The E-commerce Leader

[00:00:00] Jason: there is influence in even the slowest industry towards what is the new thing and why is it better than the old thing and what are the dynamics by which it can be changed?
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[00:01:18] Intro: Hey folks. Welcome back to the e-commerce leader podcast. Today, we are talking about the 12 e-commerce fragmentation drivers and marketing traps. In other words, how come the e-commerce marketplaces? We’re in a, whether that’s literally marketplaces Amazon, eBay, or. Big app marketplace. Yes. A direct to consumer site within the overall sort of sphere of Google and all the social media, how come it’s also fragmented.
[00:01:42] And so they were going to keep going with Porter’s 12 e-commerce fragmentation drivers, a really important strategic thinking tools. Also. Very interesting. I think we’ve enjoyed discussing this a lot and we hope that you find it useful in your thinking about your e-commerce business enjoy the show.
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[00:02:00] Jason: just described as the track that we’re on. And th that you just outlined there. It sounds like a wonderful podcast.
[00:02:05] I need to listen to it. Kyle and I were e-commerce operators that started doing well in my case, writing books, which has its own dynamics. Education, basically, one-on-one coaching and, and then what we realized, in 2000, I guess it was maybe 2000. 20 was there was software as a service tools that do have those very interesting dynamics.
[00:02:29] So in my newsletter, in the footer of it for the last year and a half, I’ve told people the business we’re building to serve you. And I lay out my business model. It is made up of four component parts, the software as a service tools, which are Omni rocket pro. The sourcing tool, Danny stock originally created, it was legendary sourcing.
[00:02:49] And now I’m your rocket sourcing tool that SAS model has the dynamics you described. One of the dynamics of that industry or model is of course that there’s ready money to be in. From Silicon valley and such, enterprises, but we’ve woven that together with our one-on-one coaching, which is obviously not sellable as an exit, but it’s high margin and we like doing it.
[00:03:14] And then we have educational events based on my writing and authorship, but also on these large events we just did. For example, the e-commerce. Power summit for 2022, and had 500 people who registered for that. And that education track has its own dynamics. And, and then the fourth component of our business model has done for you services, where we basically built the dream team of operators that we then allow our clients to tap into.
[00:03:41] So we have graphic art and Shopify site, dev people and. Funnel builders and, face people who used to work at Facebook who now work for us, and to do Facebook advertising and on. So we built this dream team that we use for our own business, but we shop them out to other clients.
[00:03:57] So those done for you services or the fourth part of our business model. So all of these. Swirl together there to make an interesting business for us that we think is valuable and is growing in value, both on real net profit terms, but also on growth and the ability to get investor income, invest your money and also the ability to exit someday.
[00:04:16] Yeah. Fragmented bits are what we’re working through all the time.
[00:04:20] Michael: Yeah. Excellent. By the way, if I, if that’d be my intention, this is the most organic pitch ever for somebody in a podcast, but that was absolutely not my intention nor it was yours. It just struck me that actually, this is you are, watching as a business coach mindset years ago, he was a smart guy, but he said, look okay by all means, follow what’s.
[00:04:38] Say, but above all observe what they do. And, I think you’ll be what you do and what you say much very well. You have great integrity as unexpected view, but it’s very instinct to look at that because actually, I suppose it gives us a bigger picture that e-commerce sits within very closely related industries and much of which is segment subject to this fragmentation thing.
[00:04:57] Because in the end. If you’re going to sell somebody a course or coaching, as we both do for a particular thing, there’s a very fragmented need, which is very specific Amazon private label training. I mean this series, these specific, that’s not generic business coaching. This is very interesting stuff.
[00:05:12] What else have we got here? Newness. You’re an American. Tell me about newness. American marketing has somehow made newness a fetish for the last hundred plus years. I think more than anywhere in the world. That strikes me. Why is newness part of this fragmentation
[00:05:26] Jason: thing is because what they said in the iron John.
[00:05:29] Cartoon. Did you ever watch that? It’s all about planned obsolescence, all the old toasters and the old cars all sit around and they’re so sad in the cartoon because the people who were smart and built all these things created planned obsolescence and, it is an interesting dynamic, isn’t it for product development that it’s the always the new thing.
[00:05:51] That catches people attention. And there’s such a confluence right now of influencers, for example, the tick tock crowd that comes up, or the Instagram crowd that comes up and, and they’re hip and young and have huge social currency and status. And what do they want to do? They don’t want to do what their parents are doing and they don’t want to wear what their parents were wearing.
[00:06:11] And they it’s all about the new thing. The British invasion in the sixties for the Beatles and all that created a culture of. We were always looking for the new thing. Many times it comes from Britain. There’s tons of cultural influence from, Europe and that kind of thing, but there’s always this churn and it bleeds right into salesmanship and product pitching.
[00:06:34] And it’s almost organic, you see the whoever’s Kardashians or whatever, and what they happen to be wearing in terms of a necklace or a bracelet or shoes or something like that. I guess strategically plan on their part, but such a minor component of their lifestyle brand. And yet whole industries can be shifted or created because of this amazing new, necklace or bracelet or shoes or whatever it is.
[00:07:02] And e-commerce folks are equipped to facilitate those, the sales from it and. Those trends and that trendspotting thing is, there’s whole universities that have, trend analysts and market forecasters in fashion. My, my daughter went through university of Hawaii’s fashion merchandising, track for her undergraduate degree, and they’re all taught how to do this.
[00:07:25] How to spot trends, how to make, lookbooks and trend books and things like that. So that people know what’s coming. Who’s the coolest person doing the coolest thing. And what does that mean for your niche, your industry, and many industries that we operate in are so boring and slow. Compared to what I just described, but they’re not impermeable.
[00:07:45] There is influence in even the slowest industry towards what is the new thing and why is it better than the old thing and what are the dynamics by which it can be changed? So much of that is written about in, my favorite book, growing a business by Paul ha. Where he talks about strategies for creating newness, in product development.
[00:08:06] And, so yeah, I think it’s just a common part of what happens on e-commerce the weird part about it in today’s marketplace is. The speed at which a new thing can go from zero to just, millions or just huge volume. And when I was a kid we’d hear about a new bubble gum or a new comic book character, I knew like a whatever, like sports, celebrity or something like that.
[00:08:33] And those things would come along so slowly, but in today’s industry, it was social media fuel and e-commerce you get this incredible velocity, and things can pop up. And of course those things can be engineered as well. Where your thing, maybe isn’t cool. Maybe isn’t really new. Maybe isn’t that dynamically.
[00:08:51] Interesting. And yet, with the right influencer, working with you to the right community of their buyers, it can be perceived as the new thing for them. And your sales velocity can take off. So all of these things, you just sit back and watch and you’re like, wow, such an amazing industry. We’re a part of.
[00:09:09] And, we’re always constantly surprised by these things. And yet they, history. And you see these things over and over,
[00:09:16] Michael: wow. I’m glad I asked you that question. That’s a profound, some fun things in that planned obsolescence sounds really obvious as soon as you say it, I’m like, okay.
[00:09:23] Yeah. I think creates the iPhone 10, the iPhone 12, the iPhone 25 when I’m an old man, the iPhone 50, if they’re still around, by the way, they may not be, but that’s a different question, but. Yeah, very interesting. But also what struck me is, within myself and I’m not, I might have typically I buy a lot of stuff on Amazon, so I might have typical, Particular type of consumer.
[00:09:43] So part of me and you were talking about the identity link with newness, which is very instinct because teenagers have always wanted to buy new stuff and you’re right there. The Britain has exported new stuff. I think actually TV and pop industry accounts for about 10% of GDP. It’s huge. I looked down my nose at it because my background is people, playing music that’s at least 200 years old, so that for me is established that’s quality music that stood the test of time. This is not typical if your average consumer and I work at a recognize this, but also. I identify myself very proudly with if it’s old. It’s good. It’s just a bit, a little bit hipster. I’ve got one of. One of the trends you might see as people like buying I don’t vinyl records or old stuff or things to look after and stuff, I don’t know, brushes for ancient clothes.
[00:10:24] So there’s a sort of there’s newness and then there’s a a new take on oldness, which sells really well. Hipsterdom is if that means anything, is that. Old, but actually by new media. So I would buy, downloads of very old symphonies played by dead people, but my Spotify or apple music, for example, you don’t have to pay on Spotify.
[00:10:43] So it’s interesting that relationship between newness and traditionalism and identity, there’s a whole bunch of stuff that, wow, there’s these one of these could be a podcast in themselves. This is
[00:10:53] Jason: an example of that. That’s funny to me to be hold, which is, interesting. My grandmother had this room in the front of her house and she called it her sunroom and she grew, African violet.
[00:11:05] And, she’s in her seventies, eighties, whatever, when I’m a kid and, that was just what she did. So I learned to love house plants, from her and, I’m 51 and I’m not, I’m a boring old guy too, but I like my house plants. So I was just shocked. To see that the like millennials on Instagram and Tik TOK, there’s a whole industry of 19 year old girls who are incredibly into house plans, they make these amazing, Instagram reels and, and Tik TOK videos, all about their house plans.
[00:11:39] And these people in far off places like the Philippines, Philippines have these huge YouTube channels where all they do is talk about their plants that are common to them. But people around the world are fascinated because their house plans are unique plans, orchids and, Coco DAMA and all these things that are just global little interesting things that have been around.
[00:11:59] Centuries that somehow it become new again in the YouTube video channels and, Tik TOK and social media and Instagram have blown them up to new Heights. And if you’re a plant sales man, you’re thinking what no it’s happened. Our industry has been recapitalized by the what’s old is new again, phenomenal.
[00:12:18] Yeah,
[00:12:19] Michael: all finding new bottles. This is the phrase that Springs to mind. And I guess that’s the marketer’s dream. I all, I think all people who go to a consultant or coach to secretly hoping that you can just pour the old one, that they are existing product into the new bottle of your magical marketing hacks and, paid breasts, lots of profit flows out.
[00:12:35] Sometimes that can be done I guess. And in certainly the broader branding strategy, you can certainly do that. If it’s organic, right? That the people making their Tik TOK videos, probably hoping to get famous. Some of them do by chance. A lot of them just love houseplants and like videos, yeah. The other thing that strikes me again, coming back to diverse market needs, which is one of the, the forces that Paul’s identified as leading to fragmenting, mark. This is such a rich seam. I’m so glad you brought this up, that diverse market needs, but buyers are willing to pay a premium for very special varieties.
[00:13:03] That’s super important for again, the riches in the niches idea, right? What’s your experience of that either as a seller yourself or what.
[00:13:10] Jason: It’s a incredibly relevant to today’s e-commerce, dynamics. I mentioned Etsy, I think when I was doing this initial read through of the 12, forces, but, you go on many e-commerce platforms now.
[00:13:21] And what you’ll realize is there’s a global use case for such interesting small variants or versions or tweaks or changes. Just for an example, physical good sellers who sell something that’s to some degree, a commodity we’ll put it in a package with six things, oh, it’s six light bulbs or at six, whatever, but there’s actually a massive community of people who are maybe restaurant tours or school administrators or people who need, the 400 pack, not the six pack.
[00:13:54] They want the 400 pack that unique needs. And their willingness to pay a premium for someone who said to themselves, oh, I’m going to actually sell this just for the fire departments of America, or I’m just going to set this up so that it works for teachers, really good. Or for coaches of sports teams, those little tiny to your point, riches in the niches.
[00:14:21] If maybe they changed that word to make it work that way. I don’t know. Richard’s in the niches. When you start to go down that track, you realize there’s almost an infinite set. Unique customers that have been globalized on the marketplaces and therefore almost an infinite number of opportunities for people to become differentiated in service of those, customer communities.
[00:14:44] And the old classic statement is from, in the, the long tale by Chris Anderson, his commentary on this, which is a fantastic book to read about this. His commentary is that in the olden days, pre-internet which, Michael, you and I remember you remember London before the internet probably.
[00:15:01] And I remember my hometown little, California town. You couldn’t have a store, for example, for. Penn aficionados, the P the inkwell type pins. Now, maybe in London, of course you did have that, but in little towns in America, you couldn’t, there weren’t enough people who cared. You couldn’t have, for example, to go back to our prior comments about plants, you couldn’t have a thriving plant stop shop.
[00:15:25] You would have a floor. Who delivered flowers and also had a few plants, but, the roll up of these marketplaces as well, that allowed these differentiators to really build, incredible businesses on the back of this super delineated service for these diverse needs, diverse communities. And I think it, it won’t stop, especially because.
[00:15:46] You’ll what you realize of course is there’s huge markets that are not even on the internet yet. And I, our charity serves in Zambia and Zambia, internet technology, connectivity, the devices themselves, whether you have a phone that’s able to get you on the internet or computers, there are just massive swaths of people who are just behind on that stuff.
[00:16:09] But guess what they’re going to do when they get on the internet, they’re going to start looking for houseplants. They’re going to start looking for ink pins and their, whatever their funny hobby is. And we’re going to be blessed by them and we’ll have new things. They sell into the world that we’re unique.
[00:16:26] And, so I think that’s never going to stop. And I think that’s one reason the internet e-commerce space will always be fractured and fragmented, to, to Michael Porter’s point here in this. Yeah.
[00:16:37] Michael: Yeah. I’d say by the way, I didn’t grow up in London. I grew up in a smallish town called bluster, which has got, is it was in the doomsday book.
[00:16:44] Cause that’s where it started. So it’s got good history, typically British, but about a hundred thousand people. So it was similar. They did not offer still forever. They might’ve done actually, but they didn’t have really, especially story. Only green ink or something like that. Whereas in London or New York, even back in the day, you could probably find that stuff.
[00:17:01] But more LA or somewhere. But to your point, I think a almost infinite set of unique customers you could serve. That, that thing of there are always communities that will buy, pay a premium for. Things. If you’ve got a pretty commodity product, but you can bundle it up with other things that are less of a commodity or you can just, even if it’s selling quite well, we had a guy in the mastermind the other day.
[00:17:19] We just gave him the most simplistic advice in the world, but he went, oh yeah, it was news to him. So we’ll see how the numbers look next meeting. But we basically said, okay, so you’re selling a six pack of this one and you sell an entire case, which apparently Amazon can let you fulfill now. So you send in a shipping carton of whatever it is, 24, 48 units, whatever it is.
[00:17:37] And, why don’t you offer it? I said, why didn’t you offer a discount for, 10 cases, 20 cases, 50, because if you’re buying for a hotel chain, maybe they were going to get through, a thousand units of this X widget that I must make sure I don’t name for them in the next month, and maybe they buy six months worth.
[00:17:53] So you might shift, 50 cases instead of three individual units. So there’s profound. Money to be made by simply thinking this stuff through and just getting the blinding the obvious, but it’s only obvious once you’ve done it. And that’s the, there’s a very simple plan. I mean a lot of people have thought of this, but to be more nuanced, as you said, if you’re catering to schools that have slightly different needs to a community center, which is a slightly different need to a hospital, which is different from commercial kitchens, any one of which could buy hundreds of units at a time, I think even in on itself, that is a huge operation.
[00:18:27] Jason: Yeah, totally. It just reminds me what you just described of one of our clients that we work with, who went that through that, scenario I mentioned earlier where, wonderful on Amazon and then trying to sell on Shopify was just a real slog. And, went through the valley of despair and the challenges.
[00:18:45] One of the things that was very interesting as that, seller came out of that valley of despair on direct consumer sales on Shopify was, in his case, restaurant. Found him on direct this direct to consumer, website he had made because of his investment in SEO and Google ads and such, and, and the pallet started going out the warehouse, it’s like, it’s not going to buy this, buy the case, it’s gonna buy this, buy the pallet.
[00:19:12] And then what he realized of course was they would have never, ever done that through the Amazon direct selling system. They would only do that if they found. Him through his own website. And all this challenge of the investment and the website felt misery. And it was like, will this work?
[00:19:29] But then it’s there’s an audience out there that will absolutely make it work with you or for you, if you find them. And that was unlocked in that scenario, very fascinating to watch. And those purchase orders for big, in. At scale buyers are, it’s a whole different game. And
[00:19:48] Michael: what’s interesting is that they put a website up with one business bottle of mind, business to business, to consumer B2C or DC via a different model than the marketplace.
[00:19:59] And if you run that model at a tiny scale, it’s absolutely broken because as you said, all the costs of the upfront cost and then your ongoing costs of graphic designers and photographers and everything else are going to crush you. Whereas what they actually stumbled across as a beat. At B2B opportunity, which suddenly changed everything.
[00:20:17] And I guess sometimes you have to put stuff out there before you stumble across opportunity, right? That’s the thing you can’t or
[00:20:23] Jason: if you will. Yeah. You mean, you don’t know how your offer is matching to the market and you have to stumble your way through these things sometimes. And the reality is sometimes it takes you six months or 12 months or 18 months, 24 months to figure out who am I?
[00:20:41] Who am I missing here? And or who am I finding? And am I serving them in the way that they want to be served? And that is such simple phrasing. That’s obvious when you say it, of course. Yeah. Retrospect and I don’t know what they want. I don’t know who they are, but I think I, I want to serve them.
[00:20:59] And those are lessons that are hard learned, man.
[00:21:02] Michael: I guess the only thing I would say is you could short circuit the learning process by looking at the type of product and how you use it in what context, and just thinking. Okay. People tend to buy and the other one is taking the hint from the data, what, or the other, like I used to sell stuff that people would eventually buy 50 off and if I’d taken it, the next step was going to be, just get an email list, just cold, email them and have a fairly simple direct consumer site.
[00:21:26] I wasn’t even gonna try and sell on that because it was an obvious play because the data told me that. But the other thing is if I’d thought about it, which I hadn’t after a while you think, oh yeah, people tend to buy these in fifties and hundreds because it’s the nature of the beast, they’re sold to.
[00:21:38] I guess one could at least take a stab at that as a thesis and try and put some kind of business, a business call out on the site. If that product lends itself to that, you’ll be not Jimmy choo shoes equivalent or something like that. So listen, fascinating stuff that I just want to mention to people.
[00:21:53] Once again, we talked a lot about this in generalizations and fascinating discussion, I think, but we are going to be talking about. Five approaches to how to overcome fragmentation, which is really important. So practical and doable stuff. We can talk about that in all next episode, if you’re still up for that, Jason, I certainly am.
[00:22:09] Could you just run through again to summarize those 12 reasons for fragmentation of a market as, put out there by Michael.
[00:22:15] Jason: Sure. Yeah. And I am excited about that conversation about the five ways to overcome the fragmented market. And again, if you’re enjoying this conversation, go get a copy of Michael Porter’s, competitive strategy book, pour through that.
[00:22:29] And, and then, we’ll have this, these reflection. Together here. So yeah, let me recap. The 12 reasons industries get fragmented and, and, we’ll wrap up here. The first one is low overall entry barriers. The second one is the absence of economies of scale. The third one is high transportation costs.
[00:22:46] The fourth one is high inventory costs or erratic sales. The fifth one is no advantage of size when dealing with buyers or suppliers. The sixth one is diseconomies of scale. Things become more expensive as you get bigger. The seventh one is diverse market needs or the desire on the customer side for differentiation.
[00:23:07] The eighth one is high product differentiation. The ninth one is exit barriers are problematic ways to get out of the market. The 10th one is local regulation. The 11th is government prohibition. Or concentration in industries and the 12th one is newness that emerges in markets. So there you have it, man.
[00:23:28] I, I think this is a wonderful line of thinking for all of us who are really trying to brainstorm how best to position our products and our offers. And it’s fun to be able to go through the list with you. So as always, it’s an honor, want to go ahead and wrap it up before.
[00:23:42] Michael: Absolutely. Yeah, it’s been great fun.
[00:23:44] And I think this bigger picture thinking really comes into its own. When you have to make decisions about where you’re going next with your business and, or the marketplace shifts greatly and forces you into decision making mode, which is not necessarily something. Typically look for once, but I think that things are shifting very rapidly at the moment.
[00:24:02] And I think going to continue to, so this ability to do bigger picture thinking is going to be really important. I think talking of which I want to call up first, Omni rocket. You’ve mentioned that before we’ve talked in quite a lot of detail about your strategy, www dot Omni, rocket.com. What things can you offer there immediately if people are interested in working with you more Jason or.
[00:24:22] Jason: Yeah, it’s the hub for all of our services. So we do a one-on-one consulting by application only. You can certainly, connect with us that way. We always do a free, conversation with everyone who applies just to understand whether we’re a good fit for you, and you’re a good fit for us. And whether it’s an appropriate service, there’s also obviously our software tools available there, and those are designed for Amazon sellers.
[00:24:44] There’s a suite of tools there. Being updated, refined work on all the time. They’re low cost. The full suite is just 29 bucks. And then we have links to our educational resources or, our books and our events and that kind of thing. So all of that’s available on your rocket.com.
[00:25:00] Michael: I guess I want to give myself a shout out. It sounds a bit lame, amazing fba.com. If you want to do some one-to-one work, particularly the UK base or your, we are increasingly I think in a somewhat different situation to America, thanks to the geopolitical ramifications of what’s going on.
[00:25:15] And we got the mastermind for a UK basin and a European based sellers as well. So just go to amazing fba.com. That’s our kind of hub. Last thing say. How many report that our downloads are up? Quite a bit, I think year and year, I’ve been looking at the stats recently and that’s great. So thank you so much for following and supporting us if you haven’t done so yet, please go to shop Spotify and follow the show and rate it.
[00:25:37] If you can. It’s a rating out of five stars. If you’re on apple, same thing. I think they call it follow now. So they’re leading, Spotify is leading the language, which is interesting. So apple podcasts is set there, whereas Spotify and they’ve changed. I follow, I think from subscribed, but whichever it is follow subscribe, and then you can rate us there as well, a rating, one to five stars.
[00:25:55] You can even leave a review on apple podcasts if you can. And if you’re liking the show, take 30 seconds and give us the love because it gives us encouragement. We do look at what you write. We do notice what you’re doing and it gives us encouragement to keep going with this stuff. So thank you very much in advance for doing that for us.
[00:26:12] Jason: Great conversation, man, really looked forward to the next one as well. And that’s always in a. Me
[00:26:17] Michael: too. Yeah. Great fun. Thank you so much for your thoughts.
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