Business-to-consumer (B2C) ecommerce sales worldwide reached an estimated $1.5 trillion in 2014, according to eMarketer. And Nielsen reported that half of global survey respondents intended to purchase clothing or make travel reservations using an online device in the next six months.
Despite the growth of ecommerce, some investors are leery of ecommerce startups given the dominance of key players like Amazon and eBay’s online marketplace, as well as e-retailers like Target and Best Buy combining online sales with brick-and-mortar stores.
However, many investors see the potential of ecommerce in emerging markets. Snapdeal, which is cornering the market in India, raised $627 million in October 2014 in a round led by Japan's SoftBank. Shortly after the funding round, which pushed Snapdeal's total funding above $1.1 billion, Snapdeal acquired Exclusively.in, an Indian shopping site focusing primarily on luxury items, in October 2015.
Read more at eCommerce vs. Fashion vs. Don’t Compete with Amazon
So, what does it take for private tech companies to compete in this market? There are four eCommerce trends to watch in 2015.
The biggest driver of ecommerce growth is the adoption of smartphones and tablets, which represent 30% of eCommerce transactions. Global mobile Internet users surpassed desktop Internet users in 2014. Even in Sub-Saharan Africa, 70% of the population now has network coverage and soon will have access to 3G coverage.
Read More at Mobile is Eating the World
Mobile is more than a sales channel; it can improve the customer connection at lower costs. REI recently won over customers with a snow report app providing up-to-date weather conditions ski resort information. And mobile apps like Amazon’s Price Check allow shoppers to scan barcodes and compare prices.
While big players like Amazon and Target are leaders in mobile, other companies like Gilt Groupe — a DataFox Company to Watch — are leveraging their internal tech departments to build web and mobile apps to be more flexible and scalable.
Read More at DataFox Report: Private Tech Companies to Watch
Some investors had expected Gilt to file for an initial public offering in 2015. However, Gilt raised $50 million in February 2015, a sign that Gilt will likely hold off an IPO until later this year or 2016.
Gilt’s hesitation to go public may have been influenced by the recent decline in the stock price of Zulily, a Gilt competitor. Zulily reported fourth quarter revenues of $391.3 million, which fell short of investors’ expectations of $408.8 million. Adding to investors’ concerns, Zulily reported that it was experiencing higher customer turnover in the recent quarter.
Zulily is following in the data footprints of Amazon and Zappos with technology as part of its DNA. Tailored home screens form based on shoppers’ brand preferences and shopping habits.
Alibaba culled its massive data on consumer purchases to link a woman's bra size with her spending habits. Alibaba's analytics team found that women who buy larger-size bras tend to spend more money overall.
Such unusual customer insights are the product of big data helping companies personalize the customer experience, such as by offering dynamic pricing and maximizing the volume of sales and level of customer retention. In particular, big data has energized the ecommerce segment focused on B2B sales, offering more storage capacity, greater computing power and more rigorous, flexible methods for analyzing retailers' data.
Beachmint, a venture-backed social commerce company, lures customers with highly personalized offers by parsing trillions of data points that consumers leave behind as they navigate the web. While BeachMint has not raised funds since raising $36.18 million in December 2011, BeachMint received a boost when it began a joint venture with magazine publisher Conde Nast in August 2014. Under the joint venture, Beachmint will run the technology platform for Lucky Magazine and will use Lucky Magazine’s built-in audience to draw shoppers to Beachmint.
Online retailer Farfetch is testing a way to help shoppers who seem hesitant to purchase or frustrated by confusing and endless offers. Farfetch measures how long shoppers hover over a product listing, and by using guided display, Farfetch displays messages suggesting other items on the site that might be more appealing. Farfetch raised $66 million in Series D funding in May 2014.
The Global Consumer
Farfetch is riding another trend, business without limits, which is why FastCompany named them one of the world's top 10 most innovative companies in retail. In November 2014, Farfetch introduced a service allowing shoppers to order apparel from one retailer and then collect the item from another retailer. Customers can browse high-end boutiques around the globe, shopping the streets of Milan or New York from the comfort of their own home.
Zalando, an online retailer that sells clothing and other fashion products for 14 different countries in Europe, is also riding the global consumer wave. Zalando went public in September 2014 with an IPO valuation of $6.8 million. Like Beachmint conducting a joint venture with Conde Nast, Zalando partnered with a legacy retailer when Zalando struck a deal with Gap in November 2014 to sell Gap apparel in Europe.
Farfetch and Zalando are further proving that ecommerce is tearing down international trade barriers. An astonishing 97% of commercial sellers on eBay export their products overseas.
The challenge for businesses is to offer globalized product offerings with a localized e-commerce experience through local language, marketing content and payment options.
Forbes called The Honest Company one of the hottest startups of 2014. The Honest Company combines for-profit goals with a non-profit mission, joining other hybrid companies like Warby Parker and Etsy. The Honest Company recently raised $70 million from Wellington Management Company and existing investors ICONIQ Capital, General Catalyst Partners, Institutional Venture Partners and Lightspeed Venture Partners in anticipation of an IPO later this year.
Another innovator, Zady, got a nod from FastCompany for its radical transparency. Zady tells shoppers where in the world their clothes are made and background information on who makes them. Every item featured on Zady is ethically sourced and manufactured.
The above graph shows funding for Zalando, The Honest Company, Warby Parker, and Etsy. Zalando raised $190.8 million in October 2013. Not surprisingly, Zalando's significant funding round was followed by an initial public offering in September 2014 valuing the company at $6.8 billion.