June 19, 2024

E-Commerce Priority Grid

In my project work, it is increasingly clear that there are four types of e-commerce businesses. I represent each business in the grid below.

Let's think about each business model.

Pay 3rd Parties For Customers / Focus on Promotions/Campaigns
  • "I see dead people".
  • This is the land of AliExpress (owned by Alibaba) and Temu. Two days ago each brand offered an iem headphone that cost $15.99 on Amazon for $5. Marketplaces!
  • It's over. Not just for you, but eventually for Amazon. These folks will gamify you (and Amazon) into oblivion.
  • You cannot compete when you are in bidding wars for customers against enormous brands possessing bottomless budgets. It's over.
  • You cannot compete when you sell something for $19.99 and Amazon sells something comparable for $14.99 and AliExpress/Temu sell something comparable for half the price Amazon sells the item for as part of their endless item-level promotions.
  • DO ... NOT ... TRY ... TO ... SUCCEED ... IN ... THIS ... REALM.
  • "I see dead people".

Pay 3rd Parties For Customers / Focus on Merchandise.
  • This is the common e-commerce business model ... where the "digital experts" roam the Earth.
  • Think of The North Face as an example. Yes, there is a brand-centric selling approach to their merchandise, maybe that is necessary when you focus on merchandise and don't focus on discounting. You'll pay for success somewhere in the p&l.
  • Lume is another example. You can't avoid that woman yelling PITS, PRIVATES at you on commercials if you still watch linear television. They're north of $100,000,000 in sales in seven years. And interestingly, they have some semblance of community on Instagram (194,000 followers ... think about that). Go to their website, you immediately see a focus on best sellers (hint - they care about merchandise).

Generate Your Own Community / Focus on Promotions/Campaigns
  • REI and their co-op model, paired with promotions and campaigns (20% off Experiences, Earn 5% via their Loyalty Program, their Outlet etc.

Generate Your Own Community / Focus on Merchandise
  • Apple
  • Lululemon
  • Headphones.com
  • GoPro

I get it ... those who generate their own community also pay Google/Facebook for customers. But they don't "have" to do that ... they already have a community of avid customers and prospects.

Let's think about an example ... how about In The Company of Dogs.
  • No social media presence to speak of (so they're not a community-based brand, are they?).
  • 40% off on the home page.
  • Sale on the home page.
  • Sign up for emails (that's a community) and get 10% off your first order (that's a promo).
  • Click on item after item after item and you'll see at the bottom "write the first review" in small print. No community.
  • You can get free catalogs on their website, so they are focused on promotions/campaigns.

In all likelihood they are a bottom-right quadrant brand.
  • "I see dead people".

Unless there are changes, they're dead, they just don't know it yet.

Where does your business fall on this grid?

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