Why eCommerce Companies Are Becoming Ecosystems

by / ⠀Career Advice Entrepreneurship / November 24, 2021

The eCommerce market is formed around several major players such as global Amazon and Alibaba. These and other eCommerce giants are quickly becoming ecosystems. Globalization is a trend that all market participants will have to live with.

Does this mean that small players have no chance? The CEO of Scallium, Andrey Pavlenko, believes that eCommerce development is closely related to the increasing globalization in the past few years. This is reflected in M&A deals and, as a result, eCommerce giants create powerful global business ecosystems. Such projects own similar or related businesses in different regions or countries.

Thanks to subsidiaries and additional services, companies build a chain of contacts with clients from first-time online store visitors to becoming regular loyal users. In other words, eCommerce giants give the client not one value in a product but several different values and force him to spend as much time as possible within the system.

It’s difficult to fight against such a competitive advantage.

The success of a platform business model was also proved by Chinese super-applications such as WeChat and attempts to create the same tools in different countries — for example, Russian Mail.ru Group + VK — and duplicate the financial results of eCommerce giant Amazon.

We see the globalization of eCommerce in different regions and markets — from China to Kazakhstan, from online ad services to marketplaces. It’s unlikely that the vector of development will shift seriously. This is despite attempts by international anti-trust authorities to penalize some eCommerce players for exploiting their monopolistic position.

Horizontal Acquisitions in eCommerce

Kazakhstan marketplace Kaspi is strengthening its presence in Ukraine, Azerbaijan, and Uzbekistan. Probably, the company plans to become the leading eCommerce platform in the Commonwealth of Independent States or even Eastern Europe. It’s already received the nickname “Kazakhstan Alibaba.”

Kaspi’s strategy also resembles the development of Amazon, whose acquisitions list has already surpassed 100 companies. This list enabled the eCommerce giant to build an ecosystem where customers exclusively rely on Amazon’s projects — from delivering food to assembling purchased furniture at the buyers’ site.

These deals allowed Amazon to expand its operations globally. In 2020, the eCommerce giant bought the developer of drone cars Zoox for $1.2 billion. In 2017 they also acquired Whole Foods Market for $13.7 billion. This enabled Amazon to launch its offline stores.

Amazon Ecosystem

The American retailer Walmart had similar ambitions when it bought 77% of the Indian e-commerce giant Flipkart for $16 billion in 2018 and Jet.com for $3.3 billion earlier.

eCommerce companies build their delivery services. Their contractors invent new ways to be faster and better than others. Among them is creating an airline for the logistic services like Ukrainian Nova Poshta because this enables eCommerce companies to ensure same-day delivery.

How to Match and Surpass the Leaders

eCommerce market consolidation is inevitable, despite attempts by regulators to slow down these processes. The future of eCommerce is ecosystems and super-apps.

For this purpose, market leaders are already absorbing the companies they need. Big players expand globally, enter foreign markets, and seem out of reach in regards to competition.

But first, there will be a place for niche players. They will retain a unique audience through their expertise in a specific area.

Secondly, you must, and you can compete even with wide-profile marketplaces like Amazon. You have to be ready either for a budget battle or for the use of another resource.

For instance, the telecom operator has half the country as its subscribers. It can capitalize on its customer base and create a retail platform for clients as added value. So, this hypothetical telecom operator reduces the marketing budget and occupies their niche by reassigning resources.

But the main prerequisite for the surpass the leaders is creating your own business ecosystem.

What Is An Ecosystem for Retail?

It’s not enough to be just an online store or marketplace. You need many proprietary and partner services to meet customer demand. The goal of a business ecosystem is to satisfy as many needs as possible in a single place within one company. It’s not just about the need to buy a product but very different customer requests.

In addition to Amazon, there is another well-known ecosystem in the world — Alibaba Group. They have everything from the wholesale platform Alibaba and retailer Aliexpress for services aimed exclusively at the Chinese market. They launched a YouTube-like platform called YouKu, an internet browser, a functional shell Alibaba Cloud, logistics, fulfillment, and a Big Data service Alimama.

The key idea is that Alibaba covers the whole cycle of different needs from different types of customers. All of these products make it possible to integrate the goods and services of the Alibaba Group within a single ecosystem.

Alibaba Group Ecosystem

All of the aforementioned is a perfect example of building a business in today’s online modern reality.

However, you need to link all services and products together in terms of brand and technology. You must have a robust IT platform that enables your business to scale up.

At the start, there’s a reasonably flexible back-office platform similar to Scallium. This platform allows you to work with third-party merchants right now, connect logistics operators and other partners, and manage the product assortment. The flexibility of such a platform means that it should enable you to make any modifications and scale efficiently in the future.

And then your business won’t be hesitant to compete in the same marketplace with Amazon and Alibaba!

About The Author

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Andrii Pavlenko has 15 years of experience in developing software products. He worked with a team to develop a process management tool which was later purchased by Amazon. Andrii has consulted with software companies on how to become more effective, working together with Scrum co-founder Jeff McKenna. Andrii has helped companies in Ukraine, Bulgaria, Moldova, Russia, Germany, Netherlands, and other countries to build enterprise processes and develop Agile culture. Since 2017, Andrii has been developing his own projects. He is co-founder and CEO of the Scallium platform.

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