Mapping the trends in the fashionable competition between online retailers
Let's explore a simple question: What is the impact of new entrants on the Cost of Customer Acquisition and Retention for incumbents in a networked digital economy
Do the costs increase with each new disruptive wave of start-ups? Or does first mover advantage offer a significant barrier to entry in the ongoing battle to achieve market leadership?
To obtain some visibility let's scrape some data from the eCommerce marketplace - in this case Fashion Retailing - to discover if there are any recognisable trends and patterns in the data
As you can see from this small sample there appears to be a trend towards a market equilibrium for all players in the market.
The new entrants who thrive quickly move towards the market mean while the incumbents are challenged to maintain their cost efficiencies in acquiring growth
Take the time to scrape other ecommerce markets and the SaaS market and you'll find similar patterns of behaviour. The transparency of the networked economy trends towards a market equilibrium. Or a perfect market.
The next question is can you build a model that predicts this trend over time? For example a predictive pricing model based on the CPC rates paid across the Adwords engine that allows you to set the price of the goods in real time based on the price paid to secure the business or more accurately the eyeballs.
Can the ROI on the margin of goods brokered become a function of the advertising paid to secure the sale?
or, put another way, can the big data deliver less sales (i.e. heavy discounting, end of season stock takes & overstock fire sales) by creating a perfect (Think: Risk Free) market across an optimised value chain?
It is an fascinating question and one we have been exploring and experimenting with for the past 9 months.
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