Return to Blog

September 20, 2022

What QED is excited about in eCommerce 

We are still in the early growth period of eCommerce.

As a millennial, it seems like it’s been forever since the beginning of eCommerce. When was eBay started? 1995? We’ve got to be in the maturity stage of eCommerce, right?

As a fintech specialist fund, we here at QED like to say that we are still in the second, not the eighth inning of fintech. And as we found ourselves fortunate enough to partner with multiple eCommerce-related marquee fintech companies like Wayflyer and Klarna, we are realizing how inseparable commerce is from fintech and how early in the eCommerce transformation journey we are.

In 2021, eCommerce was 15 percent of U.S. retail sales, at $850 billion in volume, which has been dramatically aided by the COVID-19 pandemic and consumers’ buying behavior shifts.

However, when stacking the U.S. eCommerce penetration against our global peers, we still largely lag behind. In 2021, eCommerce was 38 percent of U.K. retail sales, at $118 billion in volume. More strikingly, eCommerce was 52 percent of China’s retail sales, at $2.8 trillion in volume (first year surpassing offline retail in China). 

Source: eMarketer and ecommerceDB.

Partnering with commerce startups

If we take a step back and look at some of the most marquee names that have come out of the fintech venture landscape (Shopify, Stripe, Klarna, dLocal, MercadoLibre, PayPal, Square etc/), it is undeniable how inseparable the growth of fintech benefited from the growth of commerce. 

As a fintech specialist fund, going back to even the very early days of QED, we have partnered with some of the most notable commerce-fintech startups globally. We’ve invested heavily in merchant financing vendors like Wayflyer and Fairplay, buy now pay later vendors like Klarna, fulfillment enablement vendors like Melonn, vertical marketplaces like Kavak and Sundae, identity protection vendors like Signifyd, and commerce ecosystem aggregators like ShopCircle and Wonder Brands

As we work alongside QED founders in navigating the new era of commerce, we have been identifying some key fintech categories as key monetization and moats, such as lending and payments orchestration, as well as foreign exchange and cross-border related topics. At the same time, we have also been taking notes for ourselves on some of the largest industry moving trends, which we will share below, as well as our hypothesis around where value remains for commerce startups.

Looking back: The domination of industry mammoths and fluidity of data and purchasing becomes more prominent. 

In the past decade or so, there have been two main forces pulling the commerce category: 1) Amazon is growing larger and larger. 2) How do I beat Amazon? 

It is undeniable that Amazon has dominated the industry, with unprecedented scale to squash competition in cost, consumer mindset (Amazon is arguably the ultimate search destination in commerce) and commerce tooling.

As a result, Amazon is 49 percent of U.S. eCommerce in 2021, up from 34 percent in 2016. Its total global GMV was ~$600 billion, with its third-party marketplace contributing ~$390 billion. The scale has given Amazon the ultimate power in the platform <> merchant dynamics, charging sale-related fees range from 6% - 45% of each product's selling price, with the average seller paying about ~15 percent.

Gradually, merchants have realized that the existence of such a force like Amazon threatens significant ecosystem unbalance. Consequently, many have sought relief in going direct-to-consumer and going after various independent storefront builds. Some of the most marquee DTC brands have been birthed in the past decade (otherwise as we call “the golden era of DTC”), when ads were cheap and competition was constrained within sleepy CPG incumbents. 

One of the most notable enablers in this the DTC trend is Shopify which, with its open ecosystem and rapid product development innovations, has captured massive market share. Shopify is ~50 percent as large as Amazon Marketplace after surpassing $175 billion in GMV in 2021. (Last I checked, Shopify was a ~$50 billion company, down from ~$200 billion). 

Alongside Shopify, and perhaps one step in advance, many headless commerce enablers have been started in the past 5-10 years, decoupling the front-end/storefront from back-end content management. This category of vendors is addressing a lot of the customizability, scalability and performance issues that are not meeting expectations with monolith platforms. Some of our favorite vendors include CommerceTools, Nacelle, and

With the addition of easy-to-use platforms and tool suites, the movement of inventory and capital has also been revolutionized by drop-shipping vendors, eCommerce-focused lenders and B2B marketplaces, which all greatly reduces the barrier to entry for merchants.

The result is fierce competition on consumer eyeballs. As we discussed above, Amazon not only has unparalleled cost and tooling scale advantages but also is a core destination of consumer purchase intent and attention. The “solution” here is largely social- and community-driven outlets, such as Instagram, TikTok, Reddit and Pinterest, where commerce becomes a sub-product of content and engagement.

Over the past 10 years, ad spend, as well as cost, on social media has increased dramatically. With recent changes to Apple's app-tracking transparency policies, the social customer acquisition cost increase for eCommerce brands has become even more dire.

If you are gleaning anything from the trends we described, it likely reads: Things are getting ultra competitive for merchants.

So, going back and putting our investor hats on, we ask ourselves: where does value accrue in the next decade of commerce? In this blog entry here on integrated commerce and investing in Fermat, you'll see why we're so excited for the innovation still to come in eCommerce.