E-Commerce Dollars Are Driven More By ‘The How,’ Not ‘The What’

When it comes to e-commerce, there’s Amazon and then there’s everybody else. Whether a retailer specializes in flash sales or in subscription-based, curated “boxes of merchandise,” all companies in the space are defining themselves against what Amazon has achieved and what it, as general go-to for everything from books to music to household items, can never be.

A panel addressed this issue today at Business Insider’s Ignition conference.

Moderator Kevin Ryan, CEO of luxury discount deals site Gilt Groupe (and the co-founder of Business Insider), put the question to his guests: Amazon was the pioneer way back in the early part of the last decade — why did take until after 2007 for the innovation of flash sales, social shopping and subscription based digital retailing to attract consumers? And how long will it take until these businesses can scale (e.g., reach a revenue threshold of say, $100 million)?

“Around the time you describe, it became clear to companies entering the space that trying to build a ‘me too’ e-commerce business with nothing more than a simple search box was going to fail,” said John Caplan, CEO & founder of social shopping platform OpenSky. “These companies realized that Amazon isn’t enough for consumers. Amazon is great vending machine shopping, but consumers want an alternative. Of course, there’s lots of interesting ‘feature e-commerce’ businesses that [aim to] disrupt how people shop. The ones that can present a unique identity and set of defined offerings aimed at a particular area of the marketplace will win. Everything being launched right now is a reaction to eBay and Amazon. The ones that can stand out in consumers’ minds will win big.”

Ted Roden, CEO, Fancy Hands, a service-oriented e-commerce play,  amplified Caplan’s comment, saying, “We can’t succeed by having Amazon fail. We have to do what we do well and that means having a way better product.”

The question then turned to the meaning of “innovation” in the space and how to create that distinct identity. Michael Dubin, CEO of the literal-minded Dollar Shave Club, said that he considers content to be a major part of how the company acquires consumers and presents a certain irreverent attitude aimed at the young male demographic it caters to.

“To make it in e-commerce right now, you have to think about the way you’re asking the customer to shop,” Dubin said. “For us, the idea of a selling a razor for a dollar a day online was based on the idea that shopping for a razor is an incovenience. It’s not fun, you have to ask the guy at the pharmacy to get a key and open up the display. I think that’s an idea that can be applied universally when it comes to getting people to shop with you online on a regular basis. You’re going to have to make it very easy and even fun. Online retail is going to be more about the how, less about the what — though you can’t sell crap, of course.”

Asked about becoming profitable, large companies, Roden and Dubin both said it’s too soon to tell what will happen in terms of being able to build scalable businesses in e-commerce.

Still, Ryan pressed the group, noting that Amazon still has pretty thin margins, and the same is true for the other veteran public e-commerce player, Overstock. “So does e-commerce suck as a business model?”

“I put my fortune into OpenSky, so I don’t think e-commerce sucks,” Caplan said. “Amazon could have higher margins, but they put so much back into the business. As you scale, you can get more leverage in dealing with expenses. The other way to drive margin is to have specialty goods, but that has inventory risk. Trying to sell market goods in an Amazon world is difficult, because then you’re just competing on price. You have to find a way to create unique value for a consumer.”