Can’t Anyone in E-Commerce Do it All?

An online transaction seems simple enough. You send your credit card information: they send you stuff.

But increasingly, the company that takes your credit card information is not the one that sends you the goods. And still a different firm might answer the phone when you call to find out why your stuff doesn’t work.

Welcome to the era of e-commerce specialization. Few e-commerce concerns even pretend to be able to do it all any more, which raises the question: Can one company do it all?

The answer appears to be “no.”

Divide and Be Conquered

From a detached, third-party point of view, nothing’s wrong with the current scenario. Many hands make light work, so what’s wrong with a company like Amazon.com focusing more on what it does best — taking orders online, for instance — while others focus on their strong suits?

But what if you’re an investor in e-tailer X? Wouldn’t you want it to be baking the pie and selling it too?

Look at the world’s largest companies — post bubble, that is — and you’ll see diversified giants like General Electric at the top of the heap. They do indeed do it all, and they make lots of money for their shareholders in the process.

Or think of automakers. What if an automaker that was putting cars together soup-to-nuts suddenly decided to go into the steering wheel business alone. It might be the best darn steering wheel maker in the world, but clearly its ability to make money wouldn’t be quite the same.

Specialization Is Our Specialty

That type of specialization is exactly what’s going on in the e-commerce marketplace. Kmart decided running a Web site was too much, so it hired an outside firm to host and operate Bluelight.com. Likewise, Toys “R” Us and Borders have turned to Amazon to run parts of their online operations.

The obvious exception to the rule is eBay. eBay does it all, right? Well, a closer look reveals that’s not the case. eBay is essentially letting its army of buyers and sellers handle all the dirty work like storing and shipping. Even as it moves more into fixed-price retail, eBay is maintaining the same hands-off style, letting the companies that want to sell goods through its platforms do the grunt work.

Don’t get me wrong. This strategy makes perfect sense when viewed from certain angles. Why do things — why try to do anything — that you’re not that good at as a company?

Shaky Lean-To

But there is peril in the you-lean-on-me-and-I’ll-lean-on-you mentality. If everybody is leaning on everybody else, what happens if one company stumbles and falls? E-commerce becomes a bunch of tumbling dominoes — and the dot-com shakeout is renewed.

Perhaps it’s just nostalgia on my part. Maybe I’m like an old sports fan who remembers the days when players did it all: offense, defense, pitching, hitting, painting the foul lines, carving baseball bats by hand.

An e-commerce world chopped up into tiny pieces, where specialists know only one or two things, is just much less appealing, no matter how efficient it might be.

What do you think? Let’s talk about it.