Rudelle Blogging

The Wal-Mart type large big retailers built up their amazing success mastering three key functions: sourcing, merchandising and logistics. This combination of factors allowed them to crush down traditional mum and dad retailers and to impose a new model.
The first generation of e-commerce sites adapted this wining model on line. After a difficult start in the late 90’s learning the specificities of the Internet channel, large on line retailers today successfully master the three key area of expertise: sourcing, logistics and merchandising. Thanks to a critical mass of increasingly mature buyers, most of them now experience high volumes and attractive profitability. With a 30% growth per annum which does not seem to slow down, e-commerce has a bright future.
However, this nice picture is likely to break into pieces in the coming years. First of all, in the flat world of the Internet, the fortress of sourcing is disaggregating with an amazing speed. The most obscure manufacturers are increasingly easy to spot on line. With little work and a good vertical specialization, almost anyone can source the best product in the most remote place of the virtual world.
Regarding logistics, the growth of Fedex, UPS and other large shipping companies also makes it easy for any individual to send anything anywhere, being as reliable as any big corporation.
Furthermore, the growing maturity of many Internet technologies (which belongs to the Web 2.0 wave) is combining with the collapse of band-width and storage costs. This opens the door to an exponential growth of innovative e-merchandising concepts. New tools make it possible to create on line shops are indeed becoming so simple and powerful. Any single individual entrepreneur can unleash his marketing creativity for a very low investment. As a result, new innovative merchandising concepts are launched every day on the web at a extremely rapid pace.
Without saying that price comparisons are so easy on Internet. This makes it is much more difficult for an e-merchant to replicate a classical tactic of brick and mortar retailers: lure customers with some huge discounts on a couple of very visible products, and generate fat margins derived from impulse purchases.
The combination of these strong trends has a crucial consequence: selling on the Internet has become a commodity. We see the rise of a huge world ecosystem of small entrepreneurs who invest into all possible e-commerce niches. This army of anonymous Joes whose cost structures are close to zero, represents a very serious threat for the large e-retailers. This had made the fortune of an eBay, but the phenomenon goes today well beyond auctions.
Nevertheless, in this second e-commerce revolution, the large e-retailers have a very smart card to play. I will get back to this in my next post.