Here’s The Problem With Trendy E-Commerce Businesses

by MR Magazine Staff

It’s hard to name a category of startups that has struggled to produce big, billion-dollar exits more than e-commerce. Competing with Amazon isn’t easy, it turns out, and aspiring Davids have turned to ever more novel strategies to differentiate themselves from Goliath. The problem? Like anything trendy, each new twist on the e-commerce model eventually goes out of style. All of these recent e-commerce models are descendants of the mother of all retail fads: flash sales. With the January acquisition of Gilt Groupe at a painfully low price—it raised $280 million but sold for just $250 million—the model has finally croaked. Flash sales (and its cousin, daily deals) suffered from oversaturation. Copycats drove up the price of acquiring customers, which accelerated startups’ burn rates, and prompted shopper “deal fatigue.” When it became clear in 2012 that Groupon and Gilt would not live up to their soaring expectations, copycats pivoted away from the model. But instead of focusing on the fundamentals (supply-chain management, say, or customer service), many of them simply latched onto the next hot strategy. Read more at Fortune.