The first edition of The E-Commerce Book went on sale over 10 years ago. Back then, e-commerce executives everywhere dreamed of building a company like Zalando. Every niche was to have its market leader. Dozens of billion-dollar companies were planned for Europe alone, while the GCC region was still seen as an emerging market for Western online retailers. Just 10 years later, this dream has been shattered: now, almost all classic e-commerce companies face considerable challenges in achieving positive returns in Europe, US, and GCC. And few have ever managed to live up to the ideal of offering the perfect product selection with fast delivery at a good price has rarely been fulfilled. Why is that?
We have asked ourselves this question again and again over recent years – and have come across exciting answers when analyzing the success of major digital platforms. Unlike first-generation e-commerce companies, which wanted to keep everything under their control, platforms are outsourcing processes and focusing solely on retaining the end customer. They then "rent out" access to this end customer and make a tidy profit doing so, leaving old-style retailers with infrastructure costs and merchandise risks on their balance sheets.
Having reduced the proportion of inventory risk to less than 35% over the last 10 years, Amazon was the pioneer of this development globally: most of the goods Amazon now sells are owned by third party marketplace partners. Many entrepreneurs have tried to follow this example, yet have come up against limits.
While Alex has closely monitored the evolution of e-commerce within German-speaking countries and the US through his role at the e-commerce provider Spryker, Lina has explored the complexities of the platform economy across various industries in the GCC region. From the inception of platforms like Noon to her involvement in numerous local e-commerce projects, she has gained valuable insights. Drawing from their combined local and global experiences, together, we are in a unique position to identify the strategies which work well – and those which do not.
We could make it easy for ourselves at this point and list everything that doesn't work, but that wouldn't help readers to understand the platform economy system. With a good strategy and swift implementation, many GCC manufacturers and retailers have the opportunity to adapt their business model to the realities of the platform economy. The choice is quite simple: do I want to be a company which has to buy access to the end customer – or do I want to be a company which sells access to the customer? There are advantages and disadvantages to both strategies, although it becomes clear in the course of the book that, to retain relevance, large companies simply must become platforms.
In the course of writing this book, one figure from the last few weeks struck us as particularly absurd. The Chinese parent company of the app TikTok already generated sales of almost 300 billion dollars with its e-commerce business in 2023 and wants to expand sales in the US from two to 20 billion in 2024. This would mean that TikTok Shop would grow by the order of magnitude of several European or GCC corporations in only its second year of operation – and in just 12 months. These are figures which were wholly unimaginable just a few years ago. Now, though, with Temu joining the fray, moving at the same speed, and making a big impression in GCC and elsewhere, it’s time to get ready for a new era of e-commerce in what has become the platform economy.
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