One of my friends in San Francisco tells a funny story about his friend, “Tony” who was starting a new dotcom.
Tony: Hey dude, I invested in your business; how ’bout you invest in mine?
My friend, whose own internet biz is no slouch: Sure, Tony. What kind of business?
Tony: It’s an online shoe store.
My friend: No thanks, man. That’ll never work.
The rest, as they say, is (billions of dollars of) history.
Online sales are posting insane growth; indeed, double digits every quarter are standard.
And at the INC 500/5000 conference I just attended, the number one fastest growing company in the nation was internet retailer Ideeli with an astounding 40,882% growth rate over three years.
Online shopping is here to stay. Even my 90 year old grandfather shops online.*
Zappos and Amazon work because they’re like the Wal-marts of online shopping. (Remember that Amazon bought Zappos.)
In fact, I just bought Lacoste towels from Zappos because shipping was free and they were cheaper than the ones at my local Macy’s.**
Re: Amazon, I now take pictures of books at stores that I would like to have, put them on my Amazon list, and order big chunks at a time. Sorry Anthropologie. You give me such good ideas.
Ideeli, and other flash sale sites that are rocking it, are basically curators.
They are, in some ways, the anti-Zappos/Amazons.
Besides the relatively limited stock, time is of the essence (look gamification! and it should be noted here I hate those darned countdown checkout clocks. sooooo annoying), there is built-in exclusivity (clever positioning), and to top it all off they cull the good stuff (depending on which flash sale site you frequent) from all the shit out there for you. And make it cheaper.
Full disclosure: some designers are actually making stuff especially FOR Ideeli et al. Which means that to hit those low price points, quality and construction are likely suffering, as are the Chinese workers producing it.
In some cases, however, (Gilt for one) the flash sites place a buy for a season at the same time that other regular retailers do, meaning that the designers can order far more from their factories than they used to and forecast better, bringing prices down for the consumer and increasing production for the factories. This is good.
There are still hiccups in the model, namely no generous free shipping yet and cumbersome returns/exchanges because of the flash nature of the sale.
Gilt Groupe doesn’t really have a good exchange policy, or so they told my assistant earlier this week. Customer service’s quote was, “Uh, we’re working on that.”
They’re probably too busy selling shit to care about returns.
Gilt is doing alright. To the tune of a billion dollar valuation.
I suspect we’ll see a proliferation of “me too” flash sale sites that position themselves in more niche markets, whether they’re based on geography, product, price point, age demo, or all of the above. And we will have room for many of them.
So, given that Zappos has become a juggernaut, Amazon continues to kick ass, and flash sale sites are pretty much ubiquitous and profitable even with low margins, what could possibly be next?
We don’t want to miss the proverbial boat! Especially if it’s a Zappos-sized boat!
(Remind me to one day tell you the story of Shoes.com . It’s interesting.)
The answer, my friends, will come in the next post…
Call it the Crystal Ball of E-tail. bahahahahaha.
* Ok, he does his window shopping online. Then he calls the company and pays for his model airplane parts over the phone. He don’t trust no stinkin computer with his credit card number.
** I’m a girl who has Cartier jewelry and original contemporary art. Let us note here that most consumers, even those who make above-average income, are responsive to price and incentives like free shipping. Free shipping will be standard in the very near future, and practically is already. Point here is that if I’m trolling the interwebs to save $5 on towels, you can sure as heck bet that your average young professional is comparison shopping on way more than just towels. Hence the loveliness of the economies of scale created by both Amazon and Zappos. And the real Wal-mart. Have you seen their outdoor furniture???