Global e-commerce market size: How many e-commerce companies are there?

This article was originally published in PipeCandy Blog. For data refreshes and updates visit the blog post.

“How many e-commerce companies are there? What’s the global e-commerce market size?”

Whether you are researching the e-commerce market size to make investments or for finding e-commerce prospects, you would be confounded with this question.

E-commerce is not a homogenous thing.

There are retailers who have an e-commerce presence (called ‘e-tailers’ by some). There are e-commerce companies and then there are marketplace sellers that sell on Amazon, eBay, Lazada, Mercadolibre, etc.

Then, there are thousands of companies that use shopping carts but sell nothing that qualify them to be an e-commerce company – like a retired management consultant who built a couple of management templates and implemented a Magento site to sell them online!

“Bottomline: There are so many moving parts when it comes to estimating the e-commerce market size and it’s not trivial”.

We have tackled these complexities for you.

How does PipeCandy fit in?

We are a (so far, the only) data science-based predictive lead generation company focused solely on aggregating over a million e-commerce companies and insights about them. Our customers are the world’s leading fulfillment, tech, payment, POS companies and affiliate/ad networks.

How do we estimate the number of e-commerce companies?

Our database tracks about 750,000 e-commerce companies (the best and largest database you can get in terms of cleanliness) by looking at various sources. We built our own natural language processing and machine learning models to understand what each company does and bottom-up aggregate the insights.

We partner with some of the capital market and firmographic data providers to get corporate revenue (which is different from web revenue!) and other such insights. The rest – technology usage data, fulfillment insights, SKU insights etc. are all built ground up, by us, using a combination of technology and human review.

We’ll make comments about the methodology we used, as we go further.

So, how many e-commerce companies are there?

1. In our estimate, there are between 2 million and 3 million e-commerce companies in the world (excluding China). We’ll deal with China in a separate blog post.
2. North America (USA & Canada) has about 1.3 million e-commerce companies. If you exclude marketplaces sellers, there would be somewhere around 250K-300K eCommerce companies in the US.
3. Pure-play e-commerce companies around the world are less than 100,000. Which means, e-commerce by default means omni-channel. Pure-play is an exception. You might think otherwise, because e-commerce as a category became visible because of pioneering pure-play companies like Amazon and eBay but retail is so big that once they started taking e-commerce seriously, the omni-channel e-commerce or e-tailers have started to outnumber pure-play by almost an order of magnitude (yes, we are using ‘order of magnitude’ in a mathematical sense.)

But, you must be wondering if we are right because Shopify alone claims that 500,000 companies use Shopify. If you look at BuiltWith, they claim that 300,000 sites use Shopify. In the same manner, if you look at Magento, there are 500,000 sites that use the platform, as per BuiltWith.

So, is it fair to say that about 40% of world’s e-commerce sites are powered by these two platforms? We don’t think so. Or, to look at it the other way, if these two platforms power around 10% of the websites that do commerce, then is the overall e-commerce companies count 5 million? Most definitely not!

Methodology matters

Tools like Builtwith consider ‘presence of code snippets’ as a qualification criterion to decide if a company is into e-commerce. Presence of a shopping cart isn’t always a good indicator of e-commerce activity – especially if you’re considering prospecting or investing. If you ignore 100s of 1000s of (not exaggerating at all!) irrelevant websites (dubious websites, Chinese and Russian language spam mills, sellers of digital goods whose main business is not selling online, websites that belong to a single corporate entity), we estimate that the top 4 or 5 e-commerce platforms power about 30% – 40% of the total e-commerce websites. It’s worth noting that we did include adult websites into the estimate as several of them buy technology, advertisement inventory, and payment tech. Some of them ship adult toys and are hence, relevant to the fulfillment companies.

Within e-commerce, there is a rampant misclassification of websites based on the items they sell (‘merchandising categories’ as we call them). This is because most data providers have classified e-commerce companies as a sub-set within retail and forced them into categories that fit into SIC or NAICS codes. Besides, the process traditionally has been manual, leading to interpretations or sometimes inadequacies of the person that tags them.

PipeCandy has built a dictionary of sorts to discover items sold in each e-commerce company and classified them into logical merchandise categories. So, if we say that a company belongs to ‘Fashion’ categories, it most definitely will belong to that category.

How many e-commerce companies are there in the US?

Roughly about 1.3 million, like we said in the beginning. But only about half a million of them matter. If you take the US, our research shows that there are about 245,000 companies with web sales.

There are close to 208,000 e-commerce companies with online revenue < $1M coming from web sales. That's 85% of the market. For most of you, these are too small or just getting started. Only 11% have >$1M in online web sales. That's about 25,000 companies. However, we won't be quick to dismiss the companies with less than $1M web sales as insignificant. Several large national and regional retailers are setting up e-commerce presence and we see them fall under the 'less than a million dollars' web sales segment. In the coming years, a significant slice of them will graduate to the higher revenue tiers. Their current spend patterns mirror the corporate entity's numbers (derived mostly from brick and mortar revenue) and so if you are planning your 'Go To Market' strategies as a vendor, keep this data point in perspective.

How does US e-commerce revenue compare to the US retail revenue?

Global retail sales Vs. US retail sales

Global web sales Vs. US web sales

US Retail Sales in 2016 was about $4.8 Trillion. If the rate of growth keeps up, it will be over $5.3 Trillion in 2017. Globally, retail sales in 2016 was estimated to be $22 Trillion. The US is 22% of global retail sales. This estimate excludes travel, restaurants and event tickets. For some time, let’s concentrate on the US alone.

One small step for e-commerce, one giant leap for US retail  

E-commerce is 11.7% of retail – which is approximately $394B in the US for the year 2016. In 2015, it was 342B (Or about 10.8% of US retail size). Just about a 1% increase, right? That 1% represents nearly $50B increase in e-commerce sales in just one year. How many industries we know are there where $50B in spend moves from one channel to the other in just one year?

(Note: Factoring out the items which are generally not bought online, like fuel, automobiles and sales in restaurants and bars, total US retail sales amounted to $3.375 trillion in 2016. E-commerce is 11.7% of that, which is $394B)

Enter Amazon

The primary reason for this shift is Amazon. Let this sink in for a moment – if tomorrow the ‘powers that be’ ban online sales in the US, nothing will happen. People will continue buying at Walmart and Kmart. The US won’t stop functioning. e-commerce, even in the US, is small and nascent. It’s like the famous vitamin or painkiller argument – You don’t ‘need’ vitamins. But, if you have pain you ‘need’ painkillers. Retail is the painkiller. E-Commerce is the vitamin. So it’s a ‘nice to have’ and not ‘must have’. it’s just sheer execution genius of Amazon that took a ‘nice to solve’ problem and made a $400B ($394B to be specific) industry out it in the US alone!

How many e-commerce marketplaces are there?

We’ve kept marketplaces out of the conversation for a while now. How are they faring? How big are they? In the future, e-commerce will be dominated by marketplaces. Look at China and the US – two of the world’s top economies. In each one of them, e-commerce is owned by marketplaces.

In fact, of the 250+ privately held companies with more than $1B valuation around the world, 35-40 are e-commerce companies (if you include clothing & accessories brands with online presence). That's about 16%. Of them, nearly 33 of them are marketplaces. So, if you are in e-commerce and want to be a billion-dollar baby, you have to be a marketplace.

Let’s look at the e-commerce behemoth: Amazon.

Amazon:

1. 37% of the $394B (e-commerce sales in 2016) went to Amazon alone. That’s $147B. This is up from the $112B sales that Amazon did selling products in 2015. That’s a $35B increase in a year!
2. Remember how the US e-commerce sales increased $50B in the same year? $35B of that was just because of Amazon.That’s 70%. So in the US, Amazon is e-commerce!
3. Of the $114B revenue from e-commerce in 2016 (not including AWS, Prime, Alexa) $22B came from seller commissions and services (including FBA which is Amazon’s shipping services that it does on behalf of its sellers). That’s 20%.
4. Amazon’s 2017 revenue is estimated to be around $150B, of which $30B will come from seller commissions. The seller commission percentage for various marketplaces is here. % of units sold by sellers can be found here.
5. Amazon has over 2M sellers worldwide. But the ones that make at least $100,000 in profit a year (enough to support a person’s family a year in the US) would be about 100,000 sellers. So these 100,000 sellers give $30B dollar in commissions to Amazon.
6. Amazon charges anywhere between 15% – 40% commission. Let’s assume it’s 15%. So if $30B = 15%, what would the actual revenue of the Amazon sellers be? $200B. So, on an average, if there are 100,000 sellers that matter, each one is making $2M (of course, this is not how it will be – some will make way more and some, way less, but imagine a market where 100,000 companies having $2M revenue each). This is the ecosystem Amazon has powered.

Did you like what you just read? Do us a favor by quoting our blog link if you are using these insights elsewhere. Selling to the e-commerce/retail industry or want us to talk about the e-commerce and retail market insights at your conference? Talk to us! We have the cleanest and the most insightful data out on the market!