Entries in p2p e-commerce (12)


The API that strengthens an already vibrant e-commerce community by letting artists embrace their inner developer

The dedicated buyer and seller communities on Etsy, from the active discussion boards to the Community Council to the "hearting" of products, are behind the site's explosive growth. Nearly 250,000 new members are joining monthly. Now the developer community is joining the mix, taking advantage of the Etsy API to build new applications on Etsy's platform.

Perusing the featured developers who are part of the project Etsy dubs "Handmade Code", it's interesting to note that most all of them are also sellers themselves and their applications (with the exception of the iPhone app) are all free. I doubt that most other sites that provide APIs see their own users morph into developers.

The photographer Red Row Studio who sells prints "mainly inspired by outdoor life in and around Lothian, Scotland where I live", for example, developed one of the coolest Etsy app that I've seen. His Craft Weasel's Tag Finder helps sellers choose the most effective tags for their listings. As tags are how items are both initially categorized (Etsy uses a very detailed categorization scheme) and how they are searched, choosing effective tags is paramount for a seller looking to highlight his product among the 1,931,988 that were listed in October 2009 alone.

As a knitter, you can tag your products in a variety of ways, such as "wool" and "scarf", but taking a look at Tag Finder's tag cloud can help you choose to add, say "organic" to gain more page views and also maybe sell it at a higher price.

Another favorite app of mine is ColorMatch by 26 Olive Street, a shop "obsessed with anything vintage". ColorMatch is "designed to allow anyone to easily upload an inspiration jpeg and have the hues analyzed into a paint palette used for searching items on Etsy by color." So if you just bought a beautiful organic creme wool scarf, you can easily find a matching set of legwarmers.

The Etsy API is yet another way that the p2p community site continues to shake up the e-commerce model.


A potential new regulator for p2p lending companies

The new House financial reform bill has been described as a positive development for the p2p lending community and welcomed by industry leaders such as Prosper CEO Chris Larsen. The reason is the move of transfer of regulatory authority from the SEC to a new entity, the Consumer Financial Protection Agency (CFPA). Getting out of the clutches of the SEC probably is good news; so many nascent p2p marketplaces that initially seemed so promising, from Yadyap to People Capital  to Zopa, have either stalled or shuttered US operations in face of overwhelming regulatory requirements. Even those that survived – Prosper, Lending Club, and Pertuity Direct — were set back considerably at the time.

Yet, I’m concerned about a new entity receiving such broad sweeping power in the name of consumers and what it means for the p2p community. The Consumer Product Safety Commission, for example, has not looked with particularly friendly eyes upon the “innovation” of direct selling of handmade children’s items (rather than relying on mass production in China) and threatens to significantly curtail the operations of small sellers on Etsy. It is a sad day when the interest of big business overrides the best interests of the consumers in the name of protecting them.

Here’s to hoping that the CFPA, if it is in fact created (still a great uncertainty), will recognize the benefit of alternative credit models to consumers, rather than restricting access in fear of innovation and newness and of course, the lack of a massive lobbying effort to speak for the consumers who can now access loans at reasonable rates and the lenders who can make sound investments.


Web capitalism doesn't need a bailout

Slightly self-promotional, yes, and the title is a bit inflammatory, but my Ignite DC talk was just posted to blip.tv. It is a rapid-fire 5 minute coverage of some of my favorite topics: p2p e-commerce (e.g., Etsy), crowdsourcing, social lending, and prediction markets, all powerful technology-driven platforms that advance free markets.


Why web capitalism matters

When a community of crafters passionate about "all things handmade" becomes the fastest growing selling side on the web, it is worth paying attention. In March 2008, Etsy faciliated $1.6M in sales in March 2008; by March 2009, that number was $12M. How did this niche marketplace become so hot and so beloved? When retail sales fell across the board over that period, how did Etsy record an 8 fold increase in monthly sales?

My take is that Etsy is creating value for both buyer and seller. Buyers get unique items that are sustainably produced and sellers generate direct income from their own creativity and drive. It's what Umair Haque would term : "thick value".

Similarly, when (mostly) Americans are choosing to send over $1M/week in loans to poor aspiring entrepreneurs around the world, usually in $25 or $50 incremements, something powerful is afoot. That level of lending is seen on Kiva alone. What is inspiring so many people to join the Kiva lending community?

Source: Kivalytics (a third party app)

I think that people are excited to get behind individuals who are seeking to build value through their own determination and hard work. Lenders are disillusioned by corrupt governments receiving aid but are inspired by stories of entrepreneurs creating organic growth in their countries. And many people fundamentally believe in the power of capitalism -- when properly done -- to best drive communities out of poverty.

Etsy and Kiva are among a number of value-driving online marketplaces that we've seen launch in the past several years that indicate real alternatives to the greed, recklessness, and imaginary profits currently associated with capitalism. Here are some of my favorites:

  • Samasource -- training marginalized people to perform basic internet-based tasks and connecting them with technology companies in need of those services -- "give work, not aid" (see more here)
  • Kickstarter -- providing a mechanism for creative people to fund their projects (see more here)
  • People Capital -- innovating an alternative rating mechanism to FICO for students, thus facilitating social lending for education financing (see more here)
  • Acumen Fund -- integrating investment banking approaches to international development (see more here)
  • Prosper Marketplace -- online auction market for p2p loans
  • Lending Club -- online financial community facilitating p2p loans
  • Lend for Peace -- connecting lenders to Palestinian borrowers (see more here)
  • Pertuity Direct -- providing alternative investment and borrowing opportunities by facilitating and bundling prime loans (see more here)

These sites matter because they are creating value and driving growth. They are building communities. They are enabling individuals to make meaningful contributions -- even if they are small. They operate transparently so people can make decisions confidently. They encourage creativity. They support entrepreneurship.


Amazon's Incredible Growth

This is the coolest chart I've seen in a while. Why is Amazon's growth so explosive when many e-commerce sites (e.g., Ebay) are down?

I choose Amazon as my primary e-commerce destination (Etsy is second) for several reasons:

  1. Amazing recommendation engine
  2. Trustworthy payment system
  3. Reliable delivery
  4. Helpful community of reviewers
  5. Free shipping (they always convince me to spend $25)

Other explanations?


Credit: Business Insider


What REALLY killed eBay?

Keith Rabois of Slide thinks that social networking sites killed Ebay. His premise is that eBay was visited more for its entertainment value than its e-commerce purpose.

eBay certainly is in bad shape, as we've discussed before. But why? Perhaps the thrill of competing in auctions had something to due with its popularity and now consumers are finding that excitement elsewhere, as Rabois suggests, but there is clearly something else going on.

eBay is good for two types of transactions: the rare and the cheap. You go there for things that just need to have but can't find anywhere else or to find steals on things that you easily can get elsewhere. The latter portion is what has killed the site for me. Being on the site just feels so cheap. 50% off!! signs are everywhere and I feel like I'm in a massive budget warehouse. The site is just unpleasant to peruse. Rather than the warm fuzzies of Etsy or the simple transaction of Amazon, eBay combines the worst of both to create a fake "community" where sellers are mostly "merchants" or "powersellers" rather than individuals, buyers don't even need to list their full names, and especially with the recent rule changes, sellers are treated like criminals. The whole place feels untrustworthy.

eBay is failing at becoming another Amazon. "Buy it Now" sales now compose half of all eBay transactions, but I am looking for a new camera or a bestseller book that has a clear current price, eBay is just about the last place that I would go. Sitting around in an auction is a waste of time for something that has a clear market value and even if it is "Buy It Now" the user experience on eBay is not nearly as good as it is elsewhere. On the other hand, if I am looking for a rare 60s-era Persian rug or a hard-to-find vinyl, eBay is great. The rare item that I'm looking for is likely there and I'm willing to put in the effort of the auction to get it and I'll take my chances on the seller.

CEO John Donahue is committed to transforming Ebay's business model away from auctions and towards fixed price sales of mainstream items. This is the wrong direction. Ebay used to be the best known e-commerce company, but with so many niche companies filling certain consumer demands (Zappos for shoes, Etsy for vintage jewelry, etc...), it will never regain its prominence.

Better to stick with what it does best: connecting buyers and sellers in auctions for items that are unique, rare, ultra-niche, hard-to-price or just hard-to-find. Leave the mass e-commerce to Amazon. It does it so much better.


Integrating even more community into the marketplace at Etsy

Etsy announced today that they are launching a trial run of a "Community Council" to discuss the state of the Etsy marketplace. From The Storque:

In order to better serve the entire Etsy community, we are forming a council of community members on Etsy with whom we will meet directly. This council will help us test new products and features, report on the the state of the marketplace and generally just let us know how things on Etsy are for them. At the same time, we will make ourselves available to them to answer questions about Etsy — past, present and future. Our hope is to expand on those things we learn via our forums, virtual labs, usability sessions, customer support emails, and social media by engaging in still more direct, two-way conversation.

Yet another example why Etsy is a great place to be both a buyer and a seller. The community makes the market stronger.


Ebay announces new plan for growth

As we've discussed before, Ebay is on a downward trend. The CEO John Donahue admitted as much the other day, saying "This business has continued to fall short of our expectations and customers' expectations."

With a new three-year revival plan, however, the e-commerce giant hopes to find its way up. Donahoe told Wall Street analysts that the company's greatest growth potential lies in its online payment unit, PayPal, and that it will need to re-evaluate how to integrate Skype into its business model (We're done apologizing for Skype"). There was no talk of the future of Microplace, a peer-to-peer microfinance platform owned by E-bay that offers an alternative to Kiva and the opportunity to earn interest on your investments.

Undoubtedly, the long-term opportunity for ecommerce is huge. Donahoe pointed out that e-commerce represents just 6% of real-world retail, but that it would rise to 15% or 20% in the next five years. The questions is whether Ebay is in any position to capture this growth or whether it will go mainly to better sites like Amazon.

In response to the CEO's announcement, the company's shares rose 4.8% to $11.63.


Ebay may be down...

...but foreign e-commerce sites are up. Check out MercadoLibre in Latin America and Gmarket in Korea.

The most popular p2p trend --commerce-- is clearly going global.

 Addendum: To clarify the comment from Tim, compare Ebay's stock performance over the past 3 months, with that of MercadoLibre . The blue line is the company (Ebay on the left, MercadoLibre on the right), and the red line is the S&P 500. Ebay's fall over the past month has nearly paralleled the S&P 5000, while MercadoLibre is proving resilient.


It's February 10. Not shut down yet...but stay vigilent!

Kid in a handknit hat. This type of product would have been subject to rigorous and expensive testing under the CPSIA.The government has made a wise and practical decision. The Consumer Product and Saftety Commission is granting 1 year stay for CPSIA testing requirements that were supposed to come into effect today. As we've stated, CPSIA is a heavy-handed, poorly conceived and economically disasterous product safety law rushed into passage following the Chinese leaded toy scandal.

Etsy artists and other handmade producers in the p2p e-commerce market are relieved that they are not shut out of business, but they still warn that the law has not been repealed, only delayed. Government fearmongering around toys threatens the vitality of a flourishing on-line p2p community. Stay vigilent. The CPSIA is bad for freedom and bad for the economy.

Flickr credit: Bockstark Knits


Toy trainwreck approaching February 10

Legislation hastily passed by an overzealous Congress regarding children’s product safety threatens to shutter the vitality of a large portion of the p2p e-commerce community. The Consumer Product Safety Improvement Act (CPSIA) requires all manufacturers who create items for children 12 and under to submit their products for individual testing for safety.

These $10 handmade baby booties may cost more like $500 once the costs of compliance with the CPSIA are passed on to consumers.The law is a response to the Chinese lead in toy fiasco, but it also means that the seventeen year old girl who knits custom-made kids’ hats for sale on Etsy now needs to submit her $10 “product” for testing. For small scale crafters and traders, the thousands of dollars required for testing will simply put them out of business. [Never mind the VAST waste the law will induce by requiring EVERY toy on the shelves to be pulled and tested or else thrown into the landfill]. For more on the effects that Congress failed to foresee, see HERE and HERE.

Today crafters at Etsy and other markets are hosting a CPSIA Blog-In. We lend our support.


Image credit: CK Photography 


What are alternative markets and what elements tie them together?


Peer-to-Peer lending markets, local stock exchanges, prediction markets, direct buyer-seller community markets…Innovative re-inventions of the traditional marketplace, all made possible by web technology.


While the current financial crisis shakes the confidence of many free market believers, there glows a series of alternative market movements still enthusiastically embracing the core market essentials. These markets connect buyer to seller while rejecting the opacity and complication that characterizes much of our current financial framework. Their missions are generally simple and focused, encouraging participants to be knowledgeable of the market dynamics, with the end goal of fair and efficient trades between individuals and better information. These alternative markets can be classified into four major types:

  1. Peer-to-Peer (aka Social) Lending Markets.  This concept is a type of financial transaction where two parties can enter into a borrowing/lending agreement without the intermediation of a traditional financial services provider. See: Prosper, Lending Club, Kiva.

  2. Prediction Markets.  With the marketplace able to tap into the “wisdom of crowds”, prediction markets have emerged as a venue for speculating about the future. See: Intrade, Betfair, Futarchy.

  3. Community Markets.These sites allow buyers to get to know and interact with their sellers and buy from them directly. See: Etsy.

  4. Local Markets.  As the stock marketplace has moved increasingly global over the years, local investing enables individuals to instead invest in community companies that they know and trust. See: Locavesting.

Utilizing the efficiency of the market for the traditional purpose of exchanging goods, services, and information, these emerging concepts spin the concept to meet their niche purposes. The rise of alternative markets indicates some interesting trends of our society that have implications well beyond the marketplace.

First, there is a clear desire by market participants to introduce a level of transparency in financial dealings. Each of the social lending services works on a peer-to-peer basis, so you as an individual loaner know who is receiving your loan. This is a very different operating model than giving your money to a black box financial services company that makes decisions on your behalf. As we have seen, that model does not always make the decisions that are in the best interest of the lender. Similarly, with locavesting, rather than invest in a large corporation where you have no insights into its inner dealings (e.g., Enron, Worldcom, Global Crossing), you can invest in a neighborhood store or local company where you may actually know the management, see the customers, and build a more rounded perspective of the entity’s value.

This leads to a second trend, a lack of faith in experts.  Recent events point to the danger of trusting an individual (e.g., Bernie Madoff) while past events warn of ascribing too much faith to a group (e.g., the whiz kids of Long Term Capital Management). With economic experts and pundits of all stripes constantly pontificating their chosen strategies and predictions, it is hard to sort through the noise. This challenge was perhaps best illustrated during the November election when news agencies released daily polls accompanied by salient expert analysis that were often contradictory, repetitive, or incoherent. One of the best and simplest resources to get to the bottom of the single question, “Who will win in November?” was the prediction market Intrade, which harnessed the collective knowledge of its users to produce a startling accurate prediction of the final results (prediction of Democrats-Republicans 365-173 versus actual results of 364-174). The concept of futarchy takes faith in this concept a step further and suggests that prediction markets can be used to guide public policy decisions. Social lending services also indicate a desire for individuals to take control of their financial decisions rather than relying on the recommendations of experts. There you can manage the risk, evaluating potential lenders (or investments) yourself.

While alternative market participants personally gain from increased transparency and better informed decisions, all of the markets also demonstrate a commitment to building a community. Some peer-to-peer lending service operate under a “family and friends” model and all of them stress that the investment is not just a personal investment for return, but also a way to help fellow market community members achieve their financial objectives. Similarly, the direct artist-consumer model integrates social networking to make purchases more of an experience where you can get to know the person you choose to buy from, and in the process strengthen the artist community. Locavesting is at its core investment choices that support and sustain the local community.

Emerging market movements indicate that even in a time of bailouts and stimulus packages, capitalism is still alive and growing. Markets are evolving and individuals are having a say in that evolution. Many of these markets are now facing challenging times, however, and their future will say a lot about how our society and government value the marketplace.