Next Generation Ecommerce: Exciting trends and insights from investors

Ecommerce is generating trillions of volume, growing at +15% yoy: an enormous industry in the global economy.?But what is even more interesting it that it pulls into so many other fields, from content to store setup, procurement and supply chain, payment, transport and delivery etc. So what are the trends that are shaping next-generation Ecommerce provision? And what were some thoughts from some of the brightest investors about trends they see?

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A couple of notes:?

• This was realized collaboratively.??In the below you will find comments and points gathered through discussions, and thanks so much for all the inputs, among others: Dhruv Jain and Alex Ferrara at Bessemer, Magda Lukaszewicz?and Clara?Ricard at Balderton, Will Sheldon at Accel, Hannah Seal and Katharina Wilhelm at Index, Rebecca Liu-Doyle at Insight, Mish Mashkautsan?at Localglobe, Lea Verdillon at Aglae, Nicolas Debock at Eurazeo, Reza Malekzadeh?and Jean-Marc Patouillaud at Partech, Daniel Kleiper and Severin Zugmayer at Speedinvest, Megan Reynolds at Crane, Ayal Itzkovitz at Pitango, Kamil Mieczakowski?at Notion, Jan-Hendrik Buerk at Btov, Lotan Levkowitz?at Grove VC.
• The picture comprises services and components needed from a B2B perspective to provision a ecommerce store.?It excludes actual marketplaces, provision of goods and procurement (with the exception maybe of live shopping). The physical world has also not been included: while PIM is present, components from Order Management, Inventory Management, Merchandising, etc. lie at the right of the chart.?Also, some areas in the 'unified consumer understanding' may have been omitted for lack of space (Voice, etc.). In some cases, categories were grouped and highlighted with a "+".
• Were selected companies with +$10M in fundraising. Large, often listed, software vendors have usually not been included on the map to avoid any misrepresentation.?The map will necessarily be incomplete and can be modified for greater accuracy – please don’t hesitate to get in touch.?There is also an EMEA bias, although many companies are from the US or global.

So what are some interesting trends and insights about next generation ecommerce?

1. The new paradigm: the one-click everything.

21st century ecommerce is all about easy connection of everything. From content connection (back and front, CMS, front-end and storefront), to the actual store (headless and API if possible), to easily connectable PIMs and order management, customer understanding through many sub-components (CDP, marketing orchestration, user testing, marketing data connectivity, experience management, etc.), all the way to the one-click payment (omnichannel , subscription management, buy-now and pay-later) and into fulfillment (one-click shipping but also accounting, last mile, post purchase, returns management, etc.). The growth of ecommerce as we know it obviously revolves around this notion of one-click activation.?The world is done with long setups and implementations. New technologies allow fast plug and play, modularization and specialization. But with this new paradigm comes complexity: each component is more specialized and the whole setup and run experience requires more knowledge and understanding. Like often, efficiency means apparent simplicity but underlying complexity.

2. The one-click content - it all starts with the structure and content.

It all starts with the structure.?The CMS provides content structure and pipelines, and smart CMS can understand syntax and where and how to deliver content. Front-end personalization is gaining importance with companies like Shogun to create personalized experiences. Search providers are improving navigation, some are trying to master visual search or personalized search and as the number of objects grows in size and complexity, technologies and algorithms need to be improved. Digital asset managers allow content to be searched, collected and selected. These markets have seen increasing VC amounts. New technologies, open source or not, back or front end, allow new companies to emerge with competitive offerings. Overall, VCs pointed out that connectivity and simplicity was often a key factor, and that algorithms are becoming smarter to facilitate scanning and extraction of results, for instance in visual search, or with PIMs.

3. The store - the center of everything?

Many customers are still considering the store as the center of everything and what makes its value according to them is often its easy connectivity and hosts of partners. I quote a customer: "I want to be able to be up an running in a minute, and select the plugins I need, then change them when they don't peform like I want". Shopify has been very successful with this, and its ecosystem of partners, the same with WooCommerce and Big Commerce. The space has recently become more crowded. It is interesting to note new offerings with contenders offering 'integrated commerce', from supply chain to store, or with integrated front-end layers that can be personalized with customers, such as Fabric. Others are integrating lightning fast architecture, with microservices and APIs, such as the successful Nacelle and Commercetools.

4. The real battle: unified customer understanding?across an increasing number of channels, towards 360 customer understanding, and a real entertaining experience

The one-click everything still seems at the center of the battle for many customers but the real battle may already be about understanding the customer fully, across touchpoints and creating an experience. I quote one of the interviewed VCs "many customers are still struggling with the left part of the map - with setting up headless CMS and store, etc..?But the other real battle is already taking place around customer understanding".?While the CDP unifies customer knowledge, marketing data connectivity allows attribution, segment, sales channel allow information to flow into systems. Experience testing, customer support, etc. - many components work alongside, but do they really work together? The battle is to connect all the information - and the explosion in channels means that the volume of information has grown tremendously - to give a 360 view of the customer.?Hence the importance of touchpoint orchestrators like Twilio, but also data assemblers like Adverity and feedback gatherers, be it through user testing, customer support, advocates management, etc. Experience management platforms then goes one step further to reconcile different dimensions, from brand to customers, products, etc. to attempt to recreate the experience the customer needs and wants.?To quote one partner : “Customers want to know everything about their consumers and adapt channels as touchpoints evolve, almost in real time. Consumers then want the personalized experience and efficiency they deserve to get what they need”. It may even go further, as some consider Ecommerce to not be what it could be, quote a VC "Ecommerce is still a utilitarian experience today, it could be much more like real world shopping, and/or much more entertaining". Much to come still then, to turn the Ecommerce experience into one that creates happiness and is entertaining. Maybe video shopping, social shopping can help in this process.

5. The one-click payment - a diamond mine?

Combine finance with ecommerce and one gets a huge TAM, driving huge valuations.?From omnichannel payment, with companies like Adyen, Stripe, Square, to subscription billing (Zuora, Chargebee, etc.), to the much hyped checkout payment, and finally to the 'buy now and pay later' market - funding is very very high. And indeed the value is there. A VC mentioned: "Small percentage changes in a large ecommerce market make a large absolute return, driving valuations".?Take the example of the payment checkout space. A 0.1% improvement in the ecommerce purchase process will drive billions of value. Most companies in this space are less than 5 years old, yet had recent rounds of +$200-300M. A more recent trend is around growth financing, with select companies backed, that allow ecommerce providers to finance their growth without having to raise equity capital, through working capital loans or conversion of recurring revenues into upfront capital.?Such is the case with the Uncapped, or Clearco, or more recent players shown on the map.?

6. The one-click fulfillment: a gold mine?

The same happens with one-click fulfillment.?What a big potential, boosted by new technologies and Covid! People want good delivery, and businesses want to know what is happening in real time. From one click fulfillment with companies like Shipbob, Cubyn, etc. to more recently the last mile, and also instant delivery (Gorillas, Getir, Shadowfax - billions were recently invested), the addressable markets are huge and require investments - to fund fleets, sometimes crowds to deliver the goods for instance. Warehousing is also soon to evolve, with new offerings: micro warehousing, automated warehousing, networked warehousing. Post purchase and returns management is also getting revamped (Parcelab, Returnly, Shipup), and new offerings are emerging for recommerce and sustainability (e.g. Trove for erecommerce, Ecovadis for procurement sustainability/ratings).

7. High availability needs - a lot is happening behind the scenes

As usual, behind the scenes, a lot is happening. There is a constant need for technologies that allow high availability and connectivity, with integrations, APIs and microservices, efficiency in load times, and to allow the personalized experiences to be smooth and elegant. The topic was less mentioned but is a real pain of many customers. Again I quote anonymously, a customer this time "the sheer growth in ecommerce means that the number of objects is exploding. Technologies are there but they become expensive or not easy to setup for very large volumes.?For instance microservices quickly find their limits". High availability technologies are there to support, from APIs and microservices to data management and pipelining, to BI. “I want my web store to be connected, available and to easily scale”. Some players like Ecommerce tools are providing integrated offerings with microservices management.?APIs are getting new technologies with GraphQL (Saleor offers native integration) and open source may again rise for its transparency and collaborative upgrade process (for instance with WooCommerce in headless commerce or Airbyte in data pipelining). Some headless commerce players have understood the impotance of high availability architecture and offer integrated offerings, such as Nacelle and Commercetools. Again a lot is happening and valuations are high for many companies in the space.

And SAP in all this??Some of SAP's focus is on customer value creation and centricity, speed and agility, embedded functionality such as order management and headless commerce, and Experience Management of course and to enable the 'Intelligent Enterprise'. SAP is active in many areas with its offerings, including in Store / headless or API with "SAP Upscale Commerce"; Experience Management with "SAP Qualtrics"; CDP with "SAP CDP"; Marking Management with "SAP Marketing Cloud"; Customer support with "SAP Service Cloud"; Order Management "Commerce Order Management"; Identification with "SAP Cloud Identity"; Business Intelligence with "SAP SAC" (SAP Analytics Cloud) and Data Warehouse Cloud with "SAP CDW" and of course other such areas that may belong to either broader enterprise management (such as ERP) or just the physical world (store management, inventory management, merchandising, etc.). A lot of offerings, that work together to deliver customer value.

Conclusion: a lot happening! Modularization and connectivity, new technologies, number of channels exploding, customer understanding, experience management... Exciting times for Ecommerce. A lot of change and growth in perspective.

Ecommerce provision is growing full speed and Covid has accelerated the growth. While the setup of a store is increasingly simple through modules to be connected, it also means more fragmented and specialized offerings need to be understood and assembled. This can be more complex to handle. While the battle for many customers is often on managing the actual connection between these different modules (content, store, physical world, payment, fulfillment), the real battle seems to already be in the understanding of the customer. Some even go so far as to say that ecommerce will completely evolve towards experience management in the future. In this world, technologies around ecommerce become more common and standard, and the real wealth is how to create a sticky shopping experience for consumers. Personalized. More like in the real shopping world? Or even better? From a utilitarian experience to one that creates entertainment for the customer?

What is for sure is that the current explosion in medium and channels is creating complexity, but also opportunities, never seen before. New models also allow new realities, from collaborative purchasing (Pinduoduo) to buy-now and pay-later (Klarna, etc.), to last mile or instant delivery. Fortunately, technologies are much more flexible and efficient than before: headless, APIs and GraphQL, microservices, no code, open source, etc. can help gather and reconcile data so that the end-consumer is understood across its touchpoints and the experience delivered is one that triggers stickiness and recurring visits. Exciting times for Ecommerce!