E-Commerce Round-Up, July 2015
E-Commerce Round-Up covers major recent events and news from the past month in the commerce world, and provides a brief analysis of what they mean. This month’s Round-Up highlights innovative companies employing new business models that have implications for ecommerce: social delivery, subscriptions, and retail marketplaces.
Scandinavian start-ups fuel innovation in “social delivery” services
In May I wrote a blog post about Uber’s foray into parcel delivery in New York City and its potential impact on ecommerce, particularly on traditional shipping companies. More recently, two Scandinavian-based companies have taken up the mantle for this type of “social delivery” service in Europe:
Trunkbird, founded in Denmark in 2014, wants to enable everyone to travel anywhere for free, as long as they help others by taking something with them. The agreement is handled by Stripe and Trunkbird charges 10% of the transaction, providing insurance up to 1,500 Euro through a partnership with First Marine.
Nimber, founded in Norway in 2010 and now with an office in the UK, calls itself a “collaborative peer-to-peer service” that connects people who want to send something with those “who are going that way anyway.” Insurance covers loss or damage up to 500 GBP. A recent interview with the company’s CEO noted that many items transported are outsized such as furniture and its carriers are individuals as well as “man-with-van” type services and even smaller commercial companies.
There are similarities between these start-ups and Uber, in that all three companies were started by relatively young, well-educated professionals seeking to use technology to solve a problem they encountered initially as consumers and customers. They also rely on rating systems for users of the service. Yet Trunkbird and Nimber are also different in that they focus on what economists would call the externalities of their service: they use spare transport capacity in individually-owned vehicles to move physical goods from point A to point B, which is a sustainable solution to using fuel and infrastructure more efficiently (in addition to a way for commuters to make extra cash).
While Uber does battles with regulators and lawmakers over how their drivers should be classified or whether it is legal at all, the Trunkbirds and Nimbers of the world are starting small and modestly, using set pricing, emphasizing their insurance coverage and reliability, and positioning themselves as a solution with positive environmental benefits as well as commercial ones. What they all have in common, however, is their potential to tie-up more formally with online retailers and establish ecommerce networks that compete directly with traditional shipping companies and national postal services.
Subscription-based ecommerce gains ground with Birchbox, Jet.com moves
Two notable events in the world of subscription-based ecommerce this month:
Online retailer Birchbox, which sells curated boxes of sample-size cosmetics for $10 a month to 800,000 subscribers, is expanding on its physical store presence. The company opened its first store in 2013 in New York City’s Soho neighborhood, and plans to open two more in 2016. The physical stores are aimed at selling full-size versions of the sample products sold online, and on providing ways to engage customers further through hands-on experiences like a Build Your Own Birchbox area and video tutorial displays.
Start-up Jet.com entered the already competitive online marketplace market with the launch of its subscription-based ecommerce site. The company, which has raised $80 million in VC money, was founded by an entrepreneur who sold his business to Amazon for $550 million in 2010. Jet.com charges consumers $90 a year to belong after a 90-day trial period, rather than taking a portion of the online sale. Like other marketplaces, Jet.com charges its sellers a commission, which also covers payment processing, returns, and shipping costs. What is different is that sellers can also set rules to lower the costs of the process, such as only delivering to local addresses, or to finding the seller that can fulfill a basket of multiple items most cheaply. The sellers can then pass on the cost savings to customers, which Jet.com reports can be 10 to 15 percent lower than anywhere else online – including Amazon.
The subscription-based ecommerce model is clearly hot right now, and its appeal is easy to understand: subscriptions provide a more predictable income stream than one-off sales, thus making it easier for retailers to forecast sales and margins and plan for future growth. That both Birchbox and Jet.com both have VC funding behind them indicates that potential investors like this model too. Yet the model also carries the risk that subscriber growth could outpace online retailers’ ability to scale to accommodate that growth.
Marketplace platform provider Mirakl raises $20 million, increases North American presence
Mirakl, a provider of a Saas-based marketplace platform headquartered in France and with clients in that country and elsewhere in Europe, has just raised $20 million in Series B funding and expanded its executive team to serve the North American market. The company was founded by two entrepreneurs who sold an online video game website to retailer FNAC, then grew FNAC.com’s marketplace to be the second-largest B2C marketplace in France.
Marketplaces are already a mainstay of the ecommerce world, providing a place for buyers and sellers to connect without having to invest in building and maintaining their own websites. Amazon, eBay, Alibaba, Rakuten, and Mercado are just a sample of the many online marketplaces around the world. Mirakl’s offer is an interesting blend of a turnkey marketplace platform for retailers, combined with professional services around setting up and managing it. The company has had success setting up marketplaces for European retailers such as Galeries Lafayette in France; with its recent funding, it is positioned well to build on this success in North America.
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