Great post! Although I’ve shopped on Wayfair.com before, I didn’t know what separated their model from other furniture retailers with an online presence. It certainly seems that not holding the inventory provides a huge advantage in terms of cost savings, but that also means Wayfair, as you said, has to be diligent in ensuring they are creating real value for their suppliers in other ways. Right now, it seems like most of the value to suppliers is in allowing them to reach a large customer base. The risk with that is the same one we see in other network-based companies, such as Twitter or Instagram, that the value really comes from being able to maintain a critical mass of customers. And although the cycle is working in Wayfair’s favor now (more customers -> more suppliers -> even more customers -> even more suppliers), I could see it just as easily reverse and unravel. I think value-via-network companies should look to find alternate sources of value-add, to both their suppliers and customers, to hedge against this risk and keep their network strong.
Very interesting post! I have a lot of respect for Airbnb; they took an extremely innovative approach in an industry which I feel has only demonstrated incremental changes over recent decades.
It was been interesting to watch Airbnb’s popularity explode just in the past couple of years – I myself have switched from exclusively traditional hotel-usage to almost exclusively Airbnb usage. Although the regulatory issues certainly pose challenges for their continued growth, it sounds like they are remaining optimistic. Now I will be very curious to watch how the competitive landscape responds. Will others enter the market to try to emulate their model? Will existing hotel models try to incorporate elements of Airbnb, or will they try to differentiate further to distance themselves?
I am also surprised to learn that YouTube pays for content! If that does indeed make up a large cost for YouTube, I wonder if they could explore an alternate model for motivating and sourcing content – for example, creating intrinsic value (eg, nostalgia, bragging rights) for post-ers, or perhaps giving an award for just the most popular videos, a la Threadless. It may be difficult to reverse this, but I wonder if YouTube’s popularity would suffer if they simply ceased to pay for content.
I can’t help but compare YouTube to Facebook, which although has a similar business model/revenue stream, has seen wildly different bottom-line results. Seems to me one of the biggest differences is that Facebook has been very successful in embedding themselves at the center of the digital ecosystem, whereas YouTube still mostly exists as a standalone. Could YouTube find ways to emulate this?
Thanks for your reply, Yubo! I had a similarly disastrous experience with an alternate furniture store, so I can certainly empathize. And your observation does not seem to be an outlier – CMO Leontyne Green acknowledges the inconsistencies in IKEA’s delivery in an article on Ad Age (see link below). It seems to be a more systemic issue than simply a peak demand time in Boston.
Why? I can’t give a definitive answer, but my hypothesis is this – IKEA’s core competencies in their operating model to center around standardization and low-cost manufacturing. Delivery to individuals is inherently a different service, and requires a larger amount of customization and specialized customer service. It may be worthwhile for IKEA to explore if delivery as a service fits their operating model and what has been their competitive advantage thus far, or if it’s better to leave delivery to other companies for whom customized service is a better fit.