I was catching up this week with my good friend and longtime New York City entrepreneur and investor Owen Davis after speaking to his start-ups class at Columbia Business School. We were pondering Amazon-like vertical integration as a business strategy for today’s tech companies.
Should payment processors like Square and Stripe become commercial banks, just as cap table tools manager Carta is launching a secondary market for private company stocks of the companies using its equity management tools? Are we at a moment where the “Great Unbundling,” heralded to us a decade ago by noted venture capitalist Fred Wilson of Union Square Ventures, is about to reverse itself and swing like a pendulum the other direction and become the “Great Rebundling”?
There is no question that the unbundling of products and services was one of the biggest mega-trends of the last decade. Digital transformation has enabled the a la carte sale and delivery of so many products that were historically packaged in bundles. Music had its albums and CDs until Apple’s iPod and iTunes.
Education has historically been a monopoly of brick-and-institutions. Now, we have online universities selling courses one at a time competing with powerful online learning companies like Babbel, Duolingo, Coursera and Skillshare that also sell one course or a skill at a time. Netflix enabled us to buy a stand-alone HBO-like video entertainment service without having to subscribe to a cable or satellite channel bundle -- and then became much, much more than HBO ever was.
We are already seeing some rebundling. Spotify, Soundcloud and Apple all now offer bundled music subscription services combining massive libraries of songs. And Amazon Prime rebundles just about everything you can imagine to get you to sign up for free shipping.
What’s next? Trying to answer that question is where Owen and I brainstormed most, and we focused on the online sale of physical goods. Clearly, Amazon has demonstrated extraordinary leadership, building maybe the most powerful logistics company in the world today.
Who will be next to try to tame -- or own -- deliver-to-the-doorstep logistics, and combine it with online selling?
Should Walmart (market value at just under $400 billion) buy FedEx (market value just under $70 billion)? It would immediately make Walmart a top player in global logistics and delivery, and the company cultures are quite similar.
But wait, wouldn’t Shopify (market value of $170 billion) be a better owner of FedEx? Now, instead of super-serving one retail owner in addition to FedEx’s existing customer base, it would have as customers the hundreds of thousands of merchants using Shopify’s platform and services, all of whom are used to paying premium pricing for delivery, since most aren’t massive businesses on their own.
A Shopify/FedEx combination could deliver Walmart-scale pricing advantages for delivery, a huge advantage for the hundreds of millions of consumers who regularly buy on Shopify’s platform -- a big win for consumers beyond what a Walmart/FedEx combo could deliver.
I think we are on the cusp of the Great Rebundling, and that it will be driven and rewarded by those that are consumer-led, not by those who do it for cost savings or diversification. What do you think?