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The Next Step for Web 2.0 (2) The Fourth Flow: Emotion Flow
( 2007/09/02 - By Digitalwall.com - Way to China Internet/Telecom )
Easy profits from virtual business are what Web 2.0 should aim at.
[+] Changes in money flow, logistics flow and information flow
After 10 years of development of the Internet, people have become very familiar with the terms of "money flow, logistics flow and information flow." Especially in the area of eCommerce, the three flows can generate much business value. Some businesses are very successful by taking advantage of only one of the three flows.
Although "logistics flow" is a bridge between the Internet and the physical world, its importance has reduced with the introduction of Web 2.0. On the other hand, "money flow" and "information flow", though remain unchanged in forms, have experienced significant change in essence.
In Web 1.0 era, we spent great efforts to enable the money flow to move smoothly between the Internet and the physical world, so that financial tools in the physical world, such as credit cards or ATM cards, can be applied online, and that there are C2C payment tools such as Paypal.
We think a lot about how information should be transmitted (results are e-mails and real-time massaging tools) and gathered (results are portals and content websites) and how to cope with information asymmetry by inventing new business models (results are online job site and online auction).
The Internet has driven the cost of information transmission down. The revolution in money flow, logistics flow and information flow has made the Internet world as it is today. Yet we have sensed an emerging force of the fourth flow - the emotion flow -, which is about to change the three flows.
[+] Emotion flow will bring forth "the emotion highway" and "the media of emotion"
In the past, when you were done with a piece of online news, you were done with it. Maybe there were some people who would leave a comment below the news, but most people left quietly. Then some website operators made some changes to allow readers to score the importance of the news from one to ten points. Yet few people chose to leave a score.
The scoring system has finally been simplified to two options: "push" and "bury." If you are in favor of an article, you push. That is how the news article popularity website, digg.com, in the US succeeds. Then, we start to see news websites provide a function to allow readers to express their feelings about news articles like " happy," "sad," "confused" and so on.
The dawn of the Internet Next is upon us. Indeed, what really matters is not information per se, but what people think of the information and furthermore, how they "feel" about it. A simple "agree" or "disagree" is not enough.
You must have seen in commercials a network of beaming cables through which information flows freely. The so-called "information superhighway" has embodied people's imagination of the Internet. Now what is ahead of us is "emotion superhighway."
There must be many ways to reflect people's emotions flowing around global networks and represent these emotions on websites. Blog have been seen as grassroots media, and social networking websites a tool for social networking or meeting friends. Web 2.0 Next application will be "emotion media."
[+] Emotion: the next thing Web 2.0 is to deal with
Wanna know the moods flowing on the Internet globally? Check out http: //worldmood.info/. This service simplifies moods into smiley face and frowny face. Maybe it can be used to predict stock market performance - isn't it the sum of investors' confidence and moods?
In the time of emotion economics, the ability to control a tremendous amount emotional data will be highly valuable. We do know that emotions affect our consumption behaviors, but we do not have a chance to quantify the relations between emotions and consumption. Web 2.0 may provide a solution.
Indeed, it is very difficult to control a huge amount of personal emotional data. Yet it may work if we focus only on a specific kind of emotion and develop an emotion-centric website. Instead of attracting heavy traffic and drawing revenues from advertising, the strategy of focus survives by selling virtual products. Examples are:
Flowers for Hope: http: //www.flowersforhope.com/garden/ This website allows you to make a wish. Each wish is represented by a flower. Other people can water your flowers, while you can also check out other people's wishes. You know that you are not alone. Your wishes are being taken care of.
Secret: http: //secret.moumentei.com/ This is a very simple website in terms of technology and interface design. Yet it offers thrills to peepers and exhibitionists and even the peeped. I marveled at my first sight of this website.
[+] As emotional products get more popular, micro payment becomes a challenge
With the emergence of emotion flow applications, the selling of virtual products will become a major revenue source for Web 2.0 websites mentioned above. Some people are willing to spend 1 US dollar for a virtual object to express their detestation or some small money just to play kids online. "Emotion" has become a real product.
At the time of purchasing a virtual emotional product, the expression of an emotion, or psychological therapy, is completed. That is the magic of emotional products. A successful design of emotional products is really a test of creativity and understanding of human nature.
However, how do you pay small money like 1 US dollar, by credit card or ATM card? Virtual emotional products are absolutely linked to impulsive spending. Entry of long credit card numbers and repetitive confirmation can kill that impulse of spending.
In Web 2.0, micro payment becomes a challenge, because the profit from each virtual product is too small to make up for the credit card processing fee. Those who can solve the problem of micro payment will be able to reap the profits of the long tail of virtual emotional products.
Emotion flow will get even more important in Web 2.0 Next. Before, people discuss on whether online users would be willing to pay for information or the use of information processing tools. Now, people who can control the emotion flow of online users will have a chance to pull the money out of users' pockets.
As virtual emotional products get more popular, dependence on logistics would only decrease. Why? Because it is all about psychological satisfaction, and there is no physical thing involved - no delivery, no guarantee and no product return. Easy profits from virtual business are what Web 2.0 should aim at.
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Prev : The Next Step for Web 2.0 (1) The Dawn of Emotion Economics
Next : The Next Step for Web 2.0 (3) Collective Will Is the Cornerstone of Everything
- Today in History
The Next Step for Web 2.0 (2) The Fourth Flow: Emotion Flow - 2007/09/02
Envisioning China's 3G Market (2) 3G License & Market Strategy - 2005/09/04
The Web 2.0 Revolution (10) the Big Future of Web 3.0
( 2006/11/05 - By Digitalwall.com - Way to China Internet/Telecom )
Web 2.0 is not the end of the revolution; it is but an evolution.
[+] Web 2.0 is a confusing term
On the topic of Web 2.0, I have written 10 series articles, spanning the areas of Internet media, search engine, online communities and electronic commerce. I elaborate my thoughts on Web 2.0 thoroughly with the axis on the idea that the declining cost of storage of bandwidth will trigger changes when it continues to drop to a critical level.
In this last article I would like to point out a simple fact that, for me, there is no such a thing as Web 2.0 in the world. The source of the confusion, which has become even more ambiguous when there are so many people in the world so eager to give it an explanation, lies in its version number.
The appearance of 2.0 easily leads people to mistake that it is a completely different thing from Web 1.0, and to ignore that there may also be versions like Web 1.7354 or Web 1.212 in between these two. It misleads people to think that web 2.0 is a Revolution but not Evolution.
This is why Web 2.0 is but a transition but not an end of some kind of revolution. As nobody can clarify the causes and effects and even the direction of future developments, it does not bring too many benefits to us by using this term.
[+] The survival condition for Internet services: Cost
Along the course of Internet development, many new things have appeared, and managed to survive, with the decline of Internet bandwidth and computer storage cost. Many innovations may have been brought up long before the year of 2000, but they didn't make it to survive or succeed because of the lack of a favorable cost condition.
Now the operators have found that they can buy bandwidth and storage several times as much as what they used to get with the same money, and now they can supply services, in great quantities, which they may not be able to provide even with huge investment. An example is the 1GB email service by Google. This is the first type of typical responses.
For free personal homepage and photo album service appearing in the early time, once abandoned by portals because of the unbearable burden of high bandwidth cost after the year of 2000, they are now in mass supply in the form of Blog similar to the old personal homepage service. There is now a favorable cost condition for the emergence and popularity of Blog.
Broadband access is getting more popular among Internet users, and users can get several times the bandwidth they used to get with the same amount of money. As such, users are become more willing to use more sophisticated services that demands higher bandwidth and involve more interaction. There are still cost conditions for users to accept certain types of services.
[+] Cost shifted back to Internet users
It is not smart for website operators to only thinking about providing services that consume a lot of bandwidth. The real smart operators will think about how to shift the cost of high-bandwidth services back to users. As such, we've seen some B2C services turning to the C2C model.
One most striking example is the Internet phone service provided by Skype, which shifts the part of the service that consumes the most bandwidth back to users by enabling them to connect to each other directly. The operational cost has thus been greatly reduced, which has drastically changed the cost structure of and the dynamics in the telecom industry.
The reason why Wikipedia can challenge the traditional Encyclopedia Britannica is that it has shifted the huge burden, the compilation of the encyclopedia, back to Internet users themselves. This is the typical challenge posed to B2C by C2C in the so-called Web 2.0 way.
Even software developers are taking this trend seriously and are starting to take advantage of it. Microsoft, Google and Yahoo! rush to open their website API, hoping to attract programmers in the world to develop applications in accordance with their standards. It is exactly to throw back the software development cost back to the Internet.
[+] Cost conditions for web-based software to prevail
Speaking of software, there are more and more software companies putting efforts in developing web-based software. In the past, consumers used to buy packaged software to install on their home PCs, now they only need to connect to vendors' websites to proceed with similar functionalities via their browsers without buying packaged software or any installation.
Among various web-based tools, those which provide functionalities similar to Microsoft Office receive most attention. Many websites provide registered users with functionalities similar to Word or Excel that can be operated via browsers; the most striking example is Google's Google Docs & Spreadsheets.
At the moment, these web-based browser-interfaced software tools are given for free, but there will certainly be for-pay services. For example, versions with less, simpler functions may be given to users free of charge and subsidized by advertising revenue, but premium versions are to be provided on a monthly subscription basis. For developers, it means that they can sell software online now.
AJAX technology provides better interactivity and similar experience on a browser as that with conventional software. It also allows multiple users to edit the same document at the same time, enabling efficient communication. It was but it didn't hit the market many years ago when Microsoft put it at the core of its browser system. Why?
The answer is still the cost! For many years, software companies sell packaged software through distributors. Now because of "the declining cost of computer storage and network bandwidth", web-based versions will be cheaper than packaged ones in terms of selling costs. There are cost conditions for a product to become a market success.
[+] Take the advantage of low interpersonal communication cost
When the bandwidth becomes cheaper for users, the cost of interpersonal communication, whether between acquaintances or strangers, will consequently fall. This paves the way for social network websites to take off. We finally come to realize that "the cost to find a certain type of people gets a lot lower than before", which is sure to arouse dramatic industrial changes.
When the cost of interpersonal communication keeps dropping, the transaction cost would be falling down too. By this it means that the intermediaries who had played a role in facilitating the meeting and transactions between two parties are no longer able to charge high fees for the matching service.
This is why eBay has posed a threat to traditional B2C business, and classified websites like Craigslist are to encroach on the market of auction websites like eBay. As the direction of the Internet development is clearly towards lower transaction cost, there will be little room for intermediaries to monopolize and charge for transaction information.
As for e-commerce companies, there is no need to fear or doubt, because the key underneath the transformational force has remained the same thing: cost. The only thing they need to think through is how to take the advantage of the growing user base to drive the cost down and to create more value.
[+] What does Web 3.0 look like? When will it arrive here?
For those who are not familiar with the Internet industry, they may base their understanding on media reports and associate Web 2.0 with gossips and online dating, online diaries and photo sharing, getting to know more people through social network websites, or hearsays about big buyout bids for some Web 2.0 website.
I am always in the belief that terms like RSS, Blog, SNS, and Wiki describe only the appearances; they are the effects, not the causes, of the changes. Allow me to reiterate that "the key is always the cost," and the true spirit of the so-called Web 2.0 is:
The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".
I have been asked by some reporters to predict the possible scenario of Web 3.0. All I can say is that, just imagine what will happen to the world when the above mentioned cost is approaching zero, and you may get to see some look of Web 3.0.
As to when Web 3.0 will arrive, I can give you a sure answer. It is when the fiber reaches each household or 4G wireless broadband network prevails everywhere, when you can get bandwidth several times as much as that offered by ADSL or 3G services now. It will surely arrive in five to ten years time.
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Prev : The Web 2.0 Revolution (9) New ECommerce
Next : Great Future of Wireless Broadband (1) Living in the WiFi City
- Today in History
The Web 2.0 Revolution (10) the Big Future of Web 3.0 - 2006/11/05
The Web 2.0 Revolution (9) New ECommerce
( 2006/10/29 - By Digitalwall.com - Way to China Internet/Telecom )
The B2C model won't disappear, so we need to think about how business patterns are likely to change when the cost of bandwidth, of online user communication more precisely, is in a downward trend.
[+] C2C eCommerce is in line with the Web 2.0 spirit
Among all the various applications rising with the diffusion of the Internet, eCommerce, particularly the B2C model, has the least to do with the Internet. While a consumer does place an order online, the vendor conducts the following procedures completely in the physical world - there is little to do with the Internet.
So we finally come to realize that Amazon is actually a retailer. It focuses on reducing stock and operational cost, lowering the cost of goods through bulk purchases, and lifting sales by promotion campaigns, just like any traditional retailers. Its gross margin is practically at the same level of the traditional retailing business - nothing much to expect here.
On the other hand, C2C model is more relevant to the Internet world. What operators like eBay provide was simply a transaction platform for numerous small buyers and sellers. Apparently, the model of e-market, which is formed by gathering many individual users, can expand at a much faster rate.
This was the time when Internet forerunners first learned about the power of the Internet. In the C2C model, the most costly problems, i.e. inventory stocking and logistics, of the B2C model is thrown back to small buyers and sellers.
By matching buyers and sellers, B2C operators are able to collect fees of posting items or advertisements. Online auction services have been in full bloom these days. At the time when it's just sprouted, there was no such term as Web 2.0, but who would say it's not Web 2.0?
[+] Craigslist replaces eBay, not newspaper classifieds
After ten years of development of the Internet, users now are able to get more bandwidth with less money. This is beyond question. As discussed earlier, when the cost of bandwidth drops to a critical point, new intermediaries will arise and old ones be challenged. Let's never forget the true meaning of Web 2.0:
The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".
Following the step of auction websites, classifieds websites such as Craigslist in the U.S. has become a popular new paradigm. The success factor of Craigslist is that, it shares with users the savings obtained from the declining bandwidth cost over the past decade.
Ebay's users will be charged for making transactions on it, but most Craigslist's users don't need to pay for their classifieds posted on the website. Yet Craigslist, a high-traffic C2C website, can still survive without being beat down by the massive bandwidth consumption. This tells us how much the bandwidth cost has dropped these days that it has affected the way business is done on the Net.
Most reports about Craigslist center on its huge influence on traditional newspaper classifieds. Yet to me Craigslist is indeed a newer breed of intermediary which challenges the position of auctions websites like eBay, an once-new intermediary that took the place of traditional businesses many years ago.
[+] How the Web 2.0 spirit is infused into eCommerce
So, does it mean that all old B2C websites need to start doing C2C business in order to adapt to Web 2.0? Not at all. ON the contrary, this is exactly what we should avoid, because B2C model will not disappear. Instead we need to think about how the way of doing business may change when the bandwidth cost, or the cost of communication among Internet users, continues to fall.
Take the tourism for example. We all know that selling air tickets or tour packages online has been the most popular line of eCommerce. Yet we also know that a group tour can be a torture to many of us, because the tourist agency can only offer an ordinary tour plan with very few characteristics. It is almost impossible to offer a tailor-made package, since it is very costly to gather a group of people who have similar requirements to travel together.
Well, this is exactly where we see an opportunity for Web 2.0. The "declining cost of communication among people" has made it possible for an agency to find a group of similar interests and age to tour together.
Through proper execution, it is likely to find enough people who would like to join a tour, even for not very popular routes, in a very short time at a fairly low cost. This will lead to the downfall of discounted packaged tours and the rise of unique boutique tours. Who in the tourism business will be able to seize the power of web2.0?
[+] Apply Web 2.0 to reduce the cost of B2C eCommerce
B2C eCommerce is characterized by low gross margin similar to traditional retailing business, therefore B2C operators will care more about cost control than those running other types of websites. If the introduction of Web 2.0 services will only lead to the increase of bandwidth cost, then it's really not a good idea to go after Web 2.0.
Let's recall the case of eBay. Are there any things other than the costs logistics and warehousing that we can throw back to online shoppers? How can we make the best use of the trend of Web 2.0 to lower the operational cost in the name of consumer participation, and achieve a win-win situation for both operators and consumers?
Take the example of tourism mentioned above. Wiki applications may be very suitable for sharing individual travel experience. So, is it possible that a travel agency can reduce the number inbound calls for customer service and further lift its online sales through these applications that enable consumers to share their content voluntarily?
Here I would like to leave these questions to B2C eCommerce operators. If you still think that Web 2.0 means those terms like Blog, or RSS, or SNS, and you have no idea how these terms can be associated with your own business, then please allow me to remind you once again: the key is cost.
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Prev : The Web 2.0 Revolution (8) Transformation of the Telecom Industry
Next : The Web 2.0 Revolution (10) the Big Future of Web 3.0
- Today in History
The Web 2.0 Revolution (9) New ECommerce - 2006/10/29
The Web 2.0 Revolution (8) Transformation of the Telecom Industry - 2006/10/22
Predictions on China Internet Market (8) War of Instant Messenger
( 2006/04/23 - By Digitalwall.com - Way to China Internet/Telecom )
Compete against the leader with further customer segmentation in the crowded market.
[+] The income from the coummunication service nurtures a community
Today, online communication services mainly include the earliest services, such as email and instant messenger (e.g., QQ and MSN), and the follow-on VoIP messenger (e.g. Skype) and P2P file transmission (e.g. BitTorrent).
When we review the figure raised by me which shows the community profit model, we can see that, in addition to the advertisement, the communication service revenue is also a key component of the Web 2.0 profit model.
Some companies started their business with free communication services and made profits from community services later. For example, Tencent QQ, the number one instant messenger service provider in China, develops its business operation from the right circle of the above figure to the left one, while those who ran free community services at the beginning have to depend on communication services, for example, the wireless value added service like SMS to make a profit. In this case, their business moves form the left to the right of the above figure.
From communication to community, or the other way round, it seems that those are two conflicting concepts. As a matter of fact, there is no conflict at all. The key lies in the “heavy user” I mentioned in previous sections. Users of the community service must be the heavy users of the communication service.
[+] Iron rules for the profitability of the communication and community service
Most QQ users, as instant messenger service subscribers, do not want to pay. Yet those who are willing to do so are just in its communities. The purpose of QQ Show, a community service based on QQ subscribers, sells virtual items to those heavy users. In other words, the iron rule for the profitability of the Internet-based communication and community service is:
“A% of the users of the communication service (most of them use the service to communicate with acquaintances) use the community service (and are willing to communicate with strangers), while B% are willing to pay for a greater rights to show themselves, including buying the larger storage, virtual items and wireless value added service.”
For both the communication service (among acquaintances) and community service (among strangers), there is another possible profit model: VoIP. For services like QQ, the VoIP service call to a landline of mobile phone could prove to be a revenue source just like Skype, although the policy in China is still not clear at the present time.
For community services, the simplest profit model is making friends via VoIP service. It is a brand new field, where a lot of models could be tried. For example, eBay, which has merged Skype, is trying to introduce the VoIP service into its auction service. To make profits out of VoIP services will become an important trend for community services.
[+] Unshakable leadership of QQ
Compared with the community service market, where numerous Web 2.0 companies are involved in the fierce competition, the instant messaging service sector has another landscape: the leader is far too strong to be shaken. The following figure shows the market share of the leading instant messenger commonly used in China.
With its admirable achievements during the recent years, Tencent QQ has proved to be unshakable, leading MSN Messenger, even the nearest competitor, by miles. It is remarkable that China’s Internet market is still witnessing fast growth of the subscriber number; therefore QQ has far better ability to attract new users than its peers obviously.
It is a characteristic of the instant messenger. Most users will follow their friends or acquaintances to choose the same instant messenger, producing a “Member Gets Member" effect. Eventually, the strong gets stronger.
However, the so-called “friends and acquaintances” is only a relative term. An Internet user might get into an environment, for example, the office where all those around use MSN Messenger, instead of QQ. In fact, MSN has been a favorable tool for office workers. Maybe that could be an opportunity.
[+] Instant messenger for making friends
The following figure lists the purpose of using instant messenger. Notably, 83.8% of the users use the service to communicate with friends and family members, proving my statement that “the communication service is used mostly among acquaintances.” That turns out to be an unshakable advantage for QQ, as most of the acquaintances of a person are using it.
Then there are 61.6% of the users use the service for job-related communications, which is the base of MSN, as well as a field that Tencent is trying to infiltrate. Although the proportion of QQ-loving young students has been on the rise during the recent years, they will get a job sooner or later, and then they would switch to MSN. That is an intolerable loss for Tencent.
Surprisingly, as many as 42.3% of the users wish to make new friends, i.e., get to know strangers through instant messenger. Let us ask ourselves this: among the 10-plus instant messenger brands, which one has the most powerful ability to “enable users to make new friends fast”?
If the answer is still QQ, it would render QQ almost invincible! If the answer is not so definite, there might be room for those instant messenger which position themselves as a “powerful friends-making tool” in this market. Let us wait and see which one will be the best.
[+] Compete against market leader with new market positioning.
We should not forget what we have discussed at the very beginning of this series: there is still a growth room of 60 million subscribers expected in China’s Internet market, for which every Internet company is posed to take a bite. What, then, is the profile of that group? My simple answer is: female subscribers.
Male subscribers have been the dominating force of the Internet market in China. However, with the saturation of the market, the proportion of female users will rise. Companies that cater for the taste of female subscribers (who have particular preference for beautifulness, artistic conception and feeling) will be able to control the steering wheel in the next round of development.
The market positioning, be it “special for office”, “special for making friends” or “special for lady”, is just an attempt to compete against the market leader through re-segmentation. The previous problem with the instant messenger market is the over-similarity of the functional positioning of every brand, which leaves users little impulse to change their service providers.
Besides, we can see that 42% of the IM users use the service to save their phone tolls. Obviously, to save the long-distance phone call expense is a great enticement and great enough for IM venders to add in the VoIP functionality.
[+] A large user base could be the core competence.
When Microsoft starts to beef up its MSN Messenger in China and Google announces its strategy to stride into this market by relying on Google Talk, Tencent start from a IM service provider, is continuing along its path of diversification to dig deeper in the fields of online game, eCommerce and even portal website.
Maybe the question should be asked this way: “if you were Ma Huateng, the CEO of Tencent, held 400 million QQ users in your hand, what would you do? Would you just let them chat to death?” For me, the answer is self-evident. I do not think there is anything wrong with Tencent’s diversification.
In the contrary, as I have stressed repeatedly, community service users are heavy users. Please remember it! Thanks to that characteristics, QQ users have greater interests in shopping, are more deeply addicted to online games and show higher usage rates of other online services than general Internet users.
From another viewpoint, we can see that, it is because of its huge user base that Tencent has been able to surpass the original leaders in many fields in the shortest time possible. When QQ is no longer the synonym of the instant messenger alone, the leadership of Tecent will be extremely hard to shake.
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Prev : Predictions on China Internet Market (7) Web 2.0 Economy
Next : New Era of Online Advertising (1) from Media to Channels
- Today in History
The Mist of 3G in China (4) The Way to Survival for SP - 2007/04/22
Predictions on China Internet Market (8) War of Instant Messenger - 2006/04/23
3G Time Comes (7) 3G Is Nothing to Do with WLAN - 2003/04/27
3G Time Comes (6) Phones Don't Need to Be Smart - 2003/04/20
It All Boils Down to Brand Names
( 2005/10/09 - By Digitalwall.com - Way to China Internet/Telecom )
Competition in eCommerce will emerge from endless price warfare and head back to brand name cultivation.
[+] There will always be a lower price
Some while ago, on the occasion of a speech, I acquainted myself with an Internet start-up mom, who got her business up and running by auctioning maternity dresses on the Internet. She has got herself a reputation for good service and is doing just fine. Now this Madam Entrepreneurial is on route to operating a website that she can call her own.
In the world of online start-ups, this route, in fact, is a well-treaded one. Naturally, most would start with very little capital. After all, that's the beauty of Internet-based business. Business owners get to operate on a stripped-down platform to get access to a large number web surfer. That's how it goes. They start trading on the Net first using whatever platform already there and then picture having one of their own online store in the wake of some success.
Interestingly enough, maternity apparel as a product is not required either in large quantities or on a long-term basis. That is, she gets to do business with each of her clients during pregnancy only. The fact that each client has a business life expectancy of only 10 months gives her a hard time holding out as she is in constant need to locate new clients.
Besides, selling via e-Bay and the likes used to incur less cost as sellers could choose to sell their products one at a time, meaning they can back out anytime they want. Things get a bit tricky when one runs his or her own online store website as there is an underlying commitment for perennial operations. (Read: more choices provided, faster delivery, and higher inventory cost).
As if it's not bad enough, going it alone also means having to fend off price competition from new individuals conducting online auctions, to the surprise of many who have chosen marketing on the Net exactly having stripped-down cost and flexibility in operations in mind, just like this friend of mine before. It's a story of rags-to-riches turning against rags. Ironic, isn't it?
What happened to this friend of mine epitomizes what the eCommerce is like right now. The fact of life is that once on the Internet, nobody, be it large-scale online stores or small-fry auctioneers, can even get close to shaking price competition off their backs. Is eCommerce doomed? One can't help but wonder.
[+] Online shopping means low tag prices
Marketing people specialize in making simple things complicated unnecessarily so that they can squeeze more values out of a product. Dishonest as it may seem, it's what marketers must do to steer clear of price competition. If what's left of competition is pricing, what worth is of marketing professionals?
In the world of tangibles, pricing is less of a problem for shop owners as it's way too much trouble for consumers to even want to go store to store, aisle to aisle, or even rack to rack checking prices. That simply is not going to happen.
But that happens on the Internet as even those seeking to get a car can afford the time to go through the specs of all the cars within budget on the market before making the trip to local dealership or showroom for the actual buying. It makes a lot more sense time-wise.
When consumers can easily find something in all online shops, price becomes the only thing that makes a difference. In this day and age, loyalty is in near inexistence. The only thing you can count on is price, and that does not draw a smile from virtual shop owners.
Over time, shopping on the Net has become synonymous with shopping at bargains. That explains why one can hardly find any LV, Gucci, you name it, on the Net, since these brand names do not even go on sales much, not to mention debase themselves by rubbing elbows with cheap knockoffs on the Internet. They have brand name values to protect after all (They have got a lot to lose brand-wise).
Luxury items (garment, handbags, shoulder bags) are highly sought after on auction websites, but they are in extremely small quantity as marketers can scrape together only so many (or little, to be exact), and they are swept off by buyers the minute they appear on the Net for, again, lower prices than in the brick-and-mortars.
The truth is we have never seen producers/distributors of any of these elite brand names bother to supply to eCommerce runners. There is nothing you can click on to buy stuff s on their official sites. This is how much these elite vendors distrust the Internet.
[+] Say goodbye to price competition
For those who run small eCommerce businesses, steering clear of price war on the Net is easy, at least in theory. The key term is product differentiation. As long as your product is different, your price can be different. Period. The problem is it's hard to get something that different to sell on the Net. When you do, competitors imitate as soon as they can.
That leaves one with the sole choice of creating one's own brand. Many have been able to do so and build a reputation for which people come back to shop again. What's better, having one's own brand name means you get to name your own prices.
This strategy worked for another friend of mine, who started up a business on the Internet four years ago, when he chose to create a new aromatic essence oil brand name in stead of representing foreign ones. In just two short years, he was able to establish an unchasable lead ahead of peers.
For prestigious fashion brand names who take a dim view of Internet sales in the form of either fear or contempt, there is a way out. That is, there are answers to one's fear of what selling on the Net could do to harm channel prices, brand name values or outlet sales.
I suggest setting up a brand new sub-brand especially for the operations on the Internet. These products shall only be accessible on the Net, and yes, they should be cheaper to meet web shoppers' expectations. If anything else, they should take on a younger look to appeal to the supposedly young web-surfing generations.
All marketing activities boil down to brand names. It's just that simple. With a convincing brand name, you can thrust one type of shampoos down consumers' throats at a higher price than most and they won't even make a sound. That how magical brand names can be, and there is no reason why they won't work on the Net.
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- Today in History
The Web 2.0 Revolution (6) Struggle of the Press Industry - 2006/10/08
It All Boils Down to Brand Names - 2005/10/09
Crime and Punishment of P2P (2) Fire of Greed - 2005/10/02
Three Musts of Digital Content Biz (4) Pricing by Consumers' Budget - 2004/10/03
Corporate Website a Handful (2) Division of Labor How? - 2003/10/05
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