Authentication, visibility and community are key
Welcome to the Sociology of Business. If you are not subscribed, join the community by subscribing below and joining the Sociology of Business Discord. You can find my book, The Business of Aspiration on Amazon and you can find me on Instagram and Twitter. For those new here, in my last analysis, The new commerce opportunity, I looked into what buyers and sellers are really looking for and how commerce destinations respond to this.
Doubling down on the exploration of the new commerce opportunity landscape, I looked into the features that power the existing and emerging commerce destinations. This space is defined by two axes. The first axis goes from an aggregate of items to the curated selection of items. At the one end is Amazon with little guidance below product reviews and on the other are sites that provide an informed point of view, like The YES, 100 Thieves, NTWRK or The Strategist. The second axis goes from low to non-existent product authentication to high product authentication. At the top of this axis are goods authenticated on blockchain and digital goods, and on the bottom goods of the unknown or generic origin.
Q1 is the area of curation and high authentication. This is the domain of traditional auction houses, like Sotheby’s and Christie’s, stand-alone retailers like SSense, curated secondary marketplaces like ReSee, What Goes Around Comes Around and Bezel, and magazine shops like Highsnobiety Shop, The Strategist and Complex Shop. There’s also a new category of sourcing and distributed ownership destinations, like Rally, as well as destinations that provide simultaneous ownership of digital and physical assets, like Anybodies, and those that connect tokens with membership benefits, like Rally.io.
References: Sotheby’s, Christie’s, Bezel, ReSee, Byronesque, Friends with Benefits, Fashionphile, Thrilling, What goes around comes around, Anybodies, Rally, Rallyrd, Genies, Highsnobiety Shop, Complex Shop, The Yes, Cave Things, The Strategist, Kick Game, BLK MKT, BuyWith, SSense, Vivrelle, NTWRK, RTFKT, 100 Thieves.
Q2 is the domain of curated but not necessarily authenticated goods. Sometimes, authentication is N/A as in the case of Drest, which creates digital items. In other cases, authentication is not a platforms unique selling proposition. Buyers are happy to purchase items from livestream sellers on platforms like Ooooo, Mogu and Baidu. Livestream sellers put forward their point of view and editorial eye on the products they select and evaluate. Facebook Shops and Tik Tok Shopping similarly give opportunity to sellers of all stripes to set up their shops. While in all these instances there is curation of items that are sold, either through personal validation or a simple item selection, the provenance of the items and their authenticity are not at the forefront.
Q3 is the area of bazaars: markets with goods of unknown or unproven authenticity. This is the area of Amazon marketplace, Facebook Marketplace, Faire, The Fascination, Etsy, Depop, eBay, Fave, Ali Express. Primary and secondary marketplaces belong there, and platforms may or may not control authenticity of items sold there. Authenticity is not the key value proposition in Q3, where choice and price are key purchase drivers, and breadth and scale of offerings at the best price are what platforms are geared towards.
Q4 is the land of the authentic primary and secondary marketplaces and retailers. Items sold are of known provenance and proven authenticity, either guaranteed by the data on the blockchain or by human experts and authenticators (or some combination of both). Authenticity is USP in this area, and commerce platforms here compete based on their ability to quickly and reliably authenticate items they are selling, either from dealers or from suppliers, brands and factories. Examples are Rally, FWB, Genies. There is very little to no curation in this area, and discovery is difficult. Primary goal of primary and secondary marketplaces here is to offer the breadth of products at best price.
Two right quadrants, Q1 and Q2 are the future of commerce as they provide guided navigation through the authenticated assortment of items. The more desirable future is outlined in Q1, with authenticated items being on sale in curated settings. Here is where Web3 comes in as a value add to physical goods as one of the most reliable authentication mechanisms that also lends scale and durability. Q2 is more robust in terms of creating visibility for niche sellers and brands and putting personality of sellers at the forefront, through livestreaming. Entertainment is paramount here, and winners are going to combine this niche seller visibility with item authenticity and entertaining presentation.
Two left quadrants, Q3 and Q4 are centralized platforms that are increasingly dated. They leave buyers sorting through the mass of items without any guidance or curation. They also do not give a lot of opportunity to sellers to achieve visibility as destinations here operate according to the winner-takes-all-principle and are ruled by big-gets-bigger algorithms. The platforms reward the biggest sellers at the detriment of niche ones. A way to relevancy for aggregators is to a) offer community-based guided navigation and b) to increase visibility to all sellers.
Three key features of decentralized commerce destination are below:
Authentication needs to be quick and convenient for the sellers and reliable and consistent for the buyers. Product discovery and navigation needs to be contextualized and entertaining, either through editorial point of view or through livestreaming and social component. Visibility needs to be equal to all sellers and platforms should support in terms of audience and sales big sellers as much as the niche ones. This is how this space is currently populated:
Lastly, if the commerce space is broken down by the key feature different destinations provide, we get four layers.
In the first layer are aggregators, where exchange between buyers and sellers is transactional and where product discovery is choice- and price-driven.
Adjacent territory is defined by curation, where exchanges between buyers and sellers are still transactional, but where product navigation is guided through considered and thematic edits. Both aggregation and curation are features of the traditional commercial markets and exchanges are monetary.
The next two layers have mixed monetary and non-monetary exchanges, like status in the community, personality and charisma, taste and narrative power. In both community and entertainment layer, people buy from other people.
Community-powered markets rest on individual point of view and their taste savvy. Buyers and sellers can play both roles at the same or at different times.
Decentralized platforms add another layer to community-powered markets and turn sellers into creators and investors. Creators’ appeal revolves around their taste, knowledge, style, presentation, entertainment savvy and community clout. In decentralized platforms buyers can band up together to collectively purchase and own items, in the fractionalized ownership scenario (ConstitutionDAO, RedDAO’s purchase of D&G’s Doge Crown and LinksDAO are examples).
I had a fascinating conversation with NEXT Conference, where we talked about what Web3 means for brands - in terms of consumer behavior, status signaling, decentralization of marketing and new commerce scenarios. Listen to our conversation here.