: a mobile site is a website that you view through safari or opera on your mobile phone; a mobile app is something you have to download from iTunes app store.

So what?

I’ve met many retailers who have a mobile site, and are now trying to go for a mobile app as well. I get barraged with email offers from design studios who want to build a mobile app for my company (we already have the mobile website). The confusion between these two terms seems to gin up the demand for more work for these studios. In many cases, a mobile app is a waste of time and effort, IMHO. With a mobile website, the customer merely clicks on a link and the functionality comes right up. This works very well for email marketing messages and facebook or twitter links (social media is stronger on mobile phones than on desktops). Very quick, very viral, very painless, very nice. With a mobile app, the potential customer needs to click on the invite to download, go to the app store, click install, wait for the download, click the app open, and then get on with it. Way too many steps. Don’t get me wrong, I think mobile apps have their place.

Which one do you need?

You’ll want a mobile site if:

your online marketing is primarily selling stuff, like a catalog site with over 2000 SKUs.
your customers only purchase from you once or twice each year– if they’re only coming back every few months, they’re not going to give you valuable real estate on that little 3.5″ of glass in their hand.
email or social marketing is fairly effective: remember that your customers have only got one or two clicks in them– best to get them to the goods immediately
you’ve got no special functionality that requires a great deal of interaction– you just sell stuff or just display content.

You’ll want to go for the mobile app if:

your customers are likely to come back at least twice a month. This is often enough that it overcomes the ‘convenience barrier’ from all those clicks involved with downloading the app the first time. Netflix works here, as does amazon or mashable.
your functionality is quite involved: complex searches (travel sites) or requiring personal information that can be stored in the app. Kayak understands this, as do most travel site apps.
your information is time sensitive, or the customer will respond to a push update. Woot would work, or steepandcheap.com.
your information is easily consumable on a daily basis, and the app can download the information for offline viewing. That NYT app fits this perfectly
your website is geo-sensitive. I’ve talked about this before, and it holds the key to many multichannel or cross-channel marketing efforts.

So, think carefully. Do you really need that mobile app? Or is a mobile version of your website sufficient?

Ecommerce in Asia

ecommerce, Japan 1 Response »

Oct 072010

I’ve relocated to Tokyo with my wife for a four month assignment (possibly longer) in order to work with my company’s retail and wholesale partners in Japan, Korea, China, and perhaps The Philippines. I hope to understand the nuances of Ecommerce much more closely as I settle in over here. Here’s what I can tell from the first week:

Japanese retailers are behind the US retailers in terms of integrating social media. This is likely due to Facebook’s (relatively) recent arrival. Twitter seems to have good penetration, but not so much integrating into the catalog sites yet (no one is screaming ‘tweet this product!’ at me like every site in the US)
Design aesthetics are– well– a bit on the noisy and crowded side. This is probably just as much due to the print legacy of crowded leaflets as well as to an under-representation in the drive for UX and its effect on conversion.
Rakuten. They still call the shots.

I’ll be meeting with as many marketing software and ecommerce vendors as I can while I am here. If you know of anyone I should meet in Japan, Korea, or China, please let me know.

.mobi Domains Are a Dead End

ecommerce, mobile 1 Response »

Sep 202010

Alas, not available on the Kindle yet.

Not too many months ago, I advised my friend to buy up the .mobi equivalent of all the domains he owned. We were questioning the value of a mobile-version website, and what content to put there. I still stand by my recommendations for what thrives on a mobile-version website, but the idea of a separate domain name is completely moribund now.

Here are three reasons why: Multichannel, convenience, and branding.

Multichannel – Your customers will want a consistent experience across channels. My interactions with The Economist or Toyota Motor Corporation should be pretty similar whether I am coming in through a desktop browser, my iphone, the printed paper, or the showroom (yes– I mixed channels there, that was on purpose). This point doesn’t have anything to do with the .mobi domain specifically, until you see the next point…

Convenience – Iam lazy. All customers are. Personally, I blame a service-oriented economy and our advanced democracy: if I can pay a little money and avoid headaches, I’ll pay just about every time. Companies know this, and are constantly adjusting those services for which they charge money (because the convenience is valuable but not necessary), and those services which simply make money on their own, because the convenience greases the skids on separating me from my cash. Mobile websites are definitely in the latter category. Customers can be anywhere and now simply tap into the endless market with a few keystrokes or voice commands. This is the crunch point: every additional finger tap required costs people to give up. Each diad of information imposed upon the customer to remember costs lost sales. There’s no way I am typing in ‘foo.mobi’ instead of just ‘foo’. You’re lucky I type anything at all– I want to get to the point where I simply speak ‘foo’ into my phone, or just wave ‘foo’ in front of the camera.

Branding – A domain broker has been calling me every week asking if we are interested in buying a common-word domain related to our industry. They’re asking a huge amount of money. Every week, the answer is the same: nope. Not that I don’t think the domain could get some decent traffic (it could, and I actually calculated out a value). The problem is that the word is not part of our branding. It’s not consistent. The same thing goes for the .mobi domains: unless you’re an emo musician from New York, the domain has nothing to do with your brand– the ‘.com’ is the runaway default.

So, get that mobile website up and running. Make sure it’s convenient, but don’t bother with the .mobi domain, just make sure your IT geeks are smart enough to have an automatic redirect that senses the customer’s device and directs them to the native version.

Comign up next: why you don’t need or want a mobile app.

Older Entries Newer Entries

GSI’s Rubin Keeps the Good Bits – eBay is Trying to Follow Taobao

Yahoo Japan to use Google Search Engine

The Rise of the Internet Zaibatsu / Chaebol

The Galapogos Effect in Japan Cell Phone Market

Mobile App vs. Mobile Website

Ecommerce in Asia

.mobi Domains Are a Dead End

Topics

Comments

Archives

Tweet

Meta

Photos

Doppelgangers