This major shift in the retail technology landscape has enabled a practice known as “decentralized commerce.” Building upon traditional dropship and marketplace models, new retailers with devoted audiences can sell brands and products at scale without owning inventory or warehouses.
“In the first generation of online sales, retailers were still buying inventory and storing products in set locations,” says Keith George, CEO and co-founder at Cortina, a retail infrastructure platform that enables decentralized commerce. Consumers were wholly distributed, but costly inventory, warehouses and operations were not. Unsurprisingly, few ecommerce players made a profit.
High operating costs have always made it difficult for new entrants to compete effectively. For example, buying, storing, and shipping inventory creates risk and absorbs valuable working capital; photographing and maintaining inventory also requires extensive resources. Early dropship models tried to address the challenge but often forced brands into complicated, manual processes — including inventory holds, manual file uploads and batch orders.
A brief period of inexpensive advertising on Facebook and other platforms in the early 2010s gave rise to direct-to-consumer brands such as Casper and Allbirds. Those brands ultimately stumbled as customer acquisition costs grew 60% as Google, Facebook and Amazon consolidated two-thirds of ad spend in the past five years. Retailers’ operating margins could not absorb the impact on profitability. The public markets have not been kind to these players, and venture capital investment in pure DTC brands is now almost non-existent.
The decentralized marketplace model — popularized early on by Amazon and Walmart and now available broadly through accessible technology like Cortina — is one way retailers are expanding assortment and choice without the high costs of warehouse operations. Cortina’s core marketplace offering connects its customers to suppliers around the globe through standard API “connectors,” enabling them to expand their virtual assortment without capital risk while maintaining highly accurate product information for consumers. This out-of-the-box solution doesn’t just serve established retailers but also enables anyone with an audience to jump headfirst into commerce. Now anyone can be their own version of Amazon Marketplace.
“The next generation of retailers can focus on their audience, not inventory and warehousing,” says Brooke Cundiff, co-founder at Cortina. “One can now say, ‘I have an audience around the world. I have products from suppliers across the world. My web store is a central catalog that brings them together, but my costs and supply chain are completely decentralized.’ This is very, very powerful.”
Decentralized commerce and strong organic audience growth are resetting the retail playing field. A new retailer can be anyone, located anywhere, assort products from any brand, sell to customers anywhere, and ship from infinite warehouses without those costs. All one needs is an audience. And by embracing decentralized commerce future retailers can rapidly adapt their product assortment to best suit their customers’ needs, not just what they have sitting in their warehouse, creating a win for consumers, retailers and suppliers alike.