http://www.kpcb.com/blog/2016-internet-trends-report

The Spectrum of E-Commerce

Having spent 2 years in e-commerce, my nascent view thus far is that every player in this space lies on a spectrum of centralized to de-centralized.

Centralized

Let’s imagine you are walking through the SoHo district of e-commerce. On the centralized end of the block, you have the “everything” stores: Amazon and Walmart + Jet.com. These are huge operations that provide a wide range of inventory at a discount and can conveniently deliver to your doorstep in a few days. These businesses succeed on amassing inventory, slashing operation costs to keep prices low and faster shipping technology like drones. They focus strictly on providing value to the end consumer: savings + convenience + trust.

Decentralized

Down the street on the decentralized end, the e-commerce world is populated by small to medium businesses run by the likes of those who sell original creations or small scale resellers (e.g. buy low in one country, sell high in another). A decade ago on this end, there was one large street fair, Ebay, where anyone can come and sell anything. Over the years, smaller and more niche marketplaces have sprung-up like Etsy.

In parallel, bolder sellers decided they want to build brands and open-up independent shops from marketplaces. Companies like Shopify and Squarespace arose to provide the tools & services to the independent sellers like storefront builder and payment.

The rise of social has also put a new spin on marketplaces. There are social networks built for e-commerce like Polyvore, Wanelo and even the traditional sites like Facebook, Twitter and Pinterest have tried exploring with the Buy button in their feeds and most recently with Facebook Local Market. Wechat has also proven messaging apps can be a popular marketplace in Asia and Facebook Messenger is trying to lead the charge for conversational commerce in North America.

Marketplaces have the buyers and the tools & services enable the sellers. The company that can marry the two sides harmoniously will dominate decentralized e-commerce.

Retailers and Brands

Somewhere in between the everything-stores and independent shops are large retailers. There are retailers born into the era of e-commerce like Warby Parker and Bonobos and traditional brick-and-mortar retailers like Macy’s and Gap who are trying to build an online presence.

This group is the most underserved by innovation in my opinion. For these brands, while Spring provides a marketplace, Shopify creates storefronts and Stripe facilitates payment, there are few services trying to solve their logistical problems like shipping, warehouse management and supply chain management. There is a gap in services where Amazon has in-house competitive advantages and the tools & services companies haven’t scaled up yet, likely contributing to why we see so few new large retailers over time.

In the next 10 years, as independent sellers grow from their medium-size business into large retailers, tools & services companies will need to evolve as well to help sellers solve their scaling challenges. For instance, a company like WeWork can extend their office space offerings to brick-and-mortar store space.

Rough Sketches: Centralized to Decentralized

With Amazon having 41.2% of U.S. e-commerce sales and their boxes sitting on every doorstep, the spectrum is definitely heavy on the centralized end. However, we are nowhere close to declaring Amazon the winner as two factors continue to evolve e-commerce: 1) the “e” in e-commerce will mean new things as the way we connect with the Internet evolves from desktop to mobile to voice + augmented/virtual reality and 2) the total e-commerce pie continues to grow rapidly (14.6% in the U.S. year-over-year).