business strategy – Selim Hasagasioglu

On E-commerce: Can every category be offered through e-commerce?

E-commerce and traditionally analog incumbents, especially those that are unspecialized, have been trying to penetrate into different industries and categories, thinking that many such offerings can be provided digitally.

Were they able to make it happen?

Of course, retail operations specific to some products have quickly utilized e-commerce practices, as well as omni-channel applications.
While computer software and video games have been moving into the “digital shelves” in a profitable way as they are innately digital, many other categories are lagging behind again because of their inherent analog nature.
There are only a few category killers and niche players that have been profitably disrupting innately analog businesses despite the presence of powerful, albeit unspecialized and broad-based, incumbents.

What are the categories that are/were tried and could not still be fully streamlined through e-commerce?

In this article, I draw on my experience at Amazon and elaborate on what it takes to be a profitable and viable e-commerce business. Furthermore, I also analyze companies such as 1stdibs, Etsy, and Wayfair and what kind of a future befall these companies, also expanding on what they were doing right and wrong. This article is intended to be another blueprint for those who plan to go online and launch their e-commerce business.

On Scaling Service Businesses and Digitization 💻

“Many businesses gain only limited advantages as they grow to large scale.
Service businesses especially are difficult to make monopolies.
If you own a yoga studio, for example, you’ll only be able to serve a certain number of customers.
You can hire more instructors and expand to more locations, but your margins will remain fairly low and you’ll never reach a point where a core group of talented people can provide something of value to millions of separate clients, as software engineers are able to do.”
➡️ Taken from Peter Thiel’s Zero to One
In this article, I try to disprove Thiel’s claim, providing a number of companies that are services businesses and have scaled through digitization successfully let alone have become monopolies despite inherently being service businesses. I elaborate on how these companies reinvented their business models and became successful while also sharing what they could have done better and some potential risks looming large in the future. I also demonstrate how these exceptional companies destroyed established trends and biases.

On Management Consulting Practices: Turnaround Projects followed by Business Transformation, Brand Revitalization, and Sustainable Growth. Focusing on Lego, Nintendo, and Sega

Studying successful turnaround projects will provide you with great lessons.

Many consultants tasked with turning around a business focus mainly on cost reduction projects and deem the mission complete after a successful turnaround.

However, natural and subsequent steps after a turnaround are business transformation and brand revitalization.

Business may have survived after the turnaround but whether it will reach a sustainable and organic growth phase ever again depends on following transformation and revitalization.
In this article, I elaborate on what needs to follow after a turnaround project for a business to continue to thrive in the future. I share how successful business transformation and brand revitalization look like, analyzing the history of Lego, Nintendo, and Sega in greater detail.

Businesses, States, and Governments 🗺️Why a Shinise like Nintendo differs from Boeing

Companies cannot thrive in failed states nor can they become global players.

Those that are relatively successful in a failed state cannot compete in global markets and their insignificant local success is bound by their ability to kowtow to their local governments.

Nonetheless, one should not ignore the fact that many global giants of today, despite them not being founded in failed states, have become such because of their relationships with their respective local governments and their state’s strong economic position in the global markets.

In today’s highly competitive markets, an innate monopoly, a wielder of a patented, well-protected, and inimitable proprietary technology, or a government contractor owning exclusive and never-ending business rights are players whose successes are surest.

Nevertheless, all such sure-to-succeed models, one way or another, are reliant on the very existence of governments and relationships with governments.
In this article, I will explain how companies with close ties to their respective governments thrive through these connections, providing real-world examples of innate monopolies, technology companies, and government contractors. I will elaborate on how these relationships impact the operations of the companies and why such companies succeed regardless of the political and economic system in the original country. I will also expand on why a shinise like Nintendo is an exception and the role of competition.

Businesses built around Network Effects Part 2: Diving a little deeper into E-commerce businesses

This time, the focus is e-commerce.
⬇️

Marketplace is a very important vertical for many e-commerce companies.

Some are solely based on it while others rely on it for effortless revenue (but most importantly profit) generation as direct retail operations in e-commerce are financially less viable.

Marketplace vertical, as is the case with social platforms, is reliant on network effects, and the accompanying proprietary tech is well-connected to network effects.

The connection is strong for both social media platforms and pure e-commerce businesses as almost any front-end feature of any platform can be replicated very easily and quickly by all players.

The similarity between two business models, however, is that proprietary technology and network effects facilitate mainly usage in one and mainly purchasing process in the other so that users build “necessary” habits and never quit the platforms.
In this article, I will dive deeper into e-commerce businesses including pure e-commerce business and e-commerce giants that have many adjacent and disparate business activities. I will try to analyze and assess the viability of different business models while also elaborating a little bit more on how network effects increase the sustainability and longevity of these different companies.

Businesses built around Network Effects Part 1: A guide to understand the strategy and compare some contemporary examples (both good and bad ones)

A company that is built around network effects has a demand-side comparative advantage. Some companies have also the ability to combine this demand-side benefit with supply-side capabilities (do you know who they are?).

In today’s digital environment, a proprietary technology complemented by network effects is deemed a sure winner-take-all model (until it is not as is the case with all these financially unviable business models).

Think of a social media platform whose sole monetization tool is advertising.

It has both great proprietary technology boosting targeted advertising metrics and returns and enviable fortress built upon network effects.

However, the prospect of success may still be uncertain even if it is a monopoly.

Proprietary tech can monetize through how frequently the platform is being used and how many monthly active users the platform has command over.

Regardless of whether you run analog, digital, or a hybrid business; capitalizing fully on network effects traditionally requires both frequent usage and number of users. Nonetheless, some companies, after reaching a critical mass of users, may think that usage is more important than the number of users (which companies are they?) and they promote regular use evolving into habit and addictions.
This article is intended to be the first chapter of a thorough guide helping you understand the network effect strategies of different contemporary companies and focusing on both successes and failures of network-effects-driven businesses.

Digitization and Fixed Costs: Transformation that happened in Retail and Video Games

Digitization has reduced fixed costs for many businesses.
However, companies that were and are still being hurt most by this reality are those for which fixed costs were working as barriers to entry.
Furthermore, mediocre efforts to digitize, poor execution, and false beliefs that digitization are not possible for “them” exacerbated their situation.
The higher the fixed costs, the more skyscraping barriers to entry were.
Digitization has partially changed this situation, lowering fixed costs and helping challengers compete against incumbents.

In this article, I provide examples from the retail and video game industries regarding how digitization has been a game changer for both incumbents and new entrants.

Associating Traffic (and all other similar metrics) with Monetization

Many people mistake traffic, you can also add likes and followers in the same basket, as monetization.

For a pure-play e-commerce company, more traffic may not mean more revenues as the conversion rate for a pure-player is at low single digits; however, a decreasing one will almost always result in decreasing revenues.
For omni-channel operations, the relationship is more convoluted.

Marketing research done poorly!

Like many contemporary marketing concepts, marketing research is both an art and a science, containing many qualitative and quantitative aspects.

Star Wars and Friends would not have been created if its producers had listened to their “high-esteemed” marketing researchers.

Even for iPhone, many marketing researchers thought that the product would fail because consumers would still prefer to have their phones and MP3 players stand-alone.

Although these examples are of poorly conceived and conducted marketing research projects that still could not derail excellent products, there are still many successful products and services shaped by the insights gained through marketing research.

Success or failure of a marketing research project can be measured more easily, albeit in hindsight, if the product is launched.

For products that are scraped through marketing research, such measurement is more complicated: Obviously, you will never know if you never launch.

Think once what would have happened if George Lucas or Steve Jobs had listened to these “marketing researchers”!

Tag Archives: business strategy