Convenience, variety, and easy comparability: these are only some of the reasons why people decide to buy clothes, accessories and shoes online. Countless fashion brands have recognized the importance of adopting an omnichannel approach, by creating their own webshops or joining online fashion retail platforms. Despite the required investments, going online is considered to be fruitful; in fact, the share of clothes bought online is predicted to grow to 30% in 2020 (IAF, 2014).
Wehkamp and Zalando together make up 80 to 85% of the Dutch fashion e-commerce market (Marketingfacts, 2013). Wehkamp evolved from a mail-order company into a fully online platform in 1999. On the other hand, Zalando started as an online platform company, entering the Dutch market in 2010. Both can be considered to be multi-sided platform-mediated networks, with two main user groups: online shoppers on the demand side, and fashion brands on the supply side.
Network effects are present on both sides, and also across these sides. There are positive cross-side network effects, as an increase in the number of suppliers attracts more customers, due to higher product variety. At the same time, an increasing number of customers attracts more suppliers. There are also positive same-side network effects: an increasing number of suppliers encourages new suppliers to join, while an increase in the number of customers also indicates the popularity of a platform and attracts even more customers.
While both platforms follow a sales revenue model, they offer different value propositions. Zalando offers free shipping, a very large variety of brands, and excellent customer service. Wehkamp has a very efficient distribution and logistics network, strong knowledge of the Dutch consumer, and offers extensive payment options such as paying in installments. The two platforms operate using two types of supplier relationships: wholesale and partnerships. In Zalando’s partnership programme, the product assortment, stock levels and logistics processes, which includes all delivery and returns, fall under the responsibility of the supplier. In Wehkamp’s strategic alliance program, the product assortment and stock levels are also the responsibility of the supplier, but Wehkamp takes care of most logistics processes.
Despite their strong market positions, both platforms need to remain alert at all times. The rate at which new technologies and customer preferences are evolving could form either an opportunity or a threat, depending on how (and how quickly) the two platforms leverage new developments.
In 2015, over 40% of online shopping revenue was generated via mobile channels, and the variety of goods online is only expected to increase (Wehkamp annual report, 2015). Currently, most consumers use their desktops to shop online; the second most popular device for online sales are tablets, followed by smartphone devices (Bingham, 2016). However, online sales via smartphone devices are currently growing at a faster rate than its counterparts. Based on this trend, we predict that smartphone purchases will surpass those of tablets within the next 5 years. Do you agree? Let us know what you think!
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