eBay’s announcement yesterday of its acquisition of Zong is just another interesting example of this e-commerce giant’s grand ambition to change the face of retail as merchants and consumers know it and experience it today. Here’s what I mean.
Retail Nirvana as envisioned by eBay (and described in the current issue of Fast Company) goes something like this:
You see someone walking down the street wearing a cool pair of shoes. You pull out your smartphone and snap a pic of them. An eBay app pulls up the product and its description, then finds the 3 locations nearby where the product can be bought, whether there is inventory and if so, what the prices are at those various merchants. You choose the merchant that is right for you (best price, closest, has stock – all of the above) and then click “buy” which completes the transaction for that merchant online via the phone (using PayPal, of course). You get a confirmation back on your phone, which you show to the clerk in said store when you go in to score the new shoes. This cycle repeats each time you see someone wearing, driving, carrying, pushing or riding something you just have to have.
There is really only one word for this if you are a consumer: Cool; one word for this if you are a local merchant: Wow, one word if you are a national merchant: Hmmm and one word for you if you are a traditional network, card issuer, terminal manufacturer or mobile carrier: HOLY #%&^ (okay, two words…).(If you are one of my cranky colleagues, you say: Farfetched.)
How, you ask, can they pull this off, and why haven’t I been paying more attention. Here’s a little rundown of the assets that eBay has been assembling over the last year to move the scenario described above from fantasy to fait accomplit.
The notion of cross-channel shopping (of which the example described above is, but on steroids)drove $1 trillion in sales volume last year – more than 33% of all retail sales according to Forrester, and will reach 50% very soon. With online sales hovering around 9% (and mobile at a teeny weeny sliver of that, powered mostly by people using their phones to shop online) it is a massive opportunity that eBay obviously wants to own. So, while many have suggested that eBay is out to really best Amazon, it seems to me that the game that they are playing to win is entirely different. Rather than trying to create the world’s largest marketplace, they seem intent on creating the world’s largest retail platform – and in so doing, disrupting just about every facet of the traditional ecosystem as it now exists.
Now, as all of you know who follow our stuff, every platform needs a good ignition strategy – simply having a lot of pieces does not a successful platform make. The biggest – merchant acceptance of PayPal at large retailers-is a critical component of ignition and has been a really tough slog over the years for a whole host of reasons. PayPal had a digital wallet before that term of art was even coined, and so should have had much more penetration outside of the eBay perimeter by now. Arguably, some of these acquisitions, like Magento and GSI can minimize that friction, but getting merchants to adopt probably has as much to do with how the business model shakes out as it does with dangling the prospect of 100 million PayPal account holders walking thru their doors. Price has been one of the deterrents merchants have had to PayPal and while PayPal may not have been hurt so much by the Fed rules, downward pressure to lower merchant fees doesn’t help its case. Then, there is the issue of integrating all of these pieces together into a cohesive whole – easier said than done. Then, there’s a boatload of details to be worked out in how data gets used, what piece merchants get, and how privacy issues get navigated.
The race to retail that may really be worth paying attention to, may not be Amazon and eBay but eBay and Google, who each have the heft, platform elements and consumer and merchant base to reinvent the space as we know it. Winning this race is about recognizing that payments is just a necessary byproduct of a commerce experience that yields better merchant and consumer value and a whole new set of economics that monetize incremental sales to merchants well beyond interchange revenues. There’s a huge prize for whoever can create this online/offline retail platform. eBay is hungry for it, has bought a bunch of assets that could help it win, but faces an enormous challenge in getting consumers and merchants on board. And its increasingly contentious battle with Google is only going to become more so. It should be fun to watch.
Karen Webster is the President of Market Platform Dynamics (MPD), a consulting firm that helps companies find, implement and monetize innovation. She serves as an advisor and member of the board for a number of companies operating in the payment, technology and digital media industries. More info here.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More