Ecommerce was promised to eliminate middlemen and enable businesses to sell globally directly to consumers who can now buy with ease at fair and transparent prices.

However, this hasn’t really happened.

Marketplaces such as amazon has been flooded with unsafe and potentially fake products (see Wall Street Journal). And sometimes they are not always the cheapest and best option, particulary with growth in Walmart and other large retailers.

There is even this niche called ‘retail arbitrage’ which literally involves people buying products from retail stores and then loading them into FBA by Amazon and making money on the difference in price. If you think about this the product is shipped from a manufacturer to a retail store and then purchased and then shipped to an Amazon warehouse and then shipped to a customer. Wild but somehow it is profitable and a legitimate business niche.

There are a few reasons why these price discrepencies exist. The major reason lies with search engines. Online retailers spend up large, or rely on SEO, to rank highly on search engines for lead generation. When you’re looking to buy, I suspect most people start with a search engine. And I’d also consider Amazon search effectively a product search engine - particularly when you consider all the paid placements in the results.

Localized Pricing

Clothing and athletic brands are notorious for charging differently depending on location in the worldwide. Retail sites often redirect a user to a localized version of the ecommerce store, where the prices, range and availability of discounts can differ significantly.

This has built an industry of freight-forwarding providers aimed at retail customers hoping to get their US online shopping to their home destination at a better price then the consumer can source individually. Think of the double handling involved.

Some niche brands are leading the way with a single pricing and logistics service for all global customers like Everlane.

Over time I think we will see all online brands becoming and thinking globally from day one. A number of startups have raised capital to help resolve global fulfillment and returns, which helps smaller businesses offer global delivery.

Low Quality Brands

A large proportion of the low-value poorly-branded products on Amazon (or equivalent) are merely re-branded products directly from the manufacturer in Asia or are simply purchased on Alibaba (or AliExpress) and simply marked up and warehoused in the local territory. The emergence of Alibaba has done wonders for eliminating some middlemen but still there is substantial ineffiency.

Low quality brands, where there is little real input in product development, design or branding of the product are particularly challenging to understand their longetivity. For example, there are a number of iPhone case ‘brands’ who simply repackage already manufactured iPhone cases sourced directly from suppliers on Alibaba. The emergence of ‘Instagram brands’ has not helped the case.

Drop Shipping

Drop shipping, perhaps the most ‘intermediary’ business model in the eCommerce space, appears to be still be a legitimate business model (although is considerably more competitive then it once was). I imagine these opportunities are being exploited by manufacturers building light-weight brands and selling directly through Amazon and similar platforms.

Price Comparison Websites

There is a large industry of price comparison platforms particularly in the energy sector - where consumers can compare tariffs between providers. In New Zealand, the local government even helped fund such a site to benefit the public.

Flipper is an interesting take on the price comparison business model for energy, automatically switching customers to the best monthly tariff - no paperwork or input required from the user.

This model works very well for a homogeneous product - such as power/gas where there is minimal difference in consumer demands. However for a physical product, this should work however the number of potential suppliers is vast and the number of variations (size, colour) are endless. Retail price comparison sites do exist but often are not extensive enough or are specific to one vertical - i.e. PCPartPicker for computer parts.

Coupons/Discount codes

Coupon codes/discount codes are also somehow a big deal on the internet. Companies like RetailMeNot and Honey have made big businesses out of gathering these discount codes. Paypal even acquired Honey for a substantial sum in order to get better access to customer buying intentions.

Manufacturers are partly responsible

Manufacturers have even started to produce multiple versions of the same products. Several TV manufacturers produce ‘special’ variants of TV, despite being identical, in order to prohibit price matching between retailers and further confuse consumers.

How does this end?

I suspect marketplaces (like Amazon) will continue to expand in range but ultimately simplify and personalise in user experience. Quality issues will be resolved. Individual brands (operating outside of these marketplaces) will need to be global from day one and be more ‘high touch’ and sophisticated then ever before. Weaker brands will completely fall out of the market.

Likely the biggest disruption is coming from direct-to-consumer brands tackling a very, very specific niche, designing and building a high quality product and delivering a cohesive brand globally at scale. This is why we are seeing substantial venture capital directed into this D2C (direct to consumer) sector. However some of these well-funded D2C brands may not be sustainable in the mid-term as sufficient customer retention may be difficult to achieve and may be out-competed by legacy brands (Procter and Gamble, Adidas etc) who are readily innovating brands and products lines. Or may simply be beaten by other well-funded consumer brands. Think of how many online ‘razor’ club/subscriptions businesses there are now.

There is no doubt an opportunity to provide better price transparency to consumers purchasing online. I’ve been playing around with a format where users can crowdsource alternative suppliers/stores for a particular item. However there is still significant friction in converting an intention into an actual purchase. I can see why voucher codes were a straightforward place to start.