5 predictions for the future of e-commerce

In 2016, more than 20 years after Amazon’s founding and 10 years since Shopify launched, it would have been easy to assume e-commerce penetration (the percentage of total retail spend where the goods were bought and sold online) would be over 50%.

But what we found was shocking: The U.S. was only approximately 8% penetrated — only 8% for arguably the most advanced economy in the world!

We’ve had a close eye on the rate of e-commerce penetration globally ever since. Despite e-commerce growth skyrocketing over the past year, the reality is the U.S. has still only reached an e-commerce penetration rate of around 17%. During the last 18 months, we’ve closed the gap to South Korea and China’s e-commerce penetration of more than 25%, but there is still much progress to be made.

Image Credits: Accel

It’s clear that we are still in the early days of this megatrend and it is our strong conviction that it is inevitable that we will get to a point where at least half of every retail dollar is spent online over the next decade.

Below are five key predictions for what this road to further penetration will hold.

D2C retail will accelerate as merchants seek independence

Marketplaces have forged the path for e-commerce adoption among merchants of all sizes. They have raised significant capital and made the necessary investments in payments and logistics infrastructure, often subsidizing the consumer experience with free shipping or discounts to get them comfortable buying online.

The balance of power has shifted toward merchants, who previously didn’t have the picks and shovels to build their own e-commerce capabilities.

In recent years, merchants have pursued options aside from these marketplace aggregators. They have sought independence, opting to pay 5%-10% of their gross merchandise value (GMV) on their own technology infrastructure rather than paying the 6% to 45% (average of about 15%) in marketplace fees. Most importantly, they have prioritized owning the relationship with their end customers, given that customer loyalty and lifetime value is becoming ever more important in a hypercompetitive online market.

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Top VCs say they want to fund startups that solve retailers' biggest problem — e-commerce logistics

Summary List PlacementThe COVID-19 pandemic has forced all kinds of retailers to double down on e-commerce like never before. 
Even as restrictions on in-person retail have lifted across the US, many consumers are choosing to do more of their shopping online as they keep health and safety top of mind. 
eMarketer analysts have estimated that US online sales would reach $794.5 billion in 2020, a year-over-year increase of 32.4%.
But, businesses were met with some challenges while dealing with the huge influx of online shopping.
Some online retailers struggled to keep inventory in stock, particularly early on in the pandemic. Others began exploring new ways of getting goods into consumers’ hands as delivery networks filled up with packages. 
For venture capitalists looking to fund the next big thing in e-commerce, these bumps in the road spell opportunity.
Insider recently reached out to the top firms investing in e-commerce to get their take on where the sector is headed. Many said they were interested in funding startups that can solve problems for e-commerce businesses looking to scale.  
Read more: The 25 VC firms most active in funding e-commerce startups told us what they’re looking for in an investment — and shared the big bets they’re making for the future
“We believe that the best time to start a company is during times of uncertainty because both the cracks and innovation become more evident in a given sector,” Hans Tung, managing partner of GGV Capital, said. “If e-commerce is growing, then it’s only logical that new demand for infrastructure and analytics will be there.”
He said that the firm is interested in startups that provide “backend logistics, analytics, and operational services such as Flieber,” which helps online retailers manage their supply chain operations. 
He’s also keeping an eye on fintech startups, such as Affirm, that are changing how we pay for goods and services, to be trends in 2021.
Gautam Gupta, a partner at M13, said the firm is “looking for critical, not just nice to have, infrastructure that drives growth for independent sellers.”
He pointed to M13’s investment in Passport as an example, describing the startup as a “software-enabled international shipping carrier for DTC brands.”
“As US-based merchants look to expand their customer base overseas, Passport provides a full-service solution including logistics, duties and tax calculation, insurance and customer service,” he said. “As customers scale their international sales, Passport scales alongside the business.”
Adina Davis, an investor at BoxGroup, added that 2020 saw an “explosion of the Shopify ecosystem,” leading to investment opportunities. 
“We have been eager to make investments into companies that can serve as the infrastructure that supports e-commerce businesses in their growth,” she said. “This can span everything from innovative software solutions, to 3PL and warehousing solutions, to financing solutions, to innovations in the checkout experience, and more.”SEE ALSO: The top VCs funding e-commerce startups share what trends they’re excited to see more of in 2021
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Cosmo Wants to Own Commerce With Livestreaming and Clubhouse

With the commerce landscape forever changed, there’s a land grab for publishers to own the space. Hearst Magazine’s Cosmopolitan is building up its commerce repertoire through semi-annual deal days, Clubhouse chats with editors and designers and livestreaming commerce. The latter is forecast to generate $25 billion in U.S. sales by 2023, according to retail insights…

WordPress' secret weapon in helping retailers win big with e-commerce is this custom plugin already serving 2 million online merchants

Summary List PlacementWith e-commerce witnessing unprecedented growth during the COVID-19 pandemic, WooCommerce is having quite a moment.
Still, the WordPress plugin’s recent success has been nearly a decade in the making, according to its CEO.
WooCommerce, an open-source WordPress plugin, launched in 2011 and allows merchants to operate online stores directly on the website — from managing customer orders to providing updates on shipping. The company is a subsidiary of Automattic, which also owns WordPress. WooCommerce touts itself as a more affordable, customizable option in the realm of e-commerce services.
“As a platform provider, we make those tools available to our merchants,” Paul Maiorana, WooCommerce’s CEO,  told Insider. “They don’t have to think about, ‘Oh gosh, how am I going to actually implement this?’ They can continue to grow their businesses and meet the demands of their customers without having to really kind of lift a finger and build something unique themselves.”
Mark Lewis, an e-commerce solutions architect at e-commerce development agency Netalico Commerce, told Insider last month that WooCommerce has been a gamechanger for brands more frequently relying on online sales during the coronavirus pandemic. This has even prompted “some talk” in industry circles of WooCommerce potentially being spun off as a public company.
Maiorana, who has led WooCommerce since May 2019, said he likens the company to “a really great e-commerce engine,” adding that WooCommerce currently powers 2 million online stores — from “micro-businesses” to “very large enterprises.” The service has also seen a “significant” surge in new users, as well as a “redoubling” of online engagement by merchants already using the software.
Read more: Tonal is taking on the fitness industry by using AI to personalize at-home workouts. Here’s how it grew sales eight fold in 2020 and attracted investors like Steph Curry.
During the pandemic, two categories have thrived over others using WooCommerce in particular: custom mask-makers and direct-to-consumer home fitness brands like Tonal, Maiorana said. WooCommerce users are also especially keen on services like curbside pickup.
An open-source ‘pro-freedom philosophy’ 
According to Maiorana, WooCommerce’s mission of bringing e-commerce to all merchants is a bit more complicated than just offering customizable software.
“Everybody wants to democratize everything these days,” he said. “We feel like the democratization of commerce is really about freedom on the internet. You can use any of our competitors and build a fine store, but at the end of the day, if you want to have complete control over the experience that you’re delivering to your customers, WooCommerce is pretty unique because of our open source, pro-freedom philosophy.”
He added that, as an open-source tool, WooCommerce allows for a greater sense of ownership and privacy, allowing stores to dive into the code, control front-to-back operations, and set limits on information-sharing options.
“If you’re on a more proprietary platform, you exist in a walled garden,” the CEO said. “It’s ultimately up to the folks who direct the platform, in terms of what you’re able to do with your own business.”
WooCommerce’s more notable competitors include the likes of BigCommerce and Shopify. Maiorana’s team is now focused on creating a plugin that is more “responsive to our merchants and the changing preferences of their customers.” This entails branching out into mobile e-commerce capabilities for merchants increasingly concerned about having more of an omnichannel approach, as well as creating a generally more user-friendly, intuitive service.
“We want to empower our merchants to get up and running with WooCommerce and to build the store of their dreams without necessarily having to know code or having to hire a developer,” he said.
In recent years, the plugin has also improved its “lagging release cycle,” launching a new version of WooCommerce every month instead of three times a year. 
“Our focus is not just on being an e-commerce platform, but being a commerce platform generally, and bringing WooCommerce into every aspect of a store’s life,” Maiorana said.  SEE ALSO: Online retailer Wish just landed a $17 billion valuation in its IPO. Here are 21 other ecommerce companies experts say could go public in 2021.
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