Get Ready for eCommerce 2.0
Amazon roll-ups promise economies of scale, while next-wave platforms are helping sellers make it on their own
By Omair Tariq, CEO and co-founder of Cart.com
It seems like almost every day, we read about companies raising eye-popping amounts of cash to “roll up” slews of Amazon online retailers under a single corporate umbrella. This month, it was the turn of factory14, which raised $200M to snap up eCommerce sellers such as Pro Bike Tool, and Perch, which raised a cool $775M and now has a stable of at least 70 brands. At least half a dozen other rollup ventures have also raised large sums, bringing total investment in the space to more than $3B.
Clearly, consolidation is the order of the day for online retail. The rollup players are betting that they can deliver synergies and economies of scale that will make them more than the sum of their parts, and many investors agree. And it’s easy to see the appeal: the eCommerce marketplace is vibrant but increasingly fragmented, leaving individual sellers at a competitive disadvantage as they struggle to coordinate the multiple storefronts, tech tools, complex logistics, ad agencies, marketing and PR teams, and other outside partners whose knowhow is needed to grow a digital commerce brand.
Companies that join forces to cut their way through that thicket of third-party providers will gain a significant edge, and that’s exactly what rollup ventures promise to deliver. For some eCommerce entrepreneurs, that’s great news: with the right aggregator, you can get a tidy exit and stay on to help steer the acquired company to greater heights.
Other entrepreneurs feel differently, of course. Not everyone wants to sell their business so early, and many dream of staying independent as they grow their brands. Fortunately, it’s possible for independent startups to stay competitive even in a world of highly efficient rolled-up online retail operations. And it hinges on a seismic shift that’s now taking place in the eCommerce software and services sector.
Over the years, online brands have evolved from simple online resellers into more sophisticated, streamlined, and vertically integrated retail brands, with companies taking control of design and manufacturing as well as sales and distribution. It was a strategy that brought us now-renowned companies such as Warby Parker and Bonobos, and that helped transform eCommerce into something that could genuinely rival the real-world retail experience.
Now, we’re starting to see a corresponding transformation take place in the eCommerce software and services sector. This transformation — call it eCommerce 2.0 — is seeing brands seek out comprehensive solutions that can deliver vertical integration across the behind-the-scenes infrastructure of online selling. Instead of dealing with dozens of different vendors — one for each eCommerce function that can’t be effectively managed in-house — brands want to work with a single unified provider to rapidly get on-demand access to tried-and-tested technologies and expert advisers.
Why is eCommerce 2.0 worth shouting about? Well, the reality is that first-generation, legacy eCommerce platforms do a great job at providing established brands and entrepreneurs with an on-ramp to eCommerce. But that’s where they stop. As brands evolve, founders are being required to cover more and more ground, and manage more and more outside teams to handle advanced functions that aren’t covered by their storefront providers.
Inevitably, inefficiencies creep in — those same inefficiencies that the rollup players are now promising to eliminate through consolidation. But while rollup aggregators do offer a pathway to increased efficiency, they aren’t the only strategy worth following. The rise of eCommerce 2.0 means that brands can leverage aggregation strategies to boost their marketplace selling, but can also leverage smarter and more streamlined eCommerce solutions to find more efficient ways to sell directly to consumers.
By demanding more integrated eCommerce solutions, brands can eliminate the inefficiencies and fragmentation that would otherwise slow their growth — and they can do so while keeping full control of their business. That’s because eCommerce 2.0 platforms don’t just give brands a foundation for buying and selling — they also fold in related services ranging from support developing and implementing Instagram and Facebook ad strategies to the ability to run multiple storefronts from a single unified hub.
Individually, those capabilities might not sound all that groundbreaking. But by aggregating all these services under a single umbrella, eCommerce 2.0 providers deliver efficiency savings that match anything a market aggregator can achieve, while allowing brands to remain independent even as they scale up. The result for startup founders: fewer headaches, lower operating costs, and more time to focus on delighting customers.
So if you’re starting to struggle in the face of an increasingly fragmented and hard-to-manage eCommerce software and services environment, don’t despair. You aren’t alone, and while roll-ups offer one solution to the problems you’re facing, you don’t have to give up control of your company in order to capture the efficiencies you need to grow. Now more than ever, digital entrepreneurs have options — so take a look at the new generation of eCommerce 2.0 solutions, and find the right way to move forward on your own terms.
Omair Tariq is CEO and co-founder of Cart.com, the first end-to-end Ecommerce-as-a-Service (ECaaS) company. He previously served as Chief Financial Officer and Chief Operating Officer at Blinds.com where he played a key role in scaling the high growth eCommerce startup prior to its acquisition by Home Depot.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.