My long-time favorite social commerce company Zlio just launched an extremely interesting extension to their business model on their French site: Zlio Suppliers.

To understand what Zlio is doing here, you need to understand their general business model: Zlio allows everyone to create a store (including tons of social tools like reviews, recommendations, etc). The store is filled with products from affiliate partners - i.e. the store operator doesn’t sell his own stuff but merchandise which he selected from a broad range of affiliated partners, earning a commission from every sale he generates. This is a wonderful model for a lot of content producers (blogs, etc) to add some ecommerce capability to their store without the need to actually run a real ecommerce operation. For example could a blogger, who writes a blog about diving, create a store full of his recommended diving gear and thus would create a highly relevant shopping experience for his readers.

Now Zlio took this a huge step forward: Zlio Suppliers works directly with the suppliers of merchandise and thus increases the margin both for the store operator and Zlio dramatically (in an affiliate model the store operator only gets a few percent of the final sale price). What makes this model so interesting is the scale of Zlio - the guys have literally a couple of hundred thousand stores active. What makes Zlio an extremely interesting sales channel for manufacturers and other suppliers of merchandise. Great news if you are sitting on inventory which you want to move.

It will be very interesting to see which types of merchandise this model will attract and for which merchandise it will generate a solid sell-through rate. Also interesting to see when Zlio will roll this out internationally.

Disclaimer: I consulted for Zlio in the past.

As the details about the recent layoffs were rather few and far between (the official version is still that eBay laid off 10% of their worldwide workforce - nothing else) the real meat behind the story is slowly trickling in: It looks like the cuts in Europe basically meant that eBay slashed the local teams in each and every European country to a very bare minimum (often literally only a handful of employees) - and combining marketing and marketplace functions on a pan-European level in Switzerland and the UK respectively.

If you ask me that’s a rather bold move - and one which might backfire heavily: If there is one thing eBay should have learned with all their failed expansion plans (Japan or China anyone?), it’s the simple fact that eBay’s business is a rather local one and that you need the local face towards the seller and buyer community. With these layoffs eBay basically gives up on this idea and acts like you can run eBay like a machine - no interaction needed. I heavily doubt that this will work even in the short run - and that most larger Powersellers (who contribute a significant part of eBay’s revenue) will now finally throw the towel; looking for better managed outlets like Amazon Marketplace or their own webshops in conjunction with search & price comparison engine marketing.

Somehow this makes me rather sad - I still think eBay has a very important role to play in the still growing world of ecommerce. Sad. Really sad.

Update: The German magazine Wirtschaftswoche just posted an article about the changes at eBay Germany and confirmed the information I had. [27/10/2008]

Recently I held keynote speeches at two Etail events in Munich, Germany - one at Ciao (the price comparison and product review site which was recently acquired by Microsoft), the other at the Computer Reseller News Etail Summit (the leading B2B IT magazine in Germany). In both keynotes I spoke about Web 3.0 / Semantic Web and how it will shape the things to come both on the general web as well as in Ecommerce. Some people asked if I can share the slides - which I certainly can. So here we go (this is the English version, if you need a German language version, email me):

I just read a post on Jochen Krisch’s excellent Exciting Commerce blog (it’s in German, here’s the english version of the blog — the article is not yet translated) about eBay’s latest foray into improving their crumbling business model. According to Caroline Malifaud from eBay’s Advertising Team they will introduce a new system for sellers to advertise their listings on eBay aptly labeled eBay AdCommerce in the next few months.

What AdCommerce will do, is to place keyword-based text ads on the search results page. These ads can be booked by eBay sellers on a CPC-basis and contain title, description, an optional image and link to the respective sellers listings. Ads are bought in an auction process (similar to Google AdWords) - the ad from the highest bidder will be displayed.

So far - so good. Plain, simple and horrendously stupid! First of all eBay will display the ads at the bottom of the search result page - pretty stupid if you want to optimize for clicks (the so-called below-the-fold area - everything below your initially visible area of a website - receives very little clicks). As sellers will only pay per click this might not be a huge problem - other than the fact that sellers will get little clicks from this promotion. A bigger problem will be click-fraud - you can bet on the fact that competing sellers in a category will simply click on the ad from their competitors to deplete their ad budget. I don’t see how eBay will effectively manage this - and given the assumption that most sellers will operate with relatively small budgets and in clearly defined categories this will become a significant challenge.

But the biggest failure lies in the very nature of this program: I can’t see many eBay sellers being too happy about the fact that eBay makes them pay triple - first they pay their listing fees, then they pay their feature fees to promote their item in the search results and then they should buy keywords? Well, well… let’s see how this will go down with the already annoyed eBay seller community.

Having said all this, the one fact which makes me wonder the most is the fact that eBay tried exactly the same thing a couple of years ago (with a partner: AdMarketplace) in the US and Germany and the program was a total failure. Only very few sellers were actually willing to cough up the money to triple pay, then they all fought with click fraud, they received very little total clicks and the conversion rate (the ratio between clicks and purchases) was despicable.

I don’t get it. Normally I don’t rant about eBay - I believe it’s a great company with a ton of fantastic and super-smart people and the whole concept still has so much room to grow. And what do they do? They take a complete failure and roll it out again - without making it better. Seriously eBay - you can do better!

A little while ago (sometime in April to be half-way precise) I attended the Mini-Seedcamp event in London and met George Bevis, founder of a British startup called SpeedSell. I was intrigued about SpeedSell primarily out of two reasons: One - the company shares the same name as a company we acquired during my time at ChannelAdvisor (and where I believe that ChannelAdvisor still holds the trademark for) and two - SpeedSell sets out to do something we tried in a pilot while I was at eBay (we failed miserably by the way - which doesn’t mean anything anyway):

SpeedSell will buy your old console and computer games, picks it up at your place, gives you a guranteed price for your game and then tries to make its money back by selling the item on eBay (or later through other liquidation channels). Here’s an explanation in their own words.

So far so good. Here are a couple of the main challenges you have to overcome in this model to make it work:

• First of all you need to have a very good idea about the price you can actually sell the item for once you bought it from the consumer. If you get this wrong your whole margin can go south - or, in case you play it very conservatively, the purchase price you offer is simply too low for any sane person to sell his stuff to you.
• Second you have to deal with people who will sell you citrons - they claim that the disc works perfectly well, that all the manuals are included, etc. As this becomes your responsibility once you’ve sold the item to another consumer you have to test pretty much every item which comes in. That’s labor intensive and therefore expensive.
• Cost control in general is one of the major issues - you have so many moving parts in this game that it can become quite a nightmare to keep your margin in a healthy band.

The first issue is a rather interesting one - you can obviously use eBays past sales data to determine future prices. eBay even has a program where they license this data to you (which by the way is another drag on your margin: if you simply scrape the eBay site to extract this data, eBay will - sooner or later - come after you and shut you down; thus you need to buy their data through the Market Data Program). The problem here is that eBay’s data is notoriously ‘unclean’ - take for example a simple search for a mobile phone. eBay’s search (and thus their data) will return anything from the actual phone to batteries for this phone to bling-bling to pimp your phone. Cleaning this data to make robust price predictions is often not an easy task - it works quite well with media titles, which might be one of the main reasons SpeedSell started with PC and console games. It gets rather nasty once you turn to stuff like sporting goods, electronics, computer equipment or - god beware - fashion.

Having said all that - SpeedSell was one of the three top rated companies in April (the selection was done by a panel of well-known VCs) and is also one of the 22 finalist for next weeks Seedcamp week. SpeedSell is not alone in this market - the German Trade-A-Game is doing very well (with a slightly different business model) and the US-based ReCellular is doing phenomenally well with a similar business model in the market for used mobile phone.

In general I believe that this model has legs - if you are able to make selling for the average consumer easier than it is today (eBay was a huge leap - yet it still is quite a pain in the neck to sell something online) you have a massive market in front of you.

So - congratulations to George for his Seedcamp nomination, I’m looking forward catching up with you guys!

I just came across Virshi (labeling themself “The ultimate Shopping Experience” - quite a mouthful, eh?). Virshi is the latest project from Glaxstar, the company behind the Glubble kids browser (I wrote about this market a little while ago) and is build as a Firefox add-on. This in itself is quite exciting as I am a firm believer in creating products on top of browsers - using the browser as a platform (also something I wrote about a few weeks ago). But that’s not all - Virshi sets out to create a new form of shopping experience by putting some rather useful functions into a Firefox sidebar:

Virshi allows you to store products you found on the web in the sidebar, organize them by a multitude of criteria, share and discuss these results with your friends and find the best price on the web. If that all sounds a bit complicated I suggest you hop over to the Virshi website and watch the short demo video - it’s really nicely done and explains the concept in a few seconds.

What’s really interesting about Virshi is the fact that this is one of the next wave of applications which will greatly benefit from Web 3.0 / semantic web technologies (see also my blog post from a few days ago). What Virshi sets out to do (at least in my opinion) is to treat products as data, combine this data with lots of other, relevant information and create a new, website independent view on your shopping experience. It’s not hard to imagine that this can really take off once we have more and more data available in a portable format - price comparison data, consumer and professional reviews, stock information, geo-information about stores who carry the product, etc.

This might be early days for products like Virshi - but if you want to see (one possible) future for eCommerce I suggest you check it out!

Through a rather funny incident I came across Raffle.it - a really interesting twist to the whole notion of social commerce (especially on the selling side of things).

What Raffle.it basically does is to run raffles (yeah, I know - you kinda guessed it). The way they do this is: Raffle.it offers an item for raffle (say a Playstation 3). You buy one or more raffle tickets for a few pound/euro/dollar each and with each ticket you can choose a number out of a set of predefined numbers. The lowest number which was chosen by only one person wins. Simple.

The whole concept is neat from a buyers perspective - with a little bit of skill and luck you can ‘buy’ really expensive items for a few pound. It’s fun - and as concepts as Telebid, Luupo, rabattschlacht.de and recently xgewinnt.de prove: Users seem to be willing to try their luck if the price (both the price per ‘ticket’ and the item they can win) is attractive enough.

Personally though I find Raffle.it much more interesting from a seller’s perspective: The moment they open up their system for everybody (at the moment the raffles are hand-selected and often come from companies), it will be possible to raffle away pretty much anything. Which could prove to be a pretty smart business model for expensive, rare items. Want to sell your Porsche? Why not set up a raffle where the total amount of sold tickets represent your desired price and your buyers each have a chance to get the car for only a few pounds.

If you now combine this system with some smart marketing in the background - inject some vouchers, product samples and so on for those who didn’t win - and you’ll have a nice, round business model. It will be interesting to see in which direction Raffle.it will develop itself - there are definitely some distinct (and rather different) routes the company can take.

It looks like my friends at eBay (finally) woke up: eBay US just announced a dramatic change in fees for their fixed price (Buy-It-Now) items. After eBay struggled with their growth and saw quite a few sellers either abandon ship or grow their out-of-eBay business rather significantly, eBay seems to have heard the message and “bit the bullet”: They lowered the listing fee for fixed price items from $.15 - $4 (!) depending on the starting price and for a maximum duration of a meager 7 days to a flat $.35 for a whopping 30 days maximum duration. This comes with an increase in final value fees - though the total net effect is definitely a significant reduction in total fees for a seller.

This move will reduce the risk for any seller in listing his items on eBay (in case they don’t sell after 30 days the loss is only $.35) - which will result in a dramatic increase in total listings on the eBay marketplace. This is an interesting move as eBay always was concerned about a) the average conversion rate (ratio between listed and sold items) and b) findability (the ability of consumers to actually find what they are looking for - which gets much harder the more items are available for sale). It looks like eBay gave up it’s reservation on point a) - or believes that with a 30 day time period most items will actually sell, thus the change will not influence the overall average conversion rate too much. With point b) I guess (and hope) eBay has some improvements to their search engine in the making - otherwise it can get messy (I remember the old days when you searched for a cell phone and you found pages and pages full of cell phone accessories). It will also be interesting to see when we see these changes globally (especially in the UK and Germany - eBay’s strong international footholds).

eBay is also quite aggressive in promoting these changes (the gloves are definitely off) and launched a mini-site with examples and even videos highlighting the importance of the change (watch the video “Priced to Sell: Big Changes at the World’s Largest Marketplace” for a great Lorrie Norrington pushing the changes really hard):

http://thebestplacetosell.ebay.com/

Good to have you back eBay!

Disclaimer: I worked at eBay from 2001 to 2005.

I guess I need to get a bit more creative (and consistent) with my blog titles. Anyway - let’s talk about visual search. Which might well be the next frontier. As mentioned yesterday I firmly believe that we see a change in e-commerce - we will see more and more rich image and media, which will make us want that item we are looking at right now so much more. You’ll see a range of companies like RichFX jump on the opportunity and solve this need.

What you’ll also see is the advent of visual search in product search - and this will be a tremendously powerful shift. Check out Like.com and Pixsta to get an idea of what is coming our way: You shop by visual reference and not by painstakingly describing the item you are looking for - go to Like.com, select a category and narrow down your search by clicking into the images, telling the Like.com engine which features (e.g. a specific color or style) you are interested in. The whole process is so intuitive and fun - which makes you realize how little fun it is to go to a ‘normal’ retailer website, click on the category, then on the subcategory, then on a brand, and so on and so on.

It’s interesting to see how similar but also different Like.com (a US-based company) and Pixsta (a UK-based company) are: Like.com is the offspring of Riya - a technology company which originally developed facial recognition technology to identify and tag your digital images by ‘understanding’ who is in the picture. Like.com was more or less a technology showcase - originally Like.com showed pictures of VIPs (models, actresses, etc.), allowed you to click on certain features (e.g. a handbag) and searched for products which looked similar (which in itself is a great concept - you see that damn hot but also damn expensive Prada handbag which Kate Moss recently wore; run the picture of Kate wearing it through a visual search engine and you’ll find similar looking bags from all the more affordable high street retailers). Interestingly enough Like.com gave up this feature and is now a destination site - a purely visual shopping engine which facilitates products from a broad range of retailers. Pixsta follows a slightly different path - instead of putting their money on one card (becoming a destination site), they bet on a distributed approach by licensing their technology to media sites (e.g. ELLE or the German Gala magazine). Both companies set out to create a new, much better shopping experience - and to a wide degree they already provide a better experience than most ‘traditional’ shopping experiences.

I believe that we are only at the very beginning of this trend - combine a visual search engine with rich media images and the results will get so much better. Combine a visual search engine with the semantic web and the results will become so much more meaningful. Build this as a whitelabel tool which you can easily integrate into an existing infrastructure (e.g. your aging Intershop online store) and you’ve got a great business opportunity at hand. Design a new user interface and mashup visual search with the data from price comparison sites and you’ve got a killer application at hand: Where do I find what I am looking for (also if it looks similar to the item I wanted to buy) - for the best price? Imagine a site could tell you that you could get a handback which looks very, very similar to the one you originally intended to buy for $100 less. How powerful an argument is that?

Okay, I’ll admit it - I briefly thought about naming this post: “The Power of Images or: Sex Sells”. But this post is not about sex - it’s about the increasing importance of: Visuals. Images. Pictures. And sex is usually packaged in nice visuals - at least if it should sell to a broader audience. But again - this post is not about sex.

What this post is about is the recent announcement from my former employer ChannelAdvisor, in which they told the world that they acquired RichFX - RichFX is a company in the rich media image space. What that means is, that they produce Flash-based images and catalogs for online retailers which allows them to display their products in all it’s visual glory. RichFX has a nice client list including 45 of the top 500 Internet retailers - amongst them familiar names such as Wal-Mart, Disney, Saks or Brooks Brothers. Scot Wingo, ChannelAdvisor’s CEO, posted a couple of examples of customers using RichFX - check out Disney or Saks to get a feeling for the stuff RichFX is doing.

That’s all nice and good - but now you are asking: What does that have to do with anything? That’s a fine question - and deserves a fine answer. The answer is: Conversion - according to the information available from ChannelAdvisor and RichFX the usage of rich media images enhances your conversion by about 10%… Repeat after me: 10%. If you ever worked in retail and/or e-tailing you know that 10% is a lot. It is huge. Read Scot’s blog post for a pretty good example.

Now pause for a moment and consider what this could mean for an e-tailer: If you are able to increase your conversion rate by 10%, you are able to significantly enhance your competitve situation. Which makes me wonder how long it will take the wider market to adopt technology which is similar to RichFX. You don’t see it on that many sites at the moment - especially not in my home country Germany.

Which brings us to the power of visual product search sites like Like.com or Pixsta - but that is material for another post.

On my recent flight back from San Francisco I stumbled upon an interesting statistic: The top 5 websites in the US in 2005 (ranked by Internet traffic) according to Alexa were:

• 1. Yahoo.com
• 2. MSN.com
• 3. Google.com
• 4. eBay.com
• 5. Amazon.com

This resulted in an easy to manage world for every ecommerce company. You might not like the fact that you have to pay to access the audiences from each one of those top 5 players, but you effectively could buy them: Online advertising in the form of display and/or text ads on Yahoo, MSN and Google bought you traffic to your own webstore, listing your products on eBay and Amazons marketplace allowed you to sell your goods directly to their users. The world was easy to understand and manage: All you had to do, was to manage your marketing expenses in comparison to your conversion rate and gross margin.

Fast forward only three years and the world changed radically. Today the top 5 US-websites ranked by traffic are:

• 1. Yahoo.com
• 2. YouTube.com
• 3. Live.com
• 4. Google.com
• 5. MySpace.com
• (6. Facebook.com)

This new reality made life a lot harder. If you are selling goods or services on the Internet and you want to tap into the audiences of YouTube, Live.com, MySpace or Facebook you have a problem. Although these companies sell (in one form or another) online advertising, it is widely known that the effectiveness of these ads is problematic. Building Facebook apps or MySpace widgets is not a walk in the park - and there has yet to be one which actually proves the concept that you can create an ecommerce opportunity in one of those little applications. Todays most used applications are all in the arena of fun and communication.

Hard times for E-Tailers - at the same time an exciting opportunity for the ones who are willing (and able) to experiment.

The team at UK-based online art retailer Eyestorm not only gave us Eyestorm Trade, their marketplace for (re)selling art works you bought on Eyestorm before (see my write-up on this truly innovative business model here), but now brings us the brilliant ‘Make us an Offer‘.

‘Make us an Offer’ allows Eyestorm customers to make an offer on every art work for sale on the Eyestorm website. The Eyestorm team reviews the offer and if they deem it ‘possible’ you get the art work at the price you have set. In my eyes this is a brilliant and highly engaging way to increase sales, very much in the way social shopping sites like Woot create artificial scarcity. Makes you wonder why other brands / retailers (especially in the luxury goods segment) don’t use this technique more often and in a more concise way. All in all it’s a wonderful way to engage with your customers, get a better feeling about price perception (other than setting your prices in a vacuum) and it can help you increase your sell-through rate significantly.

BBC just ran a story on a court ruling in France which basically states that the French luxury goods manufacturer LVMH will receive 40m EUR in damages from eBay over eBay’s lack in preventing counterfeits from LVMH brands such as Louis Vuitton, Christian Dior and Givenchy being sold on the site.

It’s certainly arguable if eBay is doing enough to protect companies from the illegal sale of counterfeits on their site - especially given the fact that eBay does generate revenue on the back of such transactions. The much, much more interesting point is this:

Four perfume brands - Dior, Guerlain, Kenzo and Givenchy - sued for what they called “illicit sales” of their products.

They alleged that even auctions involving their legitimate perfumes were illegal, because only specialist dealers were permitted to sell them.

The court barred eBay from selling the four perfumes in future.

“The court barred eBay from selling the four perfumes in the future.” - Sorry? What was that? A court rules that eBay is not allowed to allow certain brands to be sold on its marketplace? Sorry guys - but the ruling judge a) clearly didn’t understand what eBay actually does (they are a marketplace - not a retailer!), b) obviously doesn’t give a hoo about open markets - how can you ban someone from his right to resell a good which he purchased?

This ruling means that if I rightfully purchased a bottle of Dior perfume I am not allowed to sell it on eBay. Sorry guys, but this is insane! It will be interesting how this ruling stands in the light of European law - eBay announced that they will fight this case.

** Annotation **

Julia Kirby at Harvard Business Publishing posted a blog post titled “Is Suing eBay the Best Way to Fight Counterfeiting?” - great points about the counterfeit case. Go, read it!

Let’s start with the buzz words: We have CSEs, which - as you know - stands for Comparison Shopping Engines, aka Price Comparison Sites, aka Kelkoo, Shopping.com, NexTag & Co. Then we have Web 3.0 (ARGH - by the way: The reason why I say ARGH every time I see or type the word Web 3.0 (ARGH) is simply that I really, really, really can’t live with this crap word; Web 2.0 was bad enough - but 3.0? Well, let’s call it the Semantic Web - which it actually is… but we are getting ahead of ourselves here). The Semantic Web is basically the next incarnation of our good, old Internet - one in which the machines can actually extract meaning out of content. Not sure what I’m talking about? Flip through this wonderful presentation from Freek Bijl which he translated from Dutch to English for the excellent blog The Next Web - Now!:

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Now that you have a good understanding of the Semantic Web - here’s the interesting question: What does this mean for Shopping Comparison Engines? CSEs receive a good amount of their information in the very format which is the fabric of the Semantic Web - structured XML feeds. But these feeds come from their merchants - ecommerce sites a CSE usually has a direct relationship with (and makes money of clicks). What if a new entrant into the market builds a crawler similar to Google’s website spider, simply crawls each and every online store and presents the information in a completely neutral format? This could be another game changer (similar to what Google did to web search) and render the business models of the current generation CSEs worthless - chances are, that as a consumer you prefer neutral and comprehensive information over limited and paid-for content.

Personally I believe that the Semantic Web will be a massive game changer for a lot of business models which we see on the web today - and thus a wonderful opportunity for entrepreneurs and people who think differently.

What do you think? I would love to hear your opinions…

This is one for all you who are out there on the harsh fronts of real-world e-commerce (you know: Actually selling goods which need to be shipped to real customers): The UK site E-Consultancy posted a rather good post about tipps on how to reduce your returns (which is one of the main headaches for most e-commerce companies). Among the points E-Consultancy share are:

• Give customers more information before they buy or
• Let customers personalize products

Read the full article here. Another article on the same topic can be found here.