3 September 2021
E-commerce is no longer a new trend but rather a part of our everyday life. There’s hardly anyone living in a larger city who’d never bought a product or a service online. In general terms, electronic commerce refers to a set of business practices associated with selling, distributing, advertising, and promoting services or goods through the Internet.
Hard facts
- 18% – e-commerce share of retail sales worldwide today
- $4.28 trillion – e-commerce revenues in 2020
- $5.4 trillion – projected global e-commerce revenues by 2022
The world’s most profitable companies are founded by industry visionaries who can see the potential of only emerging trends. From a customized cocktail delivery to a step tracker that converts your walking activity into discounts — entrepreneurship trendsetters are only limited by their imagination when looking for a niche. This article tells about the latest trends in e-commerce and how pioneers implement new business models in constantly changing environments.
Acquisition Entrepreneurship
An increasing number of marketplaces naturally creates a kick-start to new e-commerce trends. Amazon seller acquisition is one of the recent global business trends set to generate huge revenues. Hahnbeck, a UK-based consultancy connecting e-commerce business sellers and buyers, reports 34 global institutional Amazon FBA buyers as of today.
Fulfillment by Amazon (FBA) allows sellers to use Amazon’s highly developed infrastructure. The marketplace stores sellers’ goods in its warehouses, deliver them to customers, takes payments, and manages complaints and returns.
In general terms, acquisition entrepreneurship refers to the business model when larger companies buy smaller businesses or entire brands. For example, such buyers acquire Amazon sellers’ businesses and scale them up. They are often called FBA aggregators. They follow a fast acquisition template and offer an exit to Amazon sellers. In the e-commerce realm, they often follow multi-brand and multi-product strategies focused on consumer brands.
How Does It Work?
When bringing one or two products to Amazon, a small business does everything possible to promote them in the marketplace. Such businesses create new ecosystem trends and, often, new product categories. Eventually, they increase sales and generate good profits. However, once they opt for enlarging their product range, there are not enough resources to keep up with the growing business.
The cash conversion cycle is the period of circulation of funds from the moment of resource acquisition until the point of receiving profit from the sale of ready-made products.
As most of these small businesses use the Amazon infrastructure, they have limited human workforce and resources. As a result, they cannot develop the business any further. Besides, they are dependent on the marketplace, its rules, and regulations.
That’s when professional investors come into play. They have expert teams in various fields, appropriate funding, and enough resources to take over further business development. By directing the resources to marketing strategies, they increase sales.
Brand buyers improve product images and descriptions, analyze customer behavior, and launch advertising campaigns.
In more general terms, acquisition companies use a buy-and-build strategy — they expand their business using the acquired company’s resources.
This market is relatively new, and the competition is growing. It means the brands’ prices are increasing. Sellers can choose a buyer and bargain for the best offer. Economists believe that growth will continue until the market is saturated and then stabilize.
Any business is created to generate profits. Small business owners aim to get a positive financial outcome from entrepreneurship. Once it becomes too difficult to maintain the business, buyers offer an easy exit from a difficult situation. It makes this model advantageous for investors, business owners, and, eventually, consumers.
Two Factors of a Good Deal
Many factors are affecting the buyout amount or even the fact of company acquisition. Aggregators make the process easy and transparent. Usually, it’s a simple contact form sellers can use to get the initial evaluation of their businesses. However, the two most important factors impact a possible deal.
- FBA Business
If a business uses the Fulfillment by Amazon model, it indicates that they have few employees, and the cost structure is clearly defined. It’s easier for the buyer to make a deal and monetize such a purchase.
- High Ratings as an Asset
High ratings and good customer reviews give a great advantage to selling your small business successfully. Since Amazon launched a serious campaign against fake reviews, user appreciation has become the most important factor in consumer purchasing decisions. In addition, the marketplace’s search algorithm considers the number and quality of reviews. Conversion depends on this factor directly. Recent tendencies in consumer behavior show that people easily choose no-name brands if a product has high ratings on Amazon.
Industry Leaders
As the trend is still relatively young, it’s easy to see how this business model works by analyzing successful stories of the industry pioneers that rocketed to the top of the global financial elite quickly.
Thrasio
- Acquisition Focus: Global
- Total funding amount: $1.7 billion
Thrasio was founded by Carlos Cashman and Joshua Silberstein in the US in 2018. They focus on acquiring direct-to-consumer e-commerce brands and private label, third-party Amazon FBA businesses.
Seller X
- Acquisition Focus: North America, UK, EU
- Total funding amount: $266 million
Seller X was founded by Malte Horeyseck and Philipp Triebel in Berlin in 2020. They focus on making the acquisition experience as efficient as possible and aim to complete transactions 30-45 days after signing a letter of intent.
Perch
- Acquisition Focus: Global
- Total funding amount: $908.8 million
Perch was founded by Chris Bell in the US in 2019. It’s a technology-driven FBA aggregator acquiring businesses that sell winning products in the respective categories. Perch focuses on top-three brands with excellent customer reviews and steady history.
Quick Commerce
Although this concept is still relatively new, it’s rapidly becoming a mega-trend in e-commerce. The idea is not new and takes its origin in the on-demand environment.
Quick commerce (instant e-commerce, q-commerce, or q-com) is the third generation and next stage in e-commerce evolution that focuses on the instant delivery of products of everyday demand.
The trend took a dramatic turn in its development, largely due to the global COVID-19 pandemic. Despite the expectations of the worldwide retail collapse, e-commerce adapted to the new reality instantly. Q-commerce has become a natural result of this adaptation process.
How Did It Start?
Spoilers: it all started with good old over-the-counter retailing. Some of us still remember those physical stores where you buy goods at a set price over the counter. This form of retail was replaced by the cash-and-carry model based on self-service. It originally focused on wholesale but gave us traditional self-service superstores offering a large range of products from groceries to furniture under one roof.
With lifestyles becoming busier and technologies developing exponentially, e-commerce emerged. This concept implies huge warehouses, a certain range of main products available, truck deliveries, and 3-5 business days’ deliveries.
It was convenient for the most part, but the consumer needs to grow and require changes. The on-demand model was the answer. Although pizza delivery is not a new phenomenon, certain global events contributed to the model adjustments. COVID-19 resulted in a $26.7 trillion online sales boost. In the circumstances of lockdowns and self-isolation, people needed more than just a pizza — groceries, pharmacy products, and household goods.
How Does It Work?
Although this model uses underlying e-commerce principles — online orders and delivery — it has some nature-specific features.
- Time
Quick commerce is customer-centered. It focuses on satisfying the consumer’s needs instantly. Q-com companies use the time factor to win the competition. This model implies delivery within an hour.
- Logistics
It uses a decentralized approach to logistics. Unlike traditional e-commerce using large, centralized warehouses, q-com services use smaller storage places in close proximity to the delivery range. This way, delivery persons take only one order at a time, and the delivery takes little time.
- Product Range
Because of smaller storage capacity and shorter times for order processing, q-com services usually have a rather limited product offer. It imposes extra complications as you need to research the consumer needs to meet the requirements of your target customer. However, it makes it easier to optimize the process of storing and managing the products your service offers.
Quick Commerce Potential
Visionary entrepreneurs spot mega-trends instantly. Founders of q-com pioneering companies saw this model’s potential at the beginning. However, its further development will soon create large ecosystems around the big companies providing instant delivery services.
- Repurposing Real Estate
Quick commerce creates a great demand for smaller warehouses to store offered goods within reach of local communities.
- Associated Services
To operate an instant delivery service, you need to partner with several stakeholders — from local farmers and butchers to a packaging company.
- IT Services
For successful functioning, you need a website for your business or a mobile app to optimize and automate all processes, from customer-business interaction to delivery system to business analytics.
Industry Leaders
Most companies functioning within the quick commerce framework are young and focus on food and groceries delivery. Learning about their experience is helpful if you plan to enter this market soon as the model is set for further rapid development.
Getir
Total funding amount: $1 billion
Getir is an on-demand delivery company founded in 2015 with headquarters in Turkey. It combines mobile technology and advanced logistics to provide instant delivery services in Turkey, the United Kingdom, the Netherlands, France, and Germany (as of July 2021).
- Getir was the first startup to introduce the world to the instant grocery delivery model.
Gorillas
Total funding amount: $335.4 million
Gorillas is a Berlin-based grocery delivery startup founded in May 2020. They deliver a supermarket range of groceries to the customer’s door within 10 minutes and operate in the UK and seven EU countries.
Flink
Total funding amount: $304.2 million
Flink is also a Berlin-based instant delivery company founded in 2020. They offer multi-category products, including essentials, home supplies, fresh herbs, and fruit. Unlike its global competitors, Flink operates only in Germany.
flaschenpost
Total funding amount: $80.9 million
Flaschenpost is a German on-demand company originally delivering beverages within 120 minutes. However, now the company also offers food, household products, and fresh local fruit, vegetables, and dairy products. With 21 hubs, the company operates in more than 130 German cities. In 2020, the startup was acquired by the Oetker Group for $1 billion.
While some companies like Flink and flachenpost focus only on local markets, other startups choose to enter other economic areas after showing exponential growth in their origin markets in the first years of operation. Some prominent examples may inspire young entrepreneurs who consider establishing a business in quick commerce.
Yandex.Lavka
2020 revenue: almost $22.9 million
Russian-Dutch Internet giant created a 15-minute grocery delivery service Yandex.Lavka in 2019, having developed the infrastructure of their food delivery service Yandex.Eda. The service manages more than 300 dark stores in Russia and processes around two million orders a month. After showing exponential growth in Russia, the service is launching new operations in Paris and London this year.
Samokat
Startup capital: $1 million
Samokat is another Russian food delivery startup founded in 2015. The company offers grocery delivery within 15 to 30 minutes and provides mobile apps for iOS and Android devices. Samokat’s founders raised $46 million for launching their new instant delivery startup Buyk in New York.
SberMarket
Total funding amount: $59.8 million
In 2013, the largest Russian financial and banking services company Sberbank acquired an e-commerce startup Instamart. With a tremendously developed ecosystem and infrastructure, Sberbank rapidly transformed the startup into leading online consumer goods and grocery delivery service in Russia. Both SberMarket and Samokat now belong to the Sberbank ecosystem.
Final Thoughts
Keeping a competitive business is a challenging task. However, growing consumer demand creates new, more complex trends that help entrepreneurs stay afloat and multiply profits. E-commerce is one of the fastest-growing fields with multi-billion potential. Eventually, it’s most likely to take over the largest share of the global retail market. Catching up with the hottest trends in the technology-driven world provides unlimited possibilities to expand your business.
The food industry and food retailing services make up the largest market on a global scale. With the q-commerce model taking over this market, it will soon be divided by the newly-founded companies seeing the model’s tremendous potential. Recent events have shown the new digital reality people got used to quickly. Focusing on satisfying customer needs instantly and enhancing the company’s logistics open unlimited prospects for young entrepreneurs to enter the multi-billion-capital world of big players.