Mapping E-Commerce Stack 🛠

🛍 E-commerce has definitely been on the winner side of covid and 2020 was a ‘once in a lifetime’ outlier year for e-commerce as customers flocked online to buy all manner of goods. But going back to ‘normal’ didn’t impact the market negatively as new habits are here to stay. This year, global e-commerce sales are poised to exceed $5.5Tn.

⚙️ Meanwhile retailers have seen that investing in their online business can unleash their growth (if not generate better ROI than offline). The door has only just opened and we’re big believers that there is a huge opportunity for e-commerce enablers to help merchants further refine their processes to boost both the top and bottom line. Hence paving the way for startups looking to carve out a niche in this huge market.

🔴🟠🟡 Thanks to our investments in B2C brands such as Le Slip Français, 900 Care, The Socialite Family, Beem Energy, Tediber and Bergamotte we’ve been privileged observers of the innovative tools they’ve deployed to scale their businesses. Leveraging this know-how, we’ve pursued investments on the solver side, with solutions in logistics (Cubyn - fulfillment, Milkman - last mile delivery, Exotec - warehouse automatization), acquisition (ID5 - cookieless targeting) and financial services (Aidexa — neobank for SMBs).

As displayed in the mapping above, the needs of these e-commerce enablers can be splitted in 5 subsegments:

1. BUILD & RUN: help merchant set up their online activity and scale it
2. ACQUIRE & CONVERT: fuel the top of the funnel and boost conversions
3. CHECK-OUT: take-out all the tediousness of processing payment systems
4. SEND & RETURN: streamline and manage logistic operations
5. CARE & ENGAGE: nurture and reactivate the customer base post-purchase

The purpose here is not to do a comprehensive mapping, but rather to summarize our view of the market and to assess future opportunities. We couldn’t fit all the great companies operating in this space, so if we failed to include you, please reach out to clara@360cap.vc with an intro deck and we’ll make sure to add you to our database 👇👇👇

https://regular-mandevilla-a57.notion.site/360-Capital-E-commerce-stack-mapping-database-3db428e4f895405cbf9e8171dbee9043

#1 BUILD & RUN

Concentration of the e-commerce stack
Starting an e-commerce business has never been easier thanks to plug & play e-commerce platforms, spearheaded by Shopify (which on its own hosts 1.7M merchants), providing a full tech-stack for many retailers, leading to a concentration of the e-commerce stack. We’re convinced that the combined trends of e-commerce market explosion & tech stack unification will catalyze the development of e-commerce enablement software — and this is something we find extremely exciting!

“Anyone can sell”
Developing an e-commerce business has become highly commoditized (fetishizing templates, drag & drop, no-code…). Furthermore, headless solutions have smoothed the running of an e-commerce site by decoupling front-end and back-end. All this has unleashed their potential in terms of scalability, access to new technologies, faster web development, complete ownership over site architecture, marketing effectiveness and more. This commoditization spreads out to store app development or even instant shop builders for creators.

Tailor-made financing and banking solution
New actors serving the specific needs of e-commerce have emerged, trail-blazed by revenue-based financing. RBF helps e-commerce businesses smooth out cash-flow issues and accelerate growth, without diluting equity, nor requiring collateral. This allows retailers to liberate cash flow and invest in ads, inventory in order to go full speed. Besides, in an era of banking verticalization, e-merchants are not to be left behind with legacy financial companions.

Analytics layer — track it right!
Besides developing their business online, merchants are looking to improve their operations, understand and monitor CX, boost conversion rate and overall track their north star metrics. Merchants generally start with DIY solutions before switching to plug & play easy-to-use dashboard to help them spend less time on the connections, updates and computations but rather on where they can add value. That being said, as the business grows, operators need to better leverage data for decision making and learn to use increasingly sophisticated data management tools. Shoutout to the thorough mapping made by Castor to dig further into the data stack.

#2 ACQUIRE & CONVERT

Trust your community
Brands need to grow closer to their customer base and what better way than to rely on your own community (‘customer base’ is so yesterday!) through user generated content or reviews. Brands must rely less on overt top-dow advertising but rather aim to engage authentic users, fans or influencers as ambassadors for spreading their message. The new Holy Grail? Community-led-growth.

The last push
Once you’ve managed to land your target customer on your product page, now is the time to use all the tricks up your sleeve to push conversion at every step of the funnel. Needless to say that as the purchase decision happens online, with no touch and feel, merchants need to provide the right user experience through aspirational yet functional visuals (think infinite zoom, model try-on, 3D rendering, backdrop simulation…). And with no try-on and merchants trying to cut down on the return costs, brands are becoming more and more resourceful in solving the sizing and fitting challenge.

Meta — out
With the release of iOS 14 requiring apps to obtain user permission for tracking (with opt-out being the default) targeting has become far less accurate leading to substantial deterioration of conversion metrics.Companies heavily reliant on paid-social customer acquisition have seen an explosion in their CAC. Retailers are looking for clever ways to find new customers and to do so efficiently. Buying Facebook ads, running TV spots, or optimizing the site for SEO no longer cuts it. B2C brands are on the lookout for every possible way to cut down their acquisition costs and, as VCs, where we see issues, we also see room for untapped opportunities!

#3 CHECK-OUT

Easy as API(e)
Payment solutions have evolved to handle all the tedious work through a single, developer-friendly API and pre-built integrations for all major eCommerce platforms. Payment gateways now tie together all that is required to build websites/apps that accept payments and send payouts globally, streamlining the full financial stack and workflows.

Let me pay how I want and when I want
In parallel to the democratization of ‘alternative’ payment options (crypto, buy now pay later, try now pay later, one-click check-out… you name it!) merchants are now pressured to offer a greater catalog of options in order to retain users. Among them, the most popular one among customers is probably BNPL, allowing them to decrease their Working Capital Requirement by postponing or splitting the payment due date. But retailers are big fans as well as they aim at +20% conversion rate increase and +30–50% AOV increase. However, this hot space is set to be reshuffled by intense competition and new entries of incumbents such Apple Pay. On top of that, FinTech solutions have emerged to help merchants lock their customers by turning single purchase into subscriptions, facilitating the customer experience for the most loyal ones, while allowing merchants to reach the holy grail of recurring revenues.

Protect the transaction
With the multiplication of payment options and the boom of overall transactions, merchants have started to worry about fraud, solvability and identity checks. Indeed, as the tech stack becomes more ubiquitous, so do the associated cybersecurity risks. Merchants must equip themselves with tools against account takeovers, scraping, fake accounts, card frauds, KYC… The cyber e-commerce stack is definitely a space that will need reinforcement in the upcoming years and we expect cybersecurity solutions to get more and more verticalized on e-commerce use-cases.

#4 SEND & RETURN

E-Fulfillment: the cornerstone for delivery
In the last years, we have seen the emergence of e-fulfillment companies disrupting the fragmented market of traditional 3PL players: Cubyn, Byrd, Bigblue, Weengs, Shipbob… The list is long and marks a clear turn to one-stop-shop solutions that cater to all logistics needs, from managing inventory, to shipping orders, reconciling invoices and analyzing performance. Like Shopify and Stripe have made the launch of an e-commerce platform easier, these fulfillment companies have done the same for the logistics brick, by enabling e-commerces to completely outsource and externalize this tedious part.

“Turning shit into gold”
A whole new trend has also grown around companies addressing specific use cases of the value chain and relying on the same e-fulfillment players to deploy their solutions. From inventory, packaging, tracking, delivery, returns, reuse… Each brick now has a dedicated software that can be plugged on top to optimize and turn what was a structural cost into a margin accelerator. As an example, a plethora of startups has popped up to help optimize inventory to make sure excess products are brought down to their lowest. Same for returns: what was viewed by e-merchants as a sunk cost (on average, 21% of items are returned, with an average cost of 12€) has turned into a margin opportunity thanks to reverse logistics players that work to squeeze as much revenues from returned products as possible.

Make it green!
As we all know, e-commerce can be a polluting industry: brands are trying to address that from the logistics angle. From sustainable raw material sourcing, to sustainable packaging (whether it’s personalized packaging designed to lower the amount of materials used with a box-on-demand approach; or reusable packaging that takes out the one-off aspect altogether), to sustainable last-mile delivery (like Pickme, which relies on a network of neighbors to deliver product and prevent multiple delivery attempts). Brands are striving for a virtuous circle and will go as far as trying to offer a second-life to their products, with second-hand-as-a service players like Faume or Place2Swap.

#5 CARE & REPEAT

Caring can be automatic
Creating an optimized customer experience is vital for building trust and reinforcing satisfaction. With next generation e-commerce CRM tools, merchants can optimize their customer relationships in a way that is well-organized and largely automated. Similarly, freeing up the team to focus on other important value-added tasks.

Power to the people: listen to your customers
The power dynamics between brands and customers has been turned completely upside down. Customers no longer hang on a brand’s every word. There is a real sense of customer empowerment with brands obliged to carefully listen to their community’s needs and wants. This new relationship can be extremely useful to the extent that it can help brands anticipate issues, improve their existing offering or develop new products. From a listening standpoint, we’re seeing more and more solutions enabling brands to go further end actively engage with their community.

Talk to your customers like you know them. Because you do.
It is essential to develop the right marketing strategy but a big part of executing an effective marketing strategy is choosing the right tools, those best leveraging the power of automation to manage marketing campaigns. The first generation of tools helped automate email and SMS campaigns. Solutions quickly evolved to deliver more and more personalizations leading to today’s hyper-segmented, predictive capabilities delivering precisely the right message to the right customer at the right time. Yet, as customers are growing tired of being bombarded by promotional emails, new solutions are trying to snap them out of boredom by using new channels or new communication methods.

If you’re building something in this space, we’d be happy to know more about it => clara@360cap.vc

Thank you Selma for your precious help in the writing of this mapping and for your logistics knowledge!