“Ecommerce isn’t the cherry on the cake, it’s the new cake” — Jean Paul Ago, CEO L’Oréal
Long before the existence of the World Wide Web-WWW, Michel Aldrich in 1979 was already talking about e-commerce; using telephone lines, a remote control with an extra “button” to connect to the telephone, a television set modified by a menu interface (Videotex) and a printer, he managed to get Tesco to make its first online sale in 1984.
This is how such a simple process has become a complex ecosystem, with multiple stages and diverse business models that bring end consumers closer to the thousands of brands and products available on the market.
E-commerce has certainly been one of the great winners of digitalization in the era of the Internet and social networks. Companies such as Amazon, with less than 30 years in the market, has today a market capitalization value of USD$1.7tn, four times the value of Walmart (USD$410bn), reflecting an excellent performance within the sector. Another case in point is Mercado Libre, founded in 1999 in Argentina, today has a market capitalization of USD$75bn.
In addition to the Internet, the changes that undoubtedly gave way to the e-commerce that is present in the market today, have been the possibility of having online payments, connected logistics and segmented marketing with a high degree of personalization. Also, the efficient microprocessors that have reduced the first Aldrich television to a smartphone, as well as the power of telecommunications (infrastructure and bandwidth) that led from being tied to a physical place to having the possibility of buying from (almost) any corner of the world, are other important advances that determined the growth of this sector.
To understand this evolution, it is enough to go back to 1995 when the commerce in Amazon began through the purchase of a book that had to be paid through a credit card given by the user, an internet connection and a desktop computer. In addition, the delivery of the purchased products was made in the following days through a traditional courier company such as FEDEX. In 2007, this same purchase could be made through an Amazon web page on the iPhone or by paying through PayPal. Today it can be done from any cell phone on the app, paying with Amazon Pay, Apple pay or an “Amazon pay later (Buy Now Pay Later)” financing scheme.
Thus, as e-commerce has evolved, so have the trends surrounding it:
-Specialized marketplace: After having been a space to commercialize any type of product, the industry has changed its trends and today seeks to be a sales channel for specific markets. In used car sales, the unicorns, Carro in Asia and Kavak in LATAM, are important examples. In addition, the large online marketplaces today not only sell their own products, but also third-party products without the customer coming into contact with the latter, for example Amazon and Walmart marketplace.
-D2C Brands: Among the opportunities that Shopify, Wix and other no-code webpage creators have achieved, is the possibility of building brands with specialized products, that have their own identity, verticalized supply chain processes (mostly) and that put the customer experience at the center of their operations. Some examples are the famous Warby Parker eyewear brand or Casper in mattresses.
-Social commerce: E-commerce is no longer a cold relationship between brands and consumers. The social component is becoming increasingly important to facilitate commerce and multiple business models are emerging around it, such as group and community purchases such as Meesho in India or Favo in Brazil, purchases through recommendations such as Pinduoduo, or peer to peer commerce on social platforms, among others.
-Live Stream Commerce: Derived from this need for interaction, advertising has ceased to be static, translating into live broadcasts where the consumer has the opportunity to interact with the different brands during the purchase process. As well as live broadcasts with brand ambassadors. Although mostly popular in China, Gen Z’s around the world have moved brands such as Germany’s Douglas, which broadcasts several programs a week in various formats, from workshops with experts to talks with influencers, and reports conversion rates of up to 40%.
-RollUp: The great dynamism of ecommerce has led to the use of the roll up strategy to buy one or multiple ecommerce businesses, merge them and consolidate them into a larger company. Thrasio is a digital consumer goods company whose strategy focuses on acquiring direct-to-consumer ecommerce brands. To date it has raised USD$2.4bn. Other companies in Latin America that are replicating this strategy include Merama and Valoreo.
In all of these business models there are three main characteristics that will continue to drive the development of new solutions or models in the future.
-Omnichannel: In recent years, and especially as a result of the pandemic, the digitalization of businesses has accelerated, taking them to an online world, and has moved native offline players such as Amazon to open physical stores. This trend will strengthen in the coming years and will likely coexist and merge the offline world with the online world through technologies such as virtual reality and augmented reality.
-Convenience: Headless Commerce is a strategy that makes the online operation of stores more flexible by separating the experience offered to customers from the operational part, without sacrificing service. It works by isolating the user interface and the administrative part. Its objective is to give companies the freedom to customize ecommerce, having as a premise the ability to react in a timely manner to different customer needs. (Forbes) The opportunity for a customer to place an order via Whatsapp, a voice chat or make a payment with a single click, is a product of these APIS that connect all the power of a website back end and make it fast and close to the customer.
-Intelligence: Making ecommerce robust has allowed the thousands of transactions to get to know consumers and based on these preferences make recommendations that make their purchase faster, improve their experience in the process and increase their ticket. Some of the startups that are achieving this are Halla, specializing in food, and Intouch, which offers hyper-segmented real-time promotions in ecommerce of various brands.
Undoubtedly, digitalization, logistics optimization, technological infrastructure and embedded finance are making ecommerce something unimaginable. We are living the first twenty-thirty years of ecommerce, the best is yet to come.
ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.
Stay updated about Venture Capital, innovation, entrepreneurship and more! Sign up for AC Venture’s monthly Newsletter.
Follow us on LinkedIn: ACV_VC
Follow us on Twitter: acv_vc
Follow us on Spotify: ACV_VC