Yesterday I posted charts showing that from a top down market size perspective there is a big opportunity in ecommerce. Today I’m quoting a VentureBeat article which takes the bottom up approach, looking at the characteristics of companies that have recently enjoyed a lot of success, characteristics I believe the next generation of successful companies will have in spades.
This is how the article explained the success of Tinder, Airbnb, and Y-Plan:
Because they get young people. Because they get smartphones. Because they get that, in a visually-driven web, their apps and sites need to look good. They get that their customers want brands to be more human.
And this is is how they explained why the opportunity exists for these companies and others after them:
Brick-and-mortar companies were hit sideways by the first Internet companies disrupting their markets — such as Expedia or Lastminute — and failed to react until it was too late. Now those very same Internet companies are being hit by a new generation wanting smartphone-centric apps and services, and they’re not reacting quickly enough.
The way we’ve been putting it at Forward Partners is that we want to invest in companies building ecommerce brands that people love. We look for entrepreneurs and companies that leverage a deep understanding of their customers to build authentic brands and beautiful products that connect at an emotional level.
Maslow’s ‘Hierarchy of Needs’ pictured above is a useful framework to understand why these sorts of companies will be successful and the sorts of feelings and emotions they will evoke in their customers. As you can see the hierarchy has five levels of needs and Maslow’s point is that they must be satisfied from the bottom up. Physiological needs and safety needs are the first two levels and in the developed world they are largely sated. The next three levels are the needs for love/belonging, for self esteem and for self-actualisation and on these levels we collectively have a requirement for a big improvement. Some portions of society are have progressed to the top level and are focused on self actualisation, others are building self esteem and some are focused on love/belonging. From an ecommerce perspective I think the main opportunities are products and services at ‘esteem’ level and a bit at the ‘self-actualisation level’ – in a nutshell products and services that help them to become better people on the dimensions they care about – e.g. by dressing better, eating better, exercising better, caring for others, or learning about themselves.