3 Strategy Mistakes by Big Online Retailers

It’s impossible to predict the future and basically that’s what strategy is. Based on historic evidence, data and outside factors, companies try to predict how the market is going to evolve and how they can best benefit from this evolution.

While strategy is rarely un-debatable and never perfectly executed, it is a very important part in evolving companies. Having a vision and the plan to achieve that vision is what makes companies such as Amazon, Walmart or Apple stay ahead of the competition.

But sometimes things go wrong and strategy mistakes happen. Here are three cases:

1. Overstock plans to develop media service, as predicted by The Onion

Overstock is one of the largest online retailers in the US. It is an Utah based retail company that has a 20 years background in commerce.

The company sells more than 1 million items on the Overstock.com web-store. The products range from home deco to jewelry to electronics to cars to insurance. Did I mention they run a pet adoption online service? And a farmer’s market?

You’ve probably guessed where I’m going with this. Focus is really not their strongest asset. The company has basically organized its strategy around the old “let’s just try everything and see what sticks” motto. This is, of course, the winning formula to tackle Amazon. This and of course Bitcoin, a surefire solution by the company’s CEO to fight the upcoming zombie revolution.

No, really, he actually said that:

“Someday, either zombies walk the Earth or something close to that[…]. Bitcoin is the solution.”

Patrick Byrne, Overstock CEO and Bitcoin Messiah. Source: Wired.

The strategy is so hilarious, Onion can predict it

Overstock’s strategy turned “un-focused” to hilarious when it announced its new media service aimed at Amazon’s Prime earlier this year. A bold move one might say, as Overstock is missing a few things called content, digital infrastructure, hardware (think about the Kindle), Amazon’s market share and media know-how. But they did get featured in the Onion a full 2 years before they’ve made the move.

2. Walmart spins off its ecommerce operation, then acquires it, then ignores it, then develops it, then makes it central. Sort of.

Make no mistake. Walmart is huge. Walmart is on top of the retail food chain (excuse the pun). It has more than 11.000 stores, in 27 countries and employs more than 2.2 million people. The company is the biggest retailer in the world with a revenue of $485 billion.

President and CEO of Wal-Mart Global eCommerce Neil Ashe

But that doesn’t mean it should be successful online, does it?

Walmart’s digital strategy is a bit … puzzling, if I may. The company’s “ecommerce” store has been online since 1996, about the same time Amazon started to grow. Unlike Amazon, Walmart.com didn’t really matter in the company strategy until 1999. That’s when the company announced the customers that no orders placed after the 14th of December could be fulfilled in due time for the holidays.

Walmart then decided to spin off that pesky thing called the online store in 2000 and transferred the operations in Silicon Valley, under a partnership with Accel Ventures. The reason, as mentioned in this throw-back article from 2002, is thatonline is “not where their customer base is”.

After an unusually horrible decision to shut down the store for a month in the fall of 2000, for a revamp, the store was just as bad as before. But it did managed to miss the 2000 holidays season due to a late re-start.

The company eventually realized the blunder and in 2001 bought back Accel’s share in the ecommerce company. Good thing they’ve realized just how important ecommerce was. It didn’t even take long to improve and redesign the webstore: just 5 years, until 2006.

Walmart was also quick to realize it can make a connection between the online and offline channels. In 2007, 11 years after it launched its online store, it launched the Site to Store program, allowing customers to order online and pick up in store.

Blunder after blunder, the company eventually realized the importance of stepping into a new era, one where customers are connected to Walmart digitally. The company has since changed its perception on ecommerce, hired talent and started experimenting with upcoming technologies.

But if there’s something worse than an un-focused strategy and a rigid strategy, that has to be … no strategy:

3. Fab.com turns from gay social networking site to daily discounter to flash sales retailer to catalogue retailer to custom furniture designer. Within 4 years.

There are very few cases where the lack of strategy and extensive investments are seen so clear within the same company. Fab is one of these rare fails. The company was founded by Jason Goldberg and Bradford Shellhammer and experimented with some pivots. Five that I know of, mentioned above.

Fab’s evolution

It went on to raise a total of $336 million and for a while it could have been the next Amazon, or Ikea, or Apple, or whatever founder Jason Goldberg thought was the fad of the day. Eventually it went on to be a huge whole in the investors’ pockets and was acquired by an undisclosed sum in march 2015.

The whole story is outlined in this cautionary tale. It could be a very funny strategy fail if it weren’t such a sad story for investors, founders, employees and in the end – the whole online retail market. Fab is the story of what could have been, if someone were to lay out a smarter strategy. Or some strategy for that matter.

Is Mass Customization the Future of Ecommerce?

Henry Ford said “People can have the Model T in any color – as long as it’s black”, in the early 20th century. That’s when Ford’s innovation, the assembly line, vastly improved productivity thus reducing production costs. Lower costs meant companies could manufacture cheaper products and still be profitable.

The assembly line made possible the mass production of goods. Things that were previously custom-made and unique soon became available to the now emerging middle class. Clothing, food, even cars and houses became accessible to the mass market.

More than 100 years after Ford launched the "one color" Model T, Ford buyers can customize their cars online
More than 100 years after Ford launched the “one color” Model T, Ford buyers can customize their cars online

Industries were built around product manufacturing. The customer was no longer the center of the universe. Companies focused on the product. Products were manufactured in large quantities, distributed and sold, with a lot of help from advertising companies. Even though advertising was around, it wasn’t the type of organized industry we now know until the television set became a part of consumers’ daily lives. By borrowing some concepts used in WWII propaganda, experimenting a lot and innovating, advertising quickly evolved in a mature tool to push mass – manufactured products to the market, globally.

Mass manufacturing becomes the standard

After 1970 two trends started to emerge. First one – the mass-manufactured product becomes the norm. Faster assembly lines, improved productivity with better management and companies going global – it all lead to bigger manufacturing facilities and more money poured into advertising. In the western world people were spending earned and borrowed money faster than ever before to buy mass-market products.

The second trend was improving production with help from computers and networks. It all started small and kept growing. Innovation in the IT industry allowed companies to improve manufacturing productivity further. Soon cars stopped being built by people and robots took over. They were faster, better, less prone to error and cheaper in the long run. They also learned new things a lot better. With automated assembly lines, the mass produced goods could be reprogrammed to build new products fast.

The product development cycle was shortened. The fact that now BMW or Mercedes are able to launch a new model every month is possible because of advancements in management and IT. These companies can now target customer groups. Ford’s Model T was a “One Size Fits All” product but now everything’s changed. The auto companies can split their customers and they can build products for increasingly smaller niches.

Mass customization becomes a reality

The internet changed everything. When Michael Dell decided he would create a special PC for anyone willing to pay for it, he probably had no idea what his actions meant. Now Dell is a global company and one of the largest online retailers. When the company decided it was going to offer mass market customization features, it seemed like a really risky move. At that time, computer manufacturers were already engaged in a price war to market accessible computers.  It didn’t seem like a good idea to turn a mass produced, mass marketed product in a customizable one.

Dell offered their customers what they wanted: the ability to choose between different options in terms of design, software and hardware. The order, assembly and shipment processes were streamlined using software designed to minimize human input and error. Today’s devices (be it desktop computers, laptops, tablets or smartphones) are available in many formats. Most of them are a hybrid between mass produced and customized products.

The future of mass customization is already here and the company that helped most with making it a reality is the largest online retailer in the world: Amazon.

Amazon lead the way in mass customization with Print-On-Demand

amazon logoFirst off, Amazon made possible a type of personalized experience for customers by providing personal recommendations and notifications based on purchase history. Its second biggest innovation was print on demand. With Amazon, books were no longer published en-masse for long-tail items. Rather, for a small amount of extra cost, they were made available as items printed on demand.

This innovation spawned a new breed of self-published authors, leveling the field for publishing. In turn, readers were now able to read books otherwise unavailable and writers could skip pitching to publishing houses. The effect was so dramatic that some large book retailers had to close their brick and mortar stores.

Top ecommerce companies selling mass customized merchandise

From shoes to t-shirts to art-prints it seems like anything is game when it comes to online-powered mass-customization. Many companies jumped the customization wagon, but few stand out. Have a look below at these companies:

zazzle

 

Zazzle.com

One of the most popular platforms in the world for Built-To-Order, customized products is Zazzle. Its mission: “To Enable Every Custom, On-Demand Product in the World On Our Platform.” It is a mix between self-curated product designs that can be customized by customers, and a wide variety of products submitted by designers and entrepreneurs in the marketplace.

The company partnered with large brands to provide customizable products for companies such as Disney, Hallmark, DC Comics or even Google. It is growing fast, outpacing its competitors and bringing mass customization for the wide market.

Zazzle’s success is based on two main factors. The first is its ability to customize products that are manufactured separately and customized at the end, with input from the end consumer. This allows for a minimum slowdown in manufacturing capabilities.

The second factor helping Zazzle tackle its competitors is a patented color print technology that allows it to manufacture multicolored items, without signifiant increase in costs and manufacturing time.

It does also help that Klein Perkins Caufield & Byers, a well known Silicon Valley VC firm, backed Zazzle with $48 million. The VC’s have also backed up a couple of companies you might have heard of, such as Google, Amazon, AOL or Electronic Arts.

chikoshoes

Chiko Shoes

Ladies – ever felt like you could be the world’s best shoe designer? Felt like you’ve hadn’t had the chance to show what you’ve capable of? It turns out you are not alone. Founders Rumbert Kolkman and Judy Chin believed they could make shoe design a mass-customizable market. In 1999 they’ve built a B2B company that would allow shoe retailers and designers to access a rich supply chain with ease.

In 2013 they’ve opened this option to the public, unleashing the power of mass-customization to end buyers world wide. Prices are ranging from $230 to $1200 and Chiko Shoes allows customers to chose between 1300 material swatches.

The shop goes against luxury heavyweights dealing with customization, such as Louis Vuitton Mon Monogram or Prada’s Lettering Project.

shapeways

Shapeways

We’ve previously listed 3D printing as one of the technologies that are disrupting online retail. Among many other companies providing 3D printing technology, Shapeways stands out as a potential market leader for 3D printed custom items.

The company was founded in 2007 in the Netherlands. It moved to NY, where it received a $5million founding from VC’s including Andressen Horowitz. It now runs a fully operational marketplace where designers can sell their 3D designs and customers can create their own.

As of June 2012 is sold over 1 million user-created objects. Production was provided by its Queens, NY 3D Printing factory that uses  50 industrial printers to manufacture millions of user designed custom projects.

threadless

Threadless

Threadless started as a marketplace for t-shirt designers and quickly evolved into providing other customized merchandise. Users can purchase clothing items (such as t-shirts, hoodies or tank tops), art prints or phone cases.

Although Threadless does not allow mass customization per se it does allow users to submit designs. These designs can be featured and sold to consumers afterwards. What makes Threadless different is the fact that not all designs are accepted and marketed yet those who do are chosen by the community.

ethreads

Ethreads

Ethreads allows customers to create their very own bags, starting with a blank model and adding options using the online design tool. The shop also offers options to see what others have designed and the ability to buy directly on Amazon.

fab.com

Fab.com

Fab started as a flash sales online store. Its approach proved very lucrative for a while. The company decided to take another path by providing customized design options for furniture and home deco buyers. Although the change affected only its european operations, it seems the company is heavily interested in developing its customization options. It completely stopped marketing its products and flash sales options in the EU and is fully engaged in providing customized furniture.

A preview of furniture designed on Fab.com
A preview of furniture designed on Fab.com

The furniture is made-to-measure according to users’ needs. It allows customers to design their own products in 5 main categories: shelving systems, tables, sofas, beds and wall shelves. A complex yet easy to use configuration system allows potential customers-turned-designers to create the perfect match for the home. Inputs allow customization of size, materials, colors, finishing and others. A 3D visualization engine allows customers to view their newly created product before ordering.

This new pivot in the company was made possible after Fab purchased Massivkonzept, a company founders declared was already profitable and growing. It seems Germany is a great place to look for companies focused on customized furniture design. Woonio, a german ecommerce startup, offers customized furniture like tables, beds, lounge stairs.

The future of retail is mass customization

Examples above show any industry can allow mass customization and is prone to change. Individuals need to feel empowered when purchasing and technology has made this possible. Whether is next year or 10 years from now, mass customization will become massively popular.

 

 

Online Stores as Super Heroes: Top 5 Online Super Retailers

There are retailers and then there are super retailers. Here’s a list of some of the bravest and strongest online retailers and their super hero avatar.

Let’s start with number 5:

5. Batman

Secret Identity: Apple.com

batman-apple

The Batman Super Retailer is a mighty hero – strong, determined but first of all – rich. He uses gadgets to fight off the competition and just when you think he is going down  he manages to bring out a game changer out of his handy secret belt (once every year during the WWDC).

But oh my under its dark armor (designed in California, made in China) lies a hurtful secret: The Batman Super Retailer misses his dad, killed by cancer. He tries to cope with the loss by continuing in its tradition and trying to save the world from bad design. Sometimes unsuccessfully.

Biggest enemies:

The Redmond Joker and Mr. Android.

Weakness:

The Dark Knight is everybody’s target. Everyone talks about the “the iphone killer”, “the ipad killer”, “the Apple killer”. Why? Because “he’s the hero Gotham deserves, but not the one it needs right now… and so we’ll hunt him, because he can take it.”

 

3. Spiderman

Secret identity: Fab.com

spiderman-fab

You know that awkward kid that no one actually cared about back when he was into, what was that – photography? Oh, no, wait – it was social networking. It seems he is not so awkward anymore. Overnight he turned into this fabulous, tights wearing, home decorator that simply just loves to help you pick that lovely new carpet for your living room (yeah, he’s also gay).

His super powers are a. his spidey senses when it comes to picking beautiful products and selling them online, b. climbing on walls and giving you ideas on how to better redecorate, and last but certainly not least his unmatched ability to adapt fast to the market. By doing things like letting you design the furniture you want to buy.

The Spiderman Super Retailer has recently moved on from the recently mainstream Flash Sales market and into this new thing he’s doing right now, that doesn’t include Flash Sales and is aaaaalll about design. Also – you’ve probably never heard about it.

Biggest enemies

The Green Goblin living on One Kings Lane, and a distant cousin of Iron Man, the Doctor Octopus also known as  Gilt Home.

Weakness:

Spiderman the Super Retailer catches clients in a pretty expensive marketing web. It seems that its greatest weakness is the high customer acquisition cost.

 

3. Iron Man

Secret identity:  Gilt.com

ironman-gilt

Rich, famous, bright and ready to wear some of the best suits in town. The Iron Man Super Retailer was fathered by Kevin P. Ryan, that had a history of investments in some companies you have probably heard before: Business Insider, Mongo DB, Double Click. Although his corporate siblings are definitely bright, Gilt.com seems to be the prodigal son.

The Iron Man retailer is no match for any of his enemies when it comes to building the best technology, working and managing the smartest people and just being a genuine charismatic fashion and style icon.

Although not really into astrophysics the Iron Man Super Retailer manages to learn new things on the fly, adapt and … look … he does offline retail now.

Biggest enemies

The dreaded Miss RueLaLa – rich, smart and uber-sexy. She is backed up by her corporate hotshot husband, Mr. Ebay and has so far snatched a couple of victories from Mr. Gilt.

Weakness

Beautiful she-heroes like Miss RueLaLa or Maidmoiselle Ideeli.

 

2. The Hulk

Secret Identity: Walmart.com

walmart-hulk

When it comes to this Super Retailer – one thing’s for sure: you do not want to make him angry. When things go south this green retail monster will squash its competition with its low prices and national coverage. You are never too far from him and you won’t be able to hide when he gets all “Hulk, Smash!” on you.

What’s his super power? The Hulk Super Retailer has the upper hand when it comes to size, strength and endurance. The whole operation employs 1.6 million people, it’s bigger than Home Depot, K-Mart, Costco, Kroger, Target and Sears, combined and most americans (90%) live within 15 miles distance to a Walmart shop.

His online operations aren’t to shabby either: it made $4.9 billion in 2011 and that’s him not really trying. When exposed to the Big Poppa Walmart’s Green Dollar Radiation this Super Online Retailer has the potential to make its fellow competitors look like scrawny kids.

Biggest enemies. Biggest weakness:

The biggest enemy this hunk of overgrown retailer has is itself. Bigger is not always better. The Hulk is either a smashing machine or the smart researcher working at Walmart Labs. He is still trying to control its size and keep its balance while growing so fast. He is not yet there but he will be. From that moment on there will be only one Super Retailer that will, maybe, be able to face it:

 

1. Superman

Secret identity: Amazon.com

amazon-superman

This Super Retailer is actually in a class of its own. He is stronger and faster than anyone else online. He has a global reach and can fly and wirelessly deliver its products to anyone, anywhere. He grows faster than anyone else and has so far proven unbeatable.

He was born in a time when  people didn’t believe in its type of heroes. He struggled and after some slightly awkward teenage years (it took Amazon 9 years to turn a profit) it finally showed up at the graduation party, red cape flowing and all.

He is known for making a living of print but in time it diversified its product catalogue through a combination of digital content and marketplace products. After all – how could this Super Super Retailer finance its Fortress of Solitude other than by reporting a whooping $48 billion revenue in 2011.

Biggest enemies:

General Zod, a super enemy seemingly out of this world, seems to have set up shop with AliBaba.com and is now threatening Superman’s global reach. The Hulk (mentioned earlier) is not too happy with Superman’s hegemony either and is trying to catch up but is not yet strong enough to go head – to – head with the Man of Steel.

Weakness

No one has actually found the Kryptonite that is said to be the Amazon killer but rumor has it that its expanding marketplace and investment in digital sales might not be so healthy after all.