Tag Archives: Technology Management

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.

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

This time, the focus is e-commerce.
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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.