- Unwinding the Thread
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- Going Vertical
Everyone is selling everything everywhere.
There are two types of e-commerce businesses:
1. Horizontal
Category agnostic companies like Amazon or Walmart. They spread their offerings as wide as possible, & their TAM grows ever closer to the entire population of the human race.2. Vertical
Generally, smaller companies focusing on a niche or subset of products. By building a reputation within a particular category, brands convert industry trust into revenue & a low-churn customer base.Much has been written on the "Unbundling of Marketplaces" in recent years. Famously, the "Spawn of Craigslist" blog written by Andrew Parker in 2010 highlighted the various vertical-oriented challengers to the horizontally-inclined marketplace of Craigslist.
Parker’s graphic pictured above displays the endless stream of companies attempting to take a bite out of the Craiglist apple through a hyper-focused, vertical approach.
The growth of marketplaces resembles the growth of different places to sell products online, like how Ebay was unbundled
Pair that with decentralization (of culture, geography) and the lower setup costs of setting up a marketplace, we'll see soon even more— anthonymcguire.eth (@AnthonyMcG2)
12:25 AM • Apr 28, 2023
This graphic would be updated a few years later by David Haber.
These companies are credited with unbundling Craigslist. Initially popping up in the depths of Craigslist “sub-boards,” their niche brands soon left Craiglist all together — bringing their customers with them.
“As marketplaces grow, each subcategory eventually gets big enough to attract vertical-focused competition. Horizontal platforms are unfit to cater to the unique aspects of each category, focusing on the lowest common denominator instead. That’s why Etsy does handmade, and StubHub does ticketing better than eBay.”
Related dynamics are at play in the collectibles industry. There is absolutely a case to be made that the rise of vertical challengers like StockX, Wayfair, and Poshmark has forced eBay’s hand into verticality.
“Craigslist and eBay grew so enormous horizontally—covering so many products, categories and services—that they simply couldn’t pay attention to their vast clientele’s varied selling and buying needs. The broad strokes they used left consumers and sellers craving a more catered experience. Horizontal marketplaces unintentionally primed the market for vertical marketplaces.”
Marketplace Pulse reported in their piece “Unbundling eBay” on eBay Investor Day 2022 that while eBay remains far larger than the collection of niche marketplaces, it’s unavoidable that legitimate chunks of eBay’s subsets have been soaked up by competitors.
“eBay intended to remind how big it still is even compared to competitors combined. And that perhaps eBay should be valued more. But it showed how many companies took parts of it and made them better instead. In the last decade, eBay gave up innovating on most consumer-to-consumer categories like sneakers or event tickets. Its competitors doubled down.”
Yet while the big dogs are moving from generalist → specialist, the opposite is seemingly occurring at the major players in the collectibles auction house industry.
As these auction houses face increasingly tough competition and consolidation, they’re forced to compete by going horizontal — shifting gears from servicing niche clientele with specialized items toward becoming more generalist.
Companies like Goldin, PWCC, and more went from sports-specific to offering millions of dollars worth of cultural memorabilia like video games & comics in the span of a few years.
As a result, it seems like collectors of specific categories are cross pollinating.
Two points on this:
It’s tough to know what to make of the simultaneous unbundling of eBay and ‘bundling’ of these auction houses. It appears they are both chasing the same equilibrium, a middle ground whereby they can offer the personalized appeal of a vertical marketplace while reaping the profits of a horizontal shop: The Goldy Locks zone of collectibles.
There may also be a fallacy at play here with respect to the causal effect of collectible category expansion & anecdotal evidence of collectors becoming more open to exploring new sectors. It could very well be the case that auction houses are responding to this trend in the sentiment of collectors rather than causing it.
Ultimately, this is excellent for collectors who will have more opportunity than ever before to shop across multiple categories on a more frequent basis & have their pick of auction houses.
And assuming this cross pollinating effect is as real as it feels, we’ve got a rising tide lifting all of our boats.