It’s great to be back from a mini break — wishing you all a very Happy New Year!
I spent some time during the holidays thinking about what 2021 will bring to the world of commerce. There are a few technological and business model innovations that I’ve been tracking for a while now, which I suspect will become more mainstream over the next twelve months. See below for the full list.
We’ve covered many of these topics before, and I’ll continue to revisit them this year, considering how relevant they’ve become in our brave new post-pandemic world. If you’re a founder that’s building around any of these themes, or a company that’s experimenting with them, I’m always eager to connect and exchange ideas. 🙂
Without further ado…
- Continued proliferation of third-party apps for major commerce platforms: Platforms such as Shopify, WooCommerce, and BigCommerce have rapidly growing ecosystems of app publishers around them that are expanding on the core capabilities of their software. Shopify’s third-party app economy alone (which represents over 5,000 apps) has generated $6.9B in economic value to date. To put that in perspective, Shopify itself did ~$1.5B in revenue in 2019, and analysts predict it will do ~$2.5B in 2020. I expect we’ll be hearing a lot more about third-party apps that intersect with major commerce platforms — particularly those that are supporting merchants on tasks such as content management and site design, inventory sourcing, and product development. For more reading on this topic (especially as it relates to the Shopify partner ecosystem), I recommend checking out a recent interview that Mike Duboe of Greylock did with Modern Retail.
- More investment by merchants in technologies that make it easier to manage wholesaling and channel sales: To this day so many brands rely on antiquated methods of selling inventory in bulk to other retailers (yes, faxing P.O.’s is still a thing!). We are beginning to see the advent of marketplaces such as Faire that are addressing this old way of doing business. And Shopify recently acquired and launched Handshake to bolster the B2B commerce capabilities of its core platform. I suspect more merchants and suppliers will discover these B2B commerce platforms in 2021. We’ll likely also be hearing more brands talk about adopting third-party back-end infrastructure tools (such as Orderful and Stedi) to modernize their ability to partner with major retailers at scale, or working with software providers of multi-vendor marketplaces (such as Mirakl and Shuup) to activate curated channel sales opportunities in partnership with other merchants. Now is a good time to be thinking about wholesale and channel sales strategies as a brand. Many traditional retailers that rely heavily on wholesaling and channel sales will slowly be waking up from pandemic induced lockdowns, and garnering more attention from customers than they have been for the bulk of 2020.
- A higher level of experimentation with livestream commerce among major retailers: We’ve covered this topic in depth recently in one of the weekly edits. But since publishing my commentary, Walmart (the largest retailer in the U.S.) announced a partnership with TikTok that saw employees livestreaming on the platform directly from stores during the holiday season. Walmart also enlisted influencers for a 1-hour event that saw them featuring private label products and doing store walkthroughs. Viewers of the streams were able to either click items in real time and then be taken to a mobile checkout, or they could have waited until the end of the broadcast and see all of the items featured in the livestream. I wonder whether it all went according to Walmart’s plan, but having the largest retailer in the U.S. experiment with this new medium is extremely bullish for the sector as a whole. It shows a serious appetite among Western merchants to start experimenting with livestreaming. If the TikTok initiative exceeded Walmart’s expectations, you can be sure the leadership there is in eager anticipation of the U.S. Commerce Department finally approving their joint-bid with Oracle to acquire TikTok.
- More software-as-a-service (SaaS) and direct-to-consumer (DTC) brands getting rolled up: If we’ve recently spoken, you’ll know that I’m currently obsessing over roll-ups. If you’re not familiar with what a roll up strategy is, here’s some light reading. This year we’ll probably be reading more about companies that go around consolidating profitable SaaS businesses and DTC brands, with a view to achieving economies of scale and delivering better returns to investors. With respect to SaaS businesses, although the market around them has generally matured quite a bit over the past decade, we continue to see considerable secular growth opportunities and fragmentation within the commerce vertical specifically — a perfect precursor for roll ups. For example there’s a particularly interesting opportunity around consolidating a lot of the smaller companies in and around the Shopify partner ecosystem. Enter WeCommerce, a venture with a mission to do exactly that, alongside founding and investing in Shopify partner businesses. The company recently went public on the TSXV with much fanfare and excitement. With respect to DTC brands, firms such as Thrasio, Perch, and Heroes are raising large amounts of capital to acquire brands native to platforms such as Amazon. With so many brands in the market right now competing for the attention of customers, it seems like a better idea to acquire a bunch of proven, profitable brands and eventually own an entire category through roll ups (vs. branding and launching something from scratch).
I’ve spent more time thinking about the four trends listed above, but I’ll chuck in three more that are still half-baked / have my gears going:
- Cryptocurrencies being used for more types of transactions: In 2021 I hope to hear less about the price of Bitcoin and more about how people are actually finding ways to adopt it — and other cryptocurrencies — in everyday life! Major payments companies such as Visa, PayPal and Square seem to be warming up to cryptocurrencies. Their interest and validation may be just what’s needed to finally have these coins become more mainstream. Let’s see.
- Content-driven commerce making its way to Substack newsletters: Content-driven commerce alludes to shopping that happens through content-centric media platforms. Media companies such as PopSugar and BuzzFeed have been leaders in this space — both have done a great job of marrying content to purchasing intent. Check out popsugar.com/shopping and buzzfeed.com/ca/shopping to see how these companies introduce readers to new products through original copy, “buy buttons”, and strategically placed affiliate links that make the shopping journey as frictionless as possible. With everyone launching a newsletter these days (particularly on Substack), I have a feeling we’re going to see some authors adopting a lot of these same sensibilities to better monetize their own content. We’ll also probably start to hear more about startups that help authors do this. And brands will love all the action — after all, these newsletters (especially the very popular ones) represent exciting new channels to access potential customers.
- More awareness of tech to tackle the issue of fraud in digital commerce: The explosion of e-commerce has naturally invited a lot of fraud in the industry over the years. For example a recent report revealed that 1 in 5 stores on Shopify are fraudulent. There’s also no shortage of phoney sellers on platforms such as Amazon and eBay. As demand and usage of e-commerce continues to grow, more merchants will likely pay greater attention to companies that are tackling the e-commerce fraud problem, as well as the different challenges it presents to the various stakeholders in the industry.
If you have any ideas or feedback regarding this list, drop me a note here.
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