Thread by @Fritz844

On e-commerce:

In the Dotcom bubble, everybody went all in on telecom stocks. Few of them turned out to be particularly strong businesses.

Are we doing the same in this cycle?

The pitch for Alibaba during its IPO process was it dominating the market thanks to a 2-sided network effect.

While such network effects make it difficult to match Alibaba on SKU availability and price, other competitors have found niches in delivery speeds and quality control.

I'm convinced that these network effects play a smaller role as time goes by. It only takes a few botched up orders for you to become disillusioned with a service. I'm fed up with Alibaba's Lazada for that reason.

I think this is what we've seen in most markets. eBay is a shadow of its former self. Rakuten is my middling. Taobao also has new competition.

Just like Aldi offers "good enough" service for most customers, I believe that 1P e-commerce platforms will eventually offer enough SKUs and low enough price for most individuals.

The problem is that 1P doesn't offer much scale advantages. Software is cheap.

Also, the e-commerce industry doesn't offer any barriers to entry. That's part of the reason why Amazon was pushed out of China: competitors undercut them on price. Who can survive eternal price wars? Shopify can enable anyone setting up their own e-commerce websites.

While the top-down view of e-commerce is compelling, I don't see the value proposition, the micro supply & demand dynamics and the barriers to entry that makes it an attractive business.

Hard to capture the growth of an industry when competing against the best & the brightest.

Btw, Amazon is an amazing company. And mostly in 1P e-commerce. I'm more talking about the hundreds of me-too e-commerce stocks out there, who don't have the same customer focus. Just because Amazon has done well, doesn't mean Coupang or Pinduoduo necessarily will.