Is it crazy to start an e-commerce company in the age of Amazon?

By Mauria Finley , written on September 16, 2013

From The News Desk


People often ask why you'd be crazy enough to start an e-commerce company in the Amazon age. “Won’t Amazon kill you?” they ask.

Yes, Amazon is an 800-pound gorilla, but it’s not the only game in town – and it falls short in several ways. If you're smart and focus on where Amazon fails, an innovative e-commerce startups can grow into a large, successful company.

Everyone knows the e-commerce market is huge. In 2013, US retail e-commerce sales will total an estimated $259 billion, a 14.8 percent annual increase over 2012, and e-commerce sales will continue to grow at a 14 percent compound annual growth rate from 2012 to 2017, says eMarketer.

After 15 years at Netscape, AOL, Good Technology, PayPal, and eBay, I’d managed major product initiatives across the software and internet spectrum. But it was the tremendous opportunities in e-commerce that attracted me. That's because two things happened in my life at the same time: I became a mom and I noticed how lacking Amazon and Big Box stores were around product discovery for new parents.

As a new mom, I was too tired and busy to spend hours researching new baby products online. I just wanted to get good-quality products delivered right to my door. I also knew from my years at eBay that the baby category was desperately in need of a whole new type of e-commerce experience.

Amazon is great when you know what you want to buy, but it’s confusing and overwhelming when you’re looking to discover new products. New parents are looking for trusted recommendations from “people like them” and want a selection of curated, high-quality products that suit their babies' needs. Amazon’s everything-and-the-kitchen-sink listing approach makes no sense for new parents looking to make considered purchases on everything from car seats, baby carriers, and cribs, to bottles, sleepers, and night lights.

Don’t get me wrong, Amazon is an amazing company. I use the House that Jeff Bezos built all the time for regular, known purchases. But it’s not the be-all-and-end-all to e-commerce.

There are, in particular, three things that Amazon doesn’t do well: curation, discovery and social recommendations.

First, curation. That is, selecting and merchandising products with a certain feeling or style is a major stumbling point for Amazon. It's a huge one-stop-shop, but has no point of view. It has succeeded at becoming the Big Box store of the Internet, but it hasn’t put boutiques out of business.

Specialized e-commerce sites such as Nasty Gal, One Kings Lane, and Birchbox are thriving because shoppers know they’ll find a selection of products with a particular style and sensibility whereas they go to Amazon to search for “useful and known” stuff, like diapers or a new computer. Amazon has tried to get into the fashion curation game, but has mostly failed, because it just doesn’t have a particular point of view.

Discovery is another area ripe for disruption. What is one reason people still go to stores? To discover new products they might never otherwise stumble upon. The experience of walking through a shop and spotting a cool top just doesn’t happen much online. When shoppers go to Amazon, Gap, or Target online and scroll through hundreds of items hoping to see something they like, they often end up making no purchases because they feel overwhelmed. One of the key benefits of a curated subscription service like Citrus Lane is to introduce parents to the coolest, most trusted baby and kid products they might never have discovered otherwise.

Lastly, Amazon hasn’t succeeded with social recommendations. Many e-commerce companies are building thriving communities on Facebook and other social channels, allowing  customers with a likeminded point-of-view to come together to share recommendations and advice. So far, Amazon doesn’t tap into the human need to “shop together”. (OK, so it’s mostly women who like to shop together, but men also increasingly seek peer input for certain types of purchases)

When women shop for fashion, they seek the advice and approval of their girlfriends. When they shop for their kids they turn to other moms for advice on which products to buy. Amazon has nailed reviews, and these can be helpful when making purchase decisions for cameras, computers, and other non-personal items. But reviews don’t tap into communities to help certain groups – new parents, beauty fanatics, fashionistas – make very personal purchase decisions. A new set of companies that combine e-commerce and community, such as Wanelo and Houzz, are succeeding because they embrace social deep in their DNA.

E-commerce will continue to steal marketshare from physical stores and Amazon will grab share from other e-commerce. But that doesn’t mean Amazon is the only e-commerce experience people want and need.

Don't give up before you start. You can take it to the big boys but you have to know where they're vulnerable. And Amazon is vulnerable. You just have to know where to look.

Image courtesy of Michelangelo via Wikicommons.