How Some Marketplace Sellers Are Getting Ahead Through Co-opetition
Some say it’s ludicrous; some say it’s genius. Despite everything happening with marketplaces and logistics, could it be that the only way to get ahead is to actually collaborate with your biggest competitors? Here we’ll take a closer look at a historical example of how setting your differences aside can make everyone better off.
Marketplaces: A tough business that keeps getting tougher
It came out of nowhere. There was nothing you could do to stop it. And it changed the online retail landscape forever: fast and free shipping expectations. But shipping isn’t free — it’s eating your margins. And you don’t really have a choice if you want to compete. To remain competitive, Walmart and other retailers are also focusing on 2-day shipping options.
Adding to that, everyone took a haircut on Jan. 27 this year when USPS introduced zone-based pricing and raised First Class and Priority Mail rates, a month after FedEx and UPS also introduced rate increases. With more sellers online than ever before, more states collecting online sales tax, carriers and marketplaces increasing fees… It’s a never-ending struggle.
Nonetheless, customers have now come to expect fast, free shipping. Retailers that can ship faster AND ship for less will WIN. With all these things happening, one might wonder if a solution exists that allows marketplace sellers to achieve more with less competition.
Co-opetition: How Collaboration Between Competitors Yields More
Co-opetition is the cooperation between competing companies with similar interests to gain massive advantage. It has proven to be successful in the past, even in ancient times. Here are three ways businesses have benefited from co-opetition in history:
1. Co-opetition for Risk Management
One of the earliest examples of co-opetition is the collective loans used by ancient Romans. In the third century, Rome was booming with trade and wealth could be gained from lending money to merchant ship expeditions. However, lenders took the risk of losing all their money if the ships they funded sank. Enter Cato, a landlord with big ideas. He proposed an association of 50 merchants with 50 ships, with money lent to the group rather than an individual. The association would reduce risk for the lenders, as the merchants had to check on each other and sometimes bail each other out to ensure they would complete their voyages and therefore stabilize their ability to receive credit for future journeys. The merchants who competed in selling their wares had to work together to keep access to funding.
This method of risk management was also applied by the Nobel Prize-winning Grameen Bank that provides microloans for poor worker/entrepreneur communities in Bangladesh with no collateral. The bank provides loans to groups of people living in the same community or working in the same trade (e.g., making bamboo stools) and this community keeps each of its members accountable to maintain credit payment.
2. Co-opetition for Synergies, the Best of Both Worlds
Competitors collaborate with each other to create the best of both worlds at a reasonable price, like Apple’s decision to use Samsung components in their phones. In the logistics industry, we have seen the collaboration between UPS and USPS. It works because, despite being competitors, these companies have differing strengths. USPS has the best “last mile” connectivity, literally touching every doorstep in the US every day. They are the experts in handling small packages efficiently. UPS and FedEx, on the other hand, have highly automated distribution hubs optimized for large package deliveries over long distances. When they come together, it’s a win-win situation for carriers (lowering costs) and merchants (lowering shipping rates).
3. Co-opetition for Scale
Many companies big and small have collaborated with their competitors to achieve scale and produce offerings they otherwise couldn’t provide on their own. Take a look at Star Alliance and its introduction of airline code-sharing, a program in which competing airlines work together to fill up planes on less-crowded routes so they can operate these routes more profitably. It works on a smaller scale too — California Dairies worked together to invest in shared advertising campaigns and microbreweries in the Porto Alegre region of Brazil, home to more than 300 breweries, and formed an association for collective purchasing and distribution.
Now Is the Time for Marketplace Sellers to Collaborate
With historical examples of co-opetition in many different industries, the time for marketplace sellers to collaborate might be approaching. A few limited instances of this happening are coming to light through knowledge-sharing on seller forums or regional merchant groups and they appear to be most helpful for sellers just starting out and learning ways to scale their business. For shipping, however, no such alliance existed until recently, when Cahoot established a worldwide peer-to-peer shipping network. Imagine, as an example, two log truck drivers hauling the same type of lumber and passing each other on the freeway. Doesn’t that make you think about the possibilities to collaborate to send the same item to the closest customer? Wasting time and resources is exactly what Cahoot is trying to eliminate via co-opetition.
Meet Cahoot: The World’s First Peer-to-Peer Shipping Network
Cahoot uses strategic co-opetition to connect the most highly-rated online retailers, organizing them into a network of trusted shipping partners that ship orders for one another using their existing product catalogs and inventory, effectively creating the world’s largest virtual fulfillment network. It enables sellers to cut down the distance their wares have to travel, saving time by up to two days and shipping costs by up to 40%. Now, through our new partnership with ChannelAdvisor, you can take advantage of Cahoot’s network to collaborate and get ahead like the other marketplace sellers that are already on the platform. To learn more, click here.
Blog post by Manish Chowdhary, founder and CEO of Cahoot. Cahoot’s innovative network taps an alliance of top-rated merchants to fulfill orders (for each other) faster and at a lower cost than anything else out there.
Manish has founded multiple industry-leading companies, first starting from his dorm room at the University of Bridgeport, where he earned his B.S. in computer engineering. Manish’s specialties include e-commerce strategy, business methods innovation, supply chain and logistics optimization. He has been featured in The New York Times, Internet Retailer and many other leading publications.