Friday, August 12, 2005

Yahoo! kiss WallMart good by.

Dialpad and Yahoo! have joined forces.

Yahoo has just announced that they have bought dialpad and bought into alibaba.com and some other chinese interests.
Ok, the recent acquisitions all make alot of sense.

I am going to try to provide a simple explaination to a potential model of tomorrows virtual markets and ecommerce.
Imgaine a well know portal that every business owner brings his products to.
Lets first start with services and software.

Software and Services
If I could take my software and or services to a very well know portal thats core purpose is to onsell my products, I dont have to care about distribution and packaging anymore.
My distribution happens via this portal. I dont package because the software and or service is delivered electroniclaly. No more CD's and DVDs, shrink wrapping.
The portal's task is to provide the users with clear options in buying products and services in any group of products. Options meaning, reviews, presentations by the selling company, price comparisons, price bidding and even customisation and perhaps bundling.

For example:
I am looking for a photo editor, I go to this web site and it presents to me all the photo editing software it has for re-sell. I can then look at all facets of the product with in the one site and also either bid for the best price or get the supplier to provide the best price.

Other goods
This model does not have to only apply to software and services. It could be anything. Lets say I want to buy a new car and lets say I have choosen my car. Now the way car sales work depends on the size of dealership. The larger dealers can undersell the smaller one because they move large volumes and also the parent company provides incentives as they reach certain sales targets. If you get to a dealer who is about to hit a certain finacial incentive, they are known to have given cars away at nearly cost price.
So I want to be able to find that dealer without have to drive around the whole city and also going through the crap car salesmen put a person through when negotiating.
So I go to the site and say this is the car I want and these are the options. The site then goes out and finds you the best price and or package you are looking for.

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All this has some very large implications. It means our wall marts etc are going to become non existant.
Why? Well let me explain the current model.
I sell goods,products, services. I want a way to distribute and sell so I give my goods to a wholesaler who goes and sells to retail stores or a re-seller for software and services.
I do this because they cost of me having to open retail stores and provide wholesaler storage space is a very large overhead and its not my core business.
Regardless of not doing it, I have an overhead with managing where my inventory goes and re-selling agreements and underwriting etc and having to surcome to the pressure of the large chains like WallMart when it comes to pricing.

Now the new model:
I dont have to negotiate with the likes of WallMart because majority if not all my stuff sells through this portal and other portals like it. So now the margin the retailer made, becomes mine as well.
All I have to do is manufacture the products and provide to warehouses that do distribution. So imagine a big Ikea like store where you go and pick up your goods that you have purchased online via this portal.

Ok so you must be thinking, what about actually looking at, touching, hearing, seeing, listening to the product. Good question.
This will be provided by the company selling the product. So like Apple store and Sony Central stores, you will go into their shops and look at their products. They will have their experts displaying and demonstrating. You could obviously still buy from there stores as well.

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So this all means that to you, the consumer, you now get the best information because the product maker will tell you their story without the biest opinion of the sales man who gets a bigger margin from one product vs the other or has some other vested interest in one company's product vs the others.
Plus you get the best price because you are no longer paying what the retailer restricts you to but the best price or package the product maker can provide you with and the price competition will not be one retailer vs the other retailer. It will be one product vs the other product (obviously with products of the same type). So now you get the best price and hopefully the best product as well.

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So this means what for Yahoo! Well Alibaba is basically the begining of the model above. Ebay will also get into the same as they start moving out of just pure auctioning. Froogle (by Google) is another competitor.
Ofcourse just like we have our favourite retailers, we will all have our favourite portals and there will only be a few really large global portals that will have the clout to pull in the best of the best product manufacturers.

Watch this space.




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