Digital marketplaces: disrupting old industries and empowering customers

Would you pay £23,000 for John Lennon’s tooth? How about £46,000 for the boxing gloves worn by Mohammed Ali in his 1975 world heavyweight championship bout against Joe Bugner?  More importantly, how would you get hold of them to buy?

Luckily for the winning bidders of these unusual curios, the process of buying, selling and marketing collectibles is moving online. This process is drawing in millions of potential new buyers looking for interesting bids and transforming the fortunes of the companies driving this digital migration.

The same trend that is transforming the market for memorabilia is also disrupting and breathing new life into many other industries and assets, creating lucrative, digital marketplaces for everything from property to takeaways, holiday rentals to art and antiques.

Gavel on a computer

Art & antiques- disrupting a $63 billion market

This last market is a case in point. The business of buying and selling fine art for instance is worth an estimated $63bn but less than 10% of auctions are currently offered online. That is changing fast, with huge potential rewards for auction houses and the technology companies that drive their sales.

A regional auction house in, say, Yorkshire that previously depended on local custom to sell its wares can now put its auctions online, effectively reaching an audience of millions of buyers. A bidder on the other side of the world can now peruse a wider range of fine art and objects across countless sales around the world. More eyeballs mean more bidders and more pricing tension.

This is already happening, with startling results. In 2017 an auctioneer in Surrey, England, listed a 19th Century Maori tribal bugle for £50-100. Upon opening the auction, a frenzied online bidding war quickly broke out between a collector in Australia and a Parisian dealer in tribal art. The flute sold for £140,000 in the space of 2.2 minutes.

The technology that has enabled this fragmented, localised market to reach a global, online audience was built by ATG, a company ECI invested in back in 2014. ATG’s expansion into Europe and the US, where it owns the country’s largest online marketplace for second hand industrial goods, means the company’s addressable market has swelled to $250 billion, mostly still offline.

The holiday marketplace

The business of holiday cottages shares many characteristics with auction houses: a fragmented ‘industry’, often regional in nature that has also benefited massively from the development of online marketplaces. A strong online brand backed by healthy marketing spend and a customer-friendly platform can quickly grow its inventory of letting properties, in turn drawing in higher web traffic from around the world.

This ‘aggregator’ model can be expanded to other holiday-related businesses. Internet access and cheap flights have triggered a boom in bespoke, build-your-own holidays at the expense of package tours. Travellers can select their own flights, hotel rooms and car rental on aggregator sites cheaply and easily. Data analytics allow companies to better understand consumer habits and preferences, tailoring offers to their needs and enabling them to cross-sell products and services.

ECI was an early and enthusiastic backer of this digital disruption, investing in LateRooms.com (sold in 2007 for 9x return) and later car rental aggregator CarTrawler (sold in 2014 for 6x return). The firm also recently invested in Travel Chapter, one of the UK’s largest online vacation rentals platforms, trading through holidatcottages.co.uk and a range of other leading websites..

Family on a holiday

 
B2C and B2B switching

The years following the 2008 financial crisis saw an unprecedented squeeze on household budgets that has only recently begun to abate. The UK Government has highlighted switching as an ideal method to lower household bills – from electricity and gas, to phone and internet. That has helped to drive double digit growth for the digital marketplaces that have empowered this consumer revolution – the so-called price comparison websites (‘PCWs’).

That revolution is now spreading to the business world, as companies also seek to cut costs and focus on their core business. For PCWs, higher traffic brings better purchasing power for their customers. Customer data can also drive increased monetization by cross-selling and bundling services, boosting commissions for switching providers and savings for their customers.  Over the past decade ECI has invested across several businesses providing SME’s with the ability to switch critical business utilities (XLN, sold in 2014 for 3x return) and services (Citation, sold in 2016 for 5x return). ECI’s current investment in this sector is Make it Cheaper, the UK’s leading business price comparison service for electricity and gas, insurance and telecoms.

About the author

Tom Wrenn

"I’m one of the four Managing Partners at ECI who make up our Investment Committee and run the firm. I’ve spent most of my career working with tech and tech enabled businesses helping them to achieve their global growth ambitions whether organically or via M&A."

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