Diversification Business diversification, and how to resist digital monopolists
Today, Amazon is an enormous, all-consuming e-commerce company that sets nearly all the rules for how online retail works now, with everyone involved playing ball. It is the “everything store” that really does seem to offer everything you could possibly want.
Yet Amazon’s comprehensive positioning gives every other e-commerce company considerable scope to stand out. Whereas Amazon has to maintain a 100% focus on operational excellence to be able to maintain this unbelievable range of goods, smart e-commerce companies can take advantage of this to cover certain areas in depth, and to make the “everything store” look like a relic from a bygone era. So the key question is this: what will define the sales concepts of the future, allowing companies to truly set themselves apart from Amazon? Here I’d like to present two key pillars that I think will be critical:
01. The sales concepts of the future will map the core DNA of an industry
I always like to explain this point by taking the music industry as an example, where Spotify has so far managed to distance itself from big names like Apple Music and Amazon Music. Whereas the likes of Apple and Amazon are happy enough to track your favourite songs, bands and music genres, Spotify has delved much deeper, analysing every single song you listen to, for instance:
- What is the beat of the song?
- What is the rhythm of the song?
- What is the pitch and timbre of the song?

In other words, they break a song down to its core essence, and, based on this information, they scour their entire music library to see which other songs have a similar beat or rhythm. It allows them to make staggeringly high-quality recommendations, and this is also why they are so good at pinpointing a person’s musical taste. It enables them to come up with incredibly good playlists that fit my current mood, the weather (rain or sunshine) or a particular time of day (e.g. breakfast time) perfectly. With this is mind, companies looking to set themselves apart from Amazon in a given area need to ask themselves the following questions:
- What is the beat of my industry?
- What is the rhythm of my industries?
- What exactly would be the timbre and pitch of my industry?
For the furniture industry, this would mean finding out how big my customers’ apartments actually are. How are each of the rooms divided? How bright is the apartment? What are the current furnishings like? Is it an old or new-build apartment? After all, if we’re being completely honest, these are the crucial factors that will determine what dining table I ultimately go for.

In other words, for an online retailer such as XXXLutz, simply offering the longest list of dining tables is not going to cut it if they want to compete with the likes of Wayfair or Amazon. Instead, what they need to do – in the same way iOS offers me a control center where I can adjust the brightness and volume of my smartphone – is to offer a digital counterpart where customers can measure out and record their current apartment with ease to get the best possible recommendation. The trick isn’t just to list 1,000 dining tables, which customers have to sift through to find one that suits their own dining room. If you still want to be around in the future, you’ll need to be able to pick four dining tables out of these 1,000 tables, and then show them to me. These four tables would then have to be the perfect fit based on the dimensions of my dining room, and how they look. In other words, guidance trumps sheer supply, and the most relevant range trumps the biggest range. This brings us straight to our second key pillar for the future:

02. The sales concepts of the future will hinge on everyday issues, not product range
If we take a look at the 100 most popular digital services on the Western market today, you quickly realize that just ONE of these 100 services is an e-commerce company: the “everything store” Amazon. The reason for this is very simple: the most popular digital services such as Google Maps focus entirely on solving everyday problems. As a result, Google Maps manages to come up with up to six hot buttons a day because it can provide instant answers to common questions, e.g. what’s the traffic like at the moment? How do I get from A to B? Where exactly is B? It’s also why a service like Google Maps is installed on almost every smartphone, and is prominent on everyone’s start screen. An e-commerce company like Zalando, on the other hand, is only able (according to its latest annual reports) to come up with about four hot buttons a year. This is because they are “only” capable of providing answers to much rarer questions such as: “I need a new winter coat”, or “I think my old jumper is boring.”.

The e-commerce industry thinks it has found the solution to this dilemma: an even bigger range! To ensure companies are no longer just capable of answering a single question (“I need a new winter coat”), the idea is to provide answers to similar, more frequent questions, e.g. “I need new socks/boxer shorts”, or “My son needs new socks”. This is also the reason why nearly all big e-commerce names aspire to have a marketplace model. And it explains why everyone is trying to come up with bigger and bigger ranges to be able to cover increasing demand. Amazon takes this model to the absolute extreme. In Germany alone, it offers up to 250 million (!) different products in order to cover even the most whimsical of demands.
But this model comes at a high price. Not only does it require an extraordinary degree of operational excellence to be able to manage the range properly, you also end up sacrificing a real promise of quality. Why?
- Because you suddenly have the same product cropping up countless times in the search results.
- Because you order three products and it “feels” like you’re getting five different parcels from seven suppliers, all of which you can collect from somewhere else even though you were at home.
- Because the value chain now depends on the process quality of the marketplace sellers, which Amazon does not have 100% under its control, and who cannot keep up with the usual reliability Amazon provides.
At the same time, every category has to be squeezed into a sort of “data corset” to be able to cover this incredible quantity of products. You can no longer present a category in a way that is actually relevant to the target group and theme. The result of this is that the way I sell a TV is absolutely identical to the way I advertise a perfume or a dress.
Personally, though, I would say this model is not viable. The outcome is completely arbitrary, where one e-commerce company resembles another. It also leads to a promise of quality that can no longer be kept (i.e. the promise of being able to deliver everything all the time) in an economy of growing scarcity where supply chains sometimes break down. This model isn’t suitable from an affluent society perspective either, and is set to become increasingly outdated due to mega trends in sustainability and our ever-changing buying habits brought on by climate change.
And, above all, I’d say that there’s a much more attractive and financially interesting answer. We’ve learnt a very important lesson from ongoing innovation projects: if as an e-commerce company (specializing in home improvements like OBI), I manage to replace common demand-related questions (e.g. on buying screws or potting soil) with digital everyday services that allow me to stay in touch with my customers even if they don’t want to buy anything, it’s still highly likely I can persuade my customers to buy from me if a really attractive purchase crops up, such as a lawnmower or chainsaw. At the same time, I’m tapping into several exciting new business models in the service economy that are far more attractive than the low-margin, small-scale items of everyday life. It also helps explain why a company like OBI is setting up more and more digital services through its heyOBI app, for instance a digital gardening planner, which manages to stay in touch with customers on a weekly basis over the course of one to three months. What’s more, I can clearly set myself apart from the competition because I am responding to the real motivation and goals behind the purchase, i.e. having a nice lawn. OBI starts off with its core DNA: gardening, an area where they are seen as particularly trustworthy by their target group, and it links one digital service after the other with it.

It’s also why Keller Sports no longer rewards purchases themselves with its Keller Smiles loyalty programme, but instead the reason why people shop at Keller Sports in the first place: actual sport and exercise. For example, Keller Smiles regularly awards points for reaching weekly targets, e.g. getting a personal best on the 5k run, which I can redeem in the shop to get discounts. By doing this, Keller Sports is killing two birds with one stone. First, they are present as a brand in the everyday lives of people, i.e. whenever they exercise, making them a constant companion. At the same time, they learn an awful lot about their customers because they don’t just know how often people exercise in a certain way, but also where they do it, how long for and how intensely. This means they’re in a much better position to recommend the truly perfect running shoe out of all the shoes on offer. In addition to this, at Keller Sports I can concentrate on fewer, but more relevant products that I can always make a persuasive case for, e.g. because a certain shoe is the perfect match for a given customer based on how they exercise. I also reduce my procurement risks as a company, as I can concentrate on fewer products, while being able to negotiate better terms for these products because I will have higher volumes.
Summary
With these two principles, we can expect to see the launch of a brand-new e-commerce game on the market. A game where guidance trumps sheer supply, and everyday issues trump range; where the most relevant range trumps the biggest range, and where the shop is the last stage of the customer journey, not the first.
The key players of the future will focus on answering truly everyday questions for customers, in the same way Freeletics gives me a schedule to reach certain targets in order to, say, become fitter or build up my muscles. Or in the way that Pinterest responds to brand new creative questions that Amazon just can’t help me with, for instance what to give as a present for Mother’s Day.

It’s not hard for a company like Freeletics to latch onto an e-commerce model. At the same time, all they need is to offer three different workout mats instead of a thousand or so available on Amazon. They also don’t need to worry about customers ditching them for Amazon seeing as they are already a daily companion for their customers, as opposed to a company with a range of products an “everything store” can never hope to offer. The future belongs to those specialists who can really capture a category and can get to the heart of their core DNA, which they can then draw on to offer something truly relevant to people’s everyday lives. A future where Amazon is not a threat and a future that is financially much more appealing because it no longer lives off thin retail margins alone. Any e-commerce company can achieve such a future as long as they start off by identifying their motivation and aims, and they begin by “designing” digital services for their target groups rather than just defining themselves by their range. Explore new horizons in e-commerce with this in mind!
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