Thursday, July 1, 2010


My neighborhood tennis joint is blessed with clay/dirt courts and, during this time of year, ant hills are a common site along the service lines. Marching over to verify the mark for a line call, I was struck by the way these little guys scamper around in a seemingly irrational way; wondering how they get anything done in a world of such micro disorder. Yet the length of the court has at least 15 ant hills, perfectly aligned; order amid seeming chaos. It set me to thinking about what we are now seeing in the Internet Commerce space.

Today brought news of an investment in fast growing Modcloth by Accel and First Round. Yesterday's news brought the acquisition of Woot by Amazon. Earlier in June, Ebay bought bar code scanning infrastructure from Red Laser. Of course, funding stories abound from places such as Gilt, Ideeli, and elsewhere.

On the surface it seems as if there is a mad ant scramble in the commerce side of the internet. Hmmm, I suppose there is a mad ant scramble in the commerce side of the internet. I think it's justified. Let me explain.

In an area I've recently been looking at (and a microcosm of the vast commerce arena), teen commerce, enjoys less than 6% of all apparel sales online. It's a number that is probably appropriate given that most of the leading commerce sites were built and implemented prior to the social revolution, massive broadband acceptance, mobile search (which is fundamentally changing as people increasingly tend to search from within applications, as opposed to via the browser), real-time alerts/buying, and the prevalent use of video for presentation of items. In other words, the legacy sites were implemented more than two years ago. The change in the infrastructure and supporting technologies, individually, may seem like ants running about, but stepping back, there's a method to the building.

We are at the beginning of a fundamental platform shift in commerce. It has the appearance of a random ant walk, but I am convinced there's a method to this capitalistic ritual. The leading economic indicator I can point to is the rut that same day store sales are in, coupled with the double digit growth of internet sales by the same brands. I don't think we are in an economy induced retailing rut, and think the move away from physical stores will accelerate as the innovative factors mentioned above are adopted by mainstream sites, optimized by independent vendors, and embraced by savvy consumers. Now, I don't think remote sales will totally replace physical shopping, nor do I think the 95/5% ratio is justified.

Consumers are benefiting from better prices passed along to vendors who are far more inventory efficient, but the benefits extend beyond 'permacheap', into enhanced selection, real-time curation by your peers/experts, emotive real-time offers, far more efficient promotion and many other attributes which passionate entrepreneuers will uncover.

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