TOTW Team 26: Clicking instead of walking into markets: a comparison of Light in the Box and Etsy
The way of shopping has changed due to the rise of the Internet. These changes have brought new business opportunities, under which the emergence of e-commerce. E-commerce is not something retailers can ignore as it has set a firm foot in today’s digital environment, and it has characterized electronic markets. As the digital environment keeps on evolving, it is interesting to examine two companies to understand the innovative and creative elements that underlie e-commerce. Two companies that are relatable and have their similarities. However, although both were initiated as online marketplaces, they are distinctive enough to tap into their markets effectively.
Both Light in the Box (LITB) and Etsy have focused their business model on catering the need for customization. These companies made the gap between manufacturer and buyer smaller. LITB offers attractive low prices for their products and good customer service with a far reach. Unlike LITB that is B2C, Etsy is C2C-focused and provides an online platform for individuals who sell and purchase unique handcrafted products with a strong customer service and customer education. Both founded within ten years; they have achieved a high presence in the markets that they are operating with both international and local competitors. One large similarity between these two companies is the power of the suppliers. In the case of LITB, collaborations with large suppliers are the central part of its business model. For Etsy, this is the case as well. However, the suppliers in Etsy’s case are individual crafters who offer their unique handmade goods. They are mainly dependent on their suppliers to execute their business model. One large dissimilarity between the two companies is their revenue model. For LITB, their main source of revenue is sales of their products, and for Etsy listing and sales fee will be collected for every listed and sold item. Due to this fact a second dissimilarity arrises as Etsy is more dependent on the performance of its sellers, whereas LITB is dependent on itself for selling products. This has led to a difference in customer focus where LITB offers more services to the end buyer, whereas Etsy focuses more on the sellers instead of the end buyers.
As the digital environment is changing rapidly and very uncertain, both companies should keep on evolving their strengths that underlies their competitive advantage, and they should be open to opportunities for changes and innovations that will harbor growth. One opportunity for both companies is the potential of the Asian (Chinese) markets that is strongly characterized by e-commerce in recent years. Globalizing their business should go hand in hand with glocalization, where the needs of the local consumers are addressed. However on the other side of the coin, both companies should work on their weaknesses and potential threats to limit the chance of competitors using these weaknesses to their advantages.
We are inviting you to join our discussion about the futures of these companies. What are your thoughts on both business models and their success in the future? Will LITB be more susceptible to losing their competitive advantage compared to Etsy, or is it the other way around?