What Are Digital Ecosystems, and Why Are They Ruling the Market?

On top of that, extra offerings add more value to the core business, help reach new audiences, and attract more users to the ecosystem. Once attracted to one service, the user is seamlessly introduced to the others, as they comprise a single network. This strategy results in multiple users being acquired at the cost of one acquisition, a powerful competitive edge.

The services benefit from the shared user base and support each other in times of crisis. An ecosystem might not feature all of its services in a super app or a website. What’s necessary is a well-balanced network of supporting offerings that satisfy the customers’ needs and generate profit for each other.

Amazon is a good example of such a system. As of 2022, it had a suite of at least 97 acquired subsidiary companies, and an advanced ecosystem of its own services, covering multiple user wants: Amazon Music, Amazon Pay, Amazon Kindle, Amazon Fresh, and others.

The services in the Amazon ecosystem are accessed under the Amazon Prime subscription. It has 200 million users and covers a variety of their daily needs, to the point that it becomes a part of their lives. Users start their day with an Echo alarm clock powered by the voice assistant, Alexa, check out books on Kindle or Goodreads, get their food and groceries delivered from Amazon Fresh or Whole Foods, shop on the Amazon Marketplace with exclusive deals and lower prices, and round the day off with a good movie on Prime Video.

Today, Amazon is the largest e-commerce company in the world, and it wouldn’t have gotten there without leveraging the ecosystem strategy.

These ecosystem leaders began with a core service, closely studied their customers, and discovered additional needs. Now, they offer all these services in one convenient super app, making life easier for users with a single login and shared loyalty perks.

In the end, the created ecosystem advances the interests of all its participants. Let’s look at the power of ecosystems in action.

Example. Ace Hardware has the most physical stores in the U.S. In 2022, there were over 4 thousand Ace Hardware locations in the States, and over 5 thousand locations in total. The company is a retailer-owned cooperative that drives its growth from opening more physical stores. It has been noted for its rapid expansion, and in 2021, made a revenue of $8.6 billion.

Another player in this industry is The Home Depot. It operates 1,994 physical stores in the U.S., which are much fewer than its competitor. Instead of launching new locations, it focuses its efforts on creating a digital ecosystem of home improvement services.

Apart from DIY sales in stores, the company develops solutions for the B2B market, boosts online channels, and implements seamless in-store and online shopping. To expand its ecosystem even further, it has acquired and joined HD Supply, a leading industrial distributor in the multifamily and hospitality markets. In 2021, The Home Depot ecosystem made a total of $151 billion—it is almost 20 times more than the revenue of Ace Hardware, which has twice as many physical stores but doesn’t develop an ecosystem.

So, it’s not really about the number of stores. It’s about exploring new markets and targeting different clients with relevant, custom-tailored services.