August 3, 2017

Logistics at my scale

Shopify beats estimates as revenue jumps 75%

In fact, its 56 per cent growth in North America in the quarter was far surpassed by its pace of expansion in Asia, South America and Africa.

This is interesting. While Amazon continues to become a 500 pound Gorilla in the US, its international expansion has been slower — and mostly limited to developed countries.

I believe that Amazon’s superpower is overcoming complexities of logistics at scale. However, when you move from large markets into smaller ones, you face restrictions that don’t scale at all.

Say you figure out logistics in Mexico, whatever expertise you acquired will do very little in figuring out Guatemala. You can repeat the example throughout South America — and I’m willing to bet in Asia and Africa too.

Shopping has morphed since the beginning of the web. Although most players are currently experimenting with mixed models, a simplified look at their strengths could look something like:

Experience Platform Sellers Logistics Example
Centralized Centralized Centralized Centralized Walmart
Centralized Centralized Distributed Distributed
Centralized Centralized Mixed Centralized
Distributed Centralized Distributed Distributed
Distributed Distributed Distributed Centralized

I’m very curious about the edge cases where Shopify and Postmates exists. While scale is more difficult to achieve, there’s a lot of flexibility that allows for more niche segments to crop up. Still, within large markets, the advantage doesn’t last long. As soon as product X had enough demand, the centralized infrastructure takes over with its lower costs.

But when the large market is actually a combination of smaller markets, there should be a lot more space for middle of the road logistics scale. Especially when there’s variations of tastes that don’t benefit exactly the same products in each of the markets.

Still need to work through this, but I believe (and hope) will not be the only online store in the future.

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