Connectivity Disrupting Traditional Models: Online Peer to Peer Commerce

February 17, 2011
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As the world became more connected through the Internet in the 1990’s, many disruptive uses of this connectivity were tried and in some cases have grown into wildly successful businesses. One aspect of connectivity is the way it opens up interaction at different levels, that’s one of the driving factors in the growth of the social web, for example.

As the world became more connected through the Internet in the 1990’s, many disruptive uses of this connectivity were tried and in some cases have grown into wildly successful businesses. One aspect of connectivity is the way it opens up interaction at different levels, that’s one of the driving factors in the growth of the social web, for example. Ebay and PayPal are stellar examples of new business models that exist only because of the Internet and that leveraged the ability to connect individuals in peer to peer relationships (and also support BtoB and BtoC). The Internet bubble saw many new businesses try to leverage this connectivity in new and unique ways, some succeeded, many did not.

We’re now seeing another round of businesses and business models that creatively leverage hyper-connectivity to disrupt established business models. Look at Warby Parker for example. Warby Parker is disrupting the eye glass business through leveraging the Internet, some unique technology and a new approach to the supply chain. Until now common wisdom said that selling eye glasses online would not work, customers wanted to try them on and experience them in person. Because of the business model, complex multi-tiered supply chain and a general complacency with the pricing, prices were held high. Enter Warby Parker with trendy in-house designs, a direct from the manufacturer supply chain, a fixed price ($95 including frame, lens, anti-reflective coating), virtual try-on (with an uploaded or web cam photo), free shipping, at home try-on / return and a few select in person try-on counters in major cities.

Leveraging connectivity in peer to peer transactions to build a new business model is increasingly popular. The basic idea, “you have high value stuff that you don’t use all the time, so you could monetize it through micro-transactions in a peer to peer network builds off of the original ebay sales model and the social web. High value items like apartments, rooms and cars are finding their way into online networks like AirBnB and Zilok. This approach has been termed collaborative consumption, and is a very green alternative as well as very cost effective for both parties. Collaborative consumption explores many different economic models including sharing, bartering, swapping, trading and renting. The business provides the network, the structure, security, policies, and back office processing generally for a small percentage of the transaction. AirBnB is so disruptive to traditional hotels that the hotel lobby in NYC is working to have the practice made illegal. Currently businesses are in a few categories including short term accommodations, car rental, financial lending and “stuff” rental / sharing. Here are some of those businesses:

  Another twist on the peer to peer model is using the p2p network to gather group buying leverage. Wholeshare, for example, establishes a food purchasing network and allows those groups to connect to and buy directly from food producers instead of grocery stores. The key of course is getting to a quantity through the group that meets wholesale volume restrictions. As a member you save money while getting fresher food.

As you can see from the list above the model is exploding across several areas.  I’d think we’ll see more innovative uses for P2P models this year, demonstrating again the power of the network in an increasingly connected world.

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