Staples 2.0: When Online Resembles Offline

5 12 2008

Sarah Tavel of Bessemer Partners has a great post about The Staples 2.0 effect, how large e-commerce retailers are leading to the closure of mom-and-pop stores.  I highly recommend it.

The conclusion that e-commerce will come to more closely resemble physical retail in the long run always struck me as a largely underrepresented one. The seismic drop in consumer spending seems to be the catalyst to put this reality front and center.

The post got me thinking. Search Engine Ranking is the key ingredient here.

Many direct comparisons can be made between online retail and physical retail: branding, repeat customers, customer acquisition cost, economies of scale, etc. Many insurmountable benefits to scale.

With Search Ranking, it’s as if once you’ve “earned” your spot, you’ve not only got a flagship store in Times Square, but also in London Square, Union Square, Mall of America, and so on… for FREE. The land grab for this space spawned Web 1.0, Web 2.0, and on.

The existence of Search Ranking, based on popularity (links), makes it even more insurmountable to dethrone a market leader. It’s not the only benefit to scale, but my gut says that it’s the straw that breaks the camel’s back for new entrants.

Some of the thinking is very obvious. Commodities will be bought from the low-cost producer. Long tail wise, there can be a healthy long tail serving infinite small-scale interests given removal of geographical barriers. Today’s basically zero cost of real estate means these niches have a lot of room to thrive.

Hence an Etsy, Zazzle or such can thrive as well.

You’ll basically see large e-commerce retailers, with niche retailers competing on a specific niche service, which sure looks a lot like physical retail.

There’s still of lot of room to grow and create value to build a brand and your base of loyal users/customers/followers: aggregation, customization, community, socialization.

It’s just unoriginality that will go unrewarded… it’s no different on the Wild Wild Web.

(via GigaOM)

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One response

8 12 2008
Sarah

Rodger — Thanks for the link and follow-up post. You explained the advertising side of the argument much clearer than I could have! It will be interesting to see how the ecommerce landscape changes over the next few years — I agree with your conclusion that niches will have a lot of room to thrive.

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