Winner Take All or Not
I’m talking to a lot of LPs these days. :)
Some of the common questions I get when people are not that familiar with marketplaces is “Won’t Amazon just do this?” or “Is this a winner take all market?”
It’s a fair question because us marketplace aficionados have been preaching for years the benefits of network effects and flywheels. Once you get that thing spinning, it’s game over and a powerful winner take all effect kicks in. But, that is only partially true.
In many categories, there will be some very, very big winners like Amazon, but there will be many other smaller winners because there is truth in the old adage that you can’t be all things to all people.
I believe the landscape of things like eCommerce and food delivery will gradually take the shape of the more traditional brick and mortar predecessors to marketplaces and eCommerce.
Let’s take a look at the National Retail Federation’s top 100 retailers from their 2019 report. I didn’t use 2020… because … 2020.
See above. Walmart and Amazon compete for the broad category of commodity stuff. But notice how many other retailers do north of $30B annually. Each of these serves a different customer with a little different expectations. For one simple example, Walgreens and CVS are being disrupted by the likes of Alto Pharmacy.
Going a little further down the list you’ll notice two retailers that serve the deep discount market.
Dollar General and Dollar Tree are both likely being disrupted by marketplaces like Wish.
Or keep going down the list and get to a paint retailer.
Sherwin Williams along does 8.7B per year! So, is there an opportunity for a paint marketplace. Probably yes (although there might be too little fragmentation of suppliers).
The point is that there are lots of opportunities for marketplaces in many different customer segments and products.
Walmart –> Amazon
Foot Locker –> GOAT
Walgreens –> Alto Pharmacy
Dollar Tree –> Wish
Nordstrom –> Farfetch
and many many more.
The same dynamic will play out in food delivery. It is not winner take all for DoorDash and UberEats. There will be many winners that serve specific customer segments and preferences.