This post is part of my 30 blogs in 30 days series. More details here.
The digital mail-order catalog interface of ecommerce will be relegated to the minor league. Most of the world’s consumers will shop with the Digital Bazaar model. This statement might seem strange in the face of giants like Amazon and Alibaba devouring all retail globally, but hear me out; these companies serve a small portion of the connected population, and their businesses are dependent on infrastructure that does not exist in most of the world. The future of ecommerce is transplantation of the physical purchasing experience of the developing world on to the digital format.
The Origins of the current Ecommerce Interface
Long before Amazon captured retail in the US, the model existed in the analog world. Mail-Order Catalogs started in the late 19th century. Customers looked up the items they wanted to order from a catalog and mailed in their order along with payment, and were mailed their order back. This industry had its giant as well, Sears. Sears was the everything store. It mailed you everything from clothing to gardening supplies to even pre-built houses. The fact that it is a shambling mess tells you a lot.
Early ecommerce pioneers only digitized the mail-order method. Instead of sending you a catalog, they brought you to their website. The website was designed exactly like a catalog page. Like the mail-order world, the ecommerce world is ripe with fraud. What has changed is the scale and intelligence gathering capability of the firms running these businesses. However, mail-order was not how most people shopped.
If you live in any of the major urban centers of Asia, your shopping experience options hasn’t changed all that much until recently. Whether grocery shopping, or shopping for luggage or buying toys for your children; you went to a market, you browsed the shops, you entered the shop that interests you, and then you haggled and bargained with them over the price. I personally have heard ‘No profit’ in 5 languages while haggling across the continent.
This has been upended by a fairly recent sprouting of Super-markets and departmental stores, but the vast majority is still shopping this way. The neighborhood corner stores even offer free delivery, but the steep discounts have lured a lot of shoppers towards these larger establishments. However the majority of Asia, which means the majority of the world, still shops in these ‘bazaar’. And now this model is going online.
How my eyes were opened
I worked in ecommerce for the past 5 years in the US. I know the ins and outs of the business as it stands now. The conversion funnels, the sales channel, the creepy retargeting and remarketing ads. When I looked at people selling through facebook pages and groups in my home country, I dismissed them as hobbyist and housewives with side-hustles. Then COVID happened.
My family manufacturing business had to switch to ecommerce overnight. We setup a facebook page, and some ads. Most orders came through Messenger, with a few coming through WhatsApp. All cash-on-delivery, all manned by sales agents. I couldn’t believe the conversion them. In traditional Ecommerce, a good month has a 3% sales conversion. In the digital bazaar model, the sales conversion in a bad month is around 40%. Customers are more engaged, asking for more items. There is a higher attach rate with the most popular items. This was a revelation. There is a problem though.
With so much manual labor involved, scaling up would be a huge problem. This is where the opportunity arises. Many will go the opposite route; seeing the meteoric growth of the catalog sites in the past. But you have to take into account the audience. Most people in Asia only got online recently, are mobile only and the most importantly, their primary interface to the internet is chat and texting, not the web.
There is a great technological gap here. The biggest is chatbot and Natural Language Models for machine learning expanding beyond English. There is great room for startups to create enterprise management software that can integrate communication, inventory management, and fulfillment. Some of these technologies already exist, but need to be applied in the correct manner. There is also an opportunity in this space because you can’t expect much competition. At least until initial success brings in the MeToos. The Chinese and Western giants lack the perspective to go after these markets and the locals have been spoiled by cheap labor. The first firm to successfully create a method to scale the Digital Bazaar will be bigger than Amazon and AliBaba.