Ecommerce: Ecommerce Enablers Are Emerging As A Hot Pick For Investors Amidst D2C Boom

Bangalore: As online shopping grows, a lot of early stages startupwhich provide software tools to beginners direct to the consumer (D2C) brands as well as online markets, is gaining the interest of risky investors. Wednesday, two of these platforms— Shopflo and GoKwik, claimed to have raised new funds.

GoKwik said it raised $ 35 million led by RTP Global and Think Investments – its third fundraiser in less than a year,
Shopflo announced that it raised $ 2.6 million in seed financing led by Tiger Global and TQ Ventures. Both startups help merchants improve checkout conversions.

In March of this year Commercial IQproviding software to brands that helps them sell better e-commerce platforms, mainly on Amazon,
accumulated $ 115 million led by SoftBank Vision Fund 2evaluating the e-commerce Software-as-a-Service (SaaS) starting at more than $ 1 billion

With the pandemic boosting online brands, ecommerce software tool providers raised nearly $ 496.3 million in equity funding last year, a five-fold jump from $ 94.4 million. of 2019, according to data from Tracxn.

Several venture capital funds told ET that the growth of online-only brands and omnichannel gaming by fast-moving consumer brands (FMCG) brands, has given way to these software tool providers to gain ground. Ecommerce infrastructure providers don’t own the storefront or website, nor handle payments, but they help improve customer experiences and the merchant’s supply chain.

“The thesis behind this industry is that the non-market share of D2C brands is growing very rapidly and new vertical trade players are also emerging globally. To compete effectively with horizontal markets, these vertical brands and players must offer consumers a similar or better shopping experience, “said Rajat Agarwal, Chief Executive Officer of Matrix Partners India.” With the advent of e-enablers. commerce, these players no longer need to create various tools in-house, “he added.

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Ecommerce software vendors have raised nearly $ 475.6 million in funding this year alone, if the unicorn rounds of ElasticRun and CommerceIQ are to be taken into account.

“Since these companies are software infrastructure providers, they are essentially like toll roads for enabling e-commerce in the country. They have solid underlying business models as there aren’t many direct costs to build these businesses and cut back on each transaction, with the potential to earn more as they improve efficiency, “said an investor who spoke on condition of anonymity. and was considering some business in space.

While ecommerce enablers are gaining ground thanks to D2C brands, there are pockets being opened by even bigger FMCG players. “The largest brands and retailers are also veering towards a dedicated e-commerce strategy. So they need these facilitators to help them, ”said Kapil Makhija, chief executive officer (CEO), Unicommerce, which provides supply chain solutions to online marketplaces and D2C brands.

Enablers of e-commerce, however, face growing challenges posed by: changing e-commerce models, disruption of prices, as more and more startups shift their focus to this space. “Enablers on the pre-purchase journey need to pay attention to the evolution of ecommerce models and have to cater to a variety of customers to create diversity and those with a vertical-only focus can be hit. Plus, with the market becoming competitive. , it is important to create differentiation. We see that some of these enabling factors do not have a sustainable price, “added Makhija.

For a D2C brand like The Souled Store, the new age enablers are not up to par with the in-house capabilities built by these brands that started a few years ago. “Today, e-commerce tool providers can definitely help in the journey of a newly launched D2C brand. However, there aren’t many platforms out there that fit our scale and deliver better results as we have also invested in building several ecommerce functions in-house. There is also a shortage of supply chain procurement facilitators, with the middleware still broken, ”said Vedang Patel, co-founder of The Souled Store merchandising brand.

“In our research we have seen that integration for some of the e-commerce enablers is not as straightforward as a payment business and it takes time to get it right. But that also means that for these players, a once integrated, the dropout rate is likely to be lower, ”said Agarwal of Matrix Partners.

Globally, Fast, which provides online payment products, closed operations in April of this year, while its rival Bolt is under scrutiny for inflated metrics, the New York Times reported earlier this year. week. “Due to the maturity of e-commerce, we are seeing a new generation of software companies building new software products to enable e-commerce and its ever-expanding use cases. The opportunity is broad and very global in nature. E-commerce checkout players Bolt and Fast are isolated examples and will not change the view of global macro factors and favorable winds driving e-commerce innovation, “said Vaibhav Domkundwar, CEO and founder of Better. Capital which has invested in Shopflo.