After Groupon: What’s Next in the Evolution of Online Retail?
This article was published by sparksheet.com
The Groupon model may have hit a snag, but when it comes to online retail, there’s plenty in store for brands who think global, writes digital strategist Ivonne Kinser.
In 2012, e-commerce within the United States accounted for 28 percent of all global sales. It’s clear that Americans love to shop online, but “global” is the key word here.
In China, for example, the e-commerce industry is forecast to be worth $370 billion by 2015 – up from $74 billion in 2010. Over in Latin America, Forrester predicts that Brazil’s online retail sales will reach more than $25 billion by 2017, andeMarketer projects Mexican e-commerce sales will reach $7.98 billion this year and continue growing into 2016, when annual sales could reach $13 billion.
Meanwhile, in an interview with PandoDaily about the future of retail, American entrepreneur and web veteran Marc Andreessendidn’t sugar-coat his assessment of the traditional brick-and-mortar retail industry: “Retail guys are going to go out of business and e-commerce will become the place everyone buys. You are not going to have a choice.”
The rise and fall (and rise again) of group buying
There are plenty of e-commerce business models to choose from, including group buying and daily deals, subscription e-commerce, social e-commerce and more. One of the most popular business models is “flash sales” (also known as private sales clubs).
The success of this model can be attributed to the sense of urgency triggered by limited quantities of the desired item combined with the limited time customers have to decide whether to purchase the product.
Not only that, but flash sales sites also tend to benefit from the enthusiasm of the shoppers, who become brand advocates and help grow the popularity of the sites by sharing sales and links via their personal social networks.
One of the first successful flash sales models was launched by Groupon. After remarkable initial success, however, the startup encountered a problem that, in my opinion, had nothing to do with the model itself.
Despite growing competition, Groupon remains one of the more popular social buying sites.
The success of Groupon’s business model depended on the company’s ability to grow a substantial client-base and drive purchase repetition: Groupon needed a huge audience that would be happy with their purchases and return repeatedly to the site.
But price alone does not guarantee repeat customers; a great service or product experience is equally crucial. Unfortunately forGroupon, it had no control over the companies selling goods and services through its platform, which created serious problems for Groupon when customers’ expectations were not met.
Among the noteworthy companies to have successfully executed this model are Gilt (which in two years grew from no-name startup to e-commerce powerhouse worth almost $400 million),Rue La La (whose parent company was acquired by eBay in March 2011 for $2.4 billion), and Fab.com (which recorded more than $100 million in sales last year and is set to more than double revenue in 2013).
As one of the biggest privately held e-commerce properties on the web, its support of the flash sales model is proof that this e-commerce trend is here to stay.
Sites like Fab.com are jumping on the flash sales trend and are growing fast.
SouthWinston LLC (an investment holding and technology incubator company) announced recently that it has developed, incubated and led an investment round in Join’em, the world’s first crowd-commerce marketplace (currently in beta testing). That’s right, crowd-commerce.
Join’em turns the existing group-buying model on its head by allowing customers to initiate flash sales: Shoppers select the products, pick the price range, launch the deals and promote them through their networks. Reputable merchants and suppliers then compete in a “reverse auction” to fulfill those deals at or below the maximum price set by the shoppers.
According to Chief Marketing and Development Officer Darren Waxman, the platform offers retailers, manufacturers and consumers a next-generation e-commerce marketplace where massive crowd-sourced demand meets reverse-auction efficiency. The Join’em model is just one of many exciting changes coming to the e-commerce industry. As companies look to meet new challenges and figure out where e-retail is going, I look forward to watching the e-retail revolution unfold.