Achieving scale: from online food delivery to eCommerce
It’s been over two months since I joined Carted, a universal commerce API company that has recently raised USD $10M in funding, one of the largest seed rounds in Australia. I started writing down my reflections on eCommerce based on my past experiences, conversations with the Carted founders Holly & Mike, as well as other players in the industry who are challenging the traditional ways of commerce.
The paradox of choice
Going back in time: when I first joined Uber Eats in 2017, my very first task was to sign up as many restaurants as possible in an effort to expand to the outer suburbs of Brisbane, and launch on the Gold Coast.
“Selection, we need selection!”
Selection became somewhat of a buzzword. It was used again and again in team meetings, All Hands, OKRs, and strategy documents.
Selection = displaying sufficient cuisine options in every service area.
Ie. the ‘magic number’ of restaurants and cuisines you need to see every time you open the app, in order to believe you have considered every possible scenario before making a decision, thus avoiding ‘FOMO’… it’s human psychology, and strongly tied to marketplace dynamics:
If people lived way outside metro areas and only had a few options, they were less likely to order. Restaurants in those areas would slowly churn, because they didn’t see much value in the platform. In turn, this would affect the supply of delivery partners in that area.
This meant that much of the expansion and churn prevention initiatives tied back to the concept of selection.
A new way of doing things
In 2019, Doordash launched in Australia with a new business model: Over The Top (OTT). They made every restaurant available on their platform, without having an agreement in place with them. An ‘opt-out’ model.
In a matter of months, they were able to achieve the so-called selection that we had worked so hard for.
Putting aside the backlash they received from restaurant owners who weren’t comfortable with the opt-out model, Doordash was able to quickly scale and gain market share in Australia.
This got me thinking about similar challenges in eCommerce.
How important is choice in eCommerce?
My pandemic-project last year was to start a clothing brand — noël the label. After observing the shift to working from home, I designed loungewear and manufactured it in Turkey within 6 months. Making sales was tougher than I thought. I was competing with the likes of The Iconic, Asos, and Aritzia.
I learned that making sales isn’t just about having a good product, a nice Shopify site, and an aesthetic Instagram.
The internet is a vast place and it houses billions of products. Each merchant takes up 0.0000005% of a very saturated product pool. Despite what the eCommerce gurus on Youtube tell you, it’s really hard to stand out online, unless you have thousands to spend on marketing.
The same reason why the top ~6000 Shopify stores are the only ones making decent money. With an average 2.5% conversion rate on eCommerce, to be successful, you need to be driving a lot of traffic to your site.
This is why I really like aggregator models.
Where aggregators win
Aggregators achieve ‘selection’ better than anyone. They’re able to house multiple brands in one place, without holding any physical stock. People prefer shopping from multi brand retailers because they like to compare options and avoid fear of missing out.
Where aggregators don’t win
In saying that, success in eCommerce isn’t just about putting thousands of SKUs into one page. While having a large product base is an important building block of a new commerce experience, choice paralysis can happen very easily if the customer experience is not there.
I spoke to Jack Yang a few weeks ago. He’s built two unicorns previously, and is now working on a new shopping app that’s currently in stealth.
He said something to me that really struck:
“People overestimate the convenience of discovery”.
You need to be more than just a discovery app; it’s about creating a unique and seamless customer experience.
This is hard to do well. People are tired of scrolling through 10s and 20s pages of content to find something they like. They want relevant, contextual shopping experiences. Think voice shopping, live stream capabilities, social commerce.
The key to building these experiences well, is product selection.
How aggregation can become the foundation for building a successful eCommerce experience
In theory, aggregators don’t have to worry about the logistics of holding physical stock, and therefore have a lot more bandwidth to experiment and step outside the traditional ways of commerce.
In practice, there are technical limitations that make it hard to be an aggregator and do it well. Aggregators traditionally take 1 of 3 approaches, to gather product data:
- Sign up and onboard each merchant individually, which can take a long time.
- Scrape retailer websites manually, which fails to track inventory and/or price changes.
- Rely on affiliate programs’ product feeds, which is often outdated. Also means the platform is sending traffic elsewhere.
The approaches described above are no longer sufficient. To build a rich eCommerce experience, you need access to an all inclusive product database. And the only way to build one at scale, is to take the Doordash approach: an opt-out model.
Democratising product access: Carted
This is why I think Carted will be a game changer. The Carted API will provide access to a live product feed that can power any commerce experience that the platform chooses to build. It also enables the platform to offer universal checkout without sending traffic away. Previous attempts to achieve this outcome have relied on human labor to hack through the automation — which has, yet again, failed to scale.
Similar to the backlash Doordash received in Australia for listing restaurants without their permission, merchants may also not welcome the idea of sales coming through a third party, with no reliance on traffic-based affiliate models. But why? Perhaps the consensus is that traffic is king — without it, how will they retarget the customers?
I challenge this idea; what if these new up and coming platforms that are disrupting the online shopping experience lead to faster decision making? What if the experience is so good, so relevant and contextual, that the end customer doesn’t need to be retargeted 7 times before making a purchase? And what if people are more likely to purchase on a third-party platform than from the merchant itself?
Only time will tell.
