Lyst is a UK based online shopping aggregation website that has generated some traction ( ~20M from series A & B, plus $2B in sales globally).
Lyst has similar features to a normal shopping website (cart, view, share), but it has hundreds of designers / brands and allows users to “lyst” items and share them with others.
I’ll lyst mine if you lyst yours
Lyst creates value by generating a platform where a user can search/sort/filter through multiple designers in one place, and it captures some of the value by taking a cut of sales that it refers to it’s partners.
The network effect that occur are two fold:
– The more user’s friends who sign up and share pieces they think their friends will like, the more valuable this platform is to the original user. There are clear use cases where lyst may be more popular, for example finding dresses for a special occasion and getting feedback from friends who can compare different brands/SKUs side-by-side. However, the marginal value diminishes with each additional new friend as the additional value in going from 1500 to 2000 friends on the platform is not as high as between 0 to 500.
– The more brands there are on the website, theoretically the high likelihood that a user can find an item that he/she will like and proceed to make a purchase. Instead of opening multiple tabs, and sometimes forgetting a designer, users can just go to one place to fulfill their shopping needs. This also has it’s limitations as users might also find the number of SKUs overwhelming and end up leaving the site to go back to a more familiar experience (e.g. jcrew.com)
Fashion is fickle
Even though the online shopping aggregation segment is still fairly new, Lyst has emerged as the incumbent with 400% growth in 2012 and 2013. In order to continue to compete, Lyst needs to fend of newer entrants and strive to become the industry standard / first stop for online shoppers. One issue that Lyst must deal with is that brands can multi-home and easily list their SKUs with a new entrant who is likely to accept lower referral fees. This is a threat because the network effect will not be very strong and switching costs will be low because a user can simply open a different website to get similar SKUs (basically users themselves can multi-home). In order to combat this, Lyst should try to do what Nordstrom does which is securing unique brands or items that are not found through other channels. Lyst should also strive to provide a better customer service than new entrants since this can be a point of differentiation, and new entrants generally have fewer resources to offer this frill.
The biggest obstacle for Lyst is that it needs to find a way to get into the habits a user’s shopping routine. Fashion trends are constantly changing, just like the how users are changing / discovering different ways of shopping online. The emergence of new shopping sites such as Gilt.com and Ruelala shows that users are willing to shift to new platforms. However, Lyst could also easily be forgotten if a new trendier website comes along. In order to combat this, Lyst should try to increase the value of its platform by offering a loyalty program in addition to a referral program. Lyst could create a in indirect network if it convinces users that the more a he or she buys from its website the more valuable the user’s next purchase will be.