😧The Problem & Solution

More than two decades in the making, marketplaces initially lured would-be sellers with low priced selling and ad fee incentives to create e-commerce's perception of low entry barriers. Over time they increased both attention and selling fees through policy changes to create today's predicament. Excluding shipping, sellers pay a 20%-30% "tax" (for selling & marketing) at marketplaces like Amazon, eBay & others. So is this bad for shoppers? And if so, how?

Bad for Sellers; Bad for Shoppers

Let's look at advertising. Steeper ad costs intensified competition for the same search terms so sellers tried to outbid each other to stay visible at the top of search results on page one. How bad did it get? Amazon's GMV grew by <20% between 1Q'21 & 3Q'23. Yet, in that same time period, ad revenues grew by more than 500% to $50B.

More sellers were entering the e-commerce arena but more failed as competitive attention costs slowly ate away at their working capital. Specifically, when they could no longer outbid better funded sellers, sales dwindled and they closed "shop".

A growing number of SKUs (>100M SKUs) ended up in fewer controlling "hands". As this happened, the remaining sellers passed on as much of the cost of ads & selling fees pushing consumer prices higher.

Everywhere shoppers looked, they thought this must be the much talked about "inflation". Afetr all, prices seem to be going up everywhere; but this was nothing more than the "appearance" of competition. Marketplace policy changes had caused the majority of these price increases.

And if you're wondering "how big is this fee problem?", the answer is it's huge! In 2023, just in the US, UK, CAN and the EU & just at e-tail/retail e-commerce marketplaces, the total selling and ad fees collected exceeded >USD$300B. Globally, it's more than $1T.

The Root Cause

While marketplaces thrive, sellers and shoppers suffer. And this occurs because sellers & shoppers have no governance power. Can any shopper or seller propose and vote on an enforceable proposal that changes policies at Amazon? No.

The Solution

Inspired by Amazon's, Uber's, Airbnb's and others' low-cost incentives bait to higher prices switch, Dema's user-only driven governance structure has a vision to remake the marketplace platform as an inclusive community and drive the cost of selling, discovery and attention from 30% to <3%.