Retail & E-commerce Faces Headwinds and Urges Bold Moves in 2019 H1
The ever-growing array of human needs and desires would secure the retail & e-commerce market's position in the long run, however, companies need to take more bold moves to disrupt themselves with the willingness to innovate.
Despite the promulgated opinion of the "retail apocalypse" in Northen America or the fact that e-commerce only accounted for 14.3% of total retail sales in 2018 for the region, we look at these two sectors as a whole. Since e-commerce trend has penetrated into the retail world and most retail shops have made some kind of online presences.
EqualOcean has collected data of retail and e-commerce startups worldwide that have raised money for more than USD 1 million from venture capital and private equity (convertible notes, debt financing, grant, corporate funding, crowd-sourced funding in VC/PE markets are excluded) in recent three years.
Through this article, you will have a big picture of retail & e-commerce market, and get the idea of the most active markets and what key players are like.
What's the trend from 2016 to 2019 H1?
The retail & e-commerce industry had kept an uptrend in startups' fundraising until 2019. Both the deal value and deal count peaked in 2018 for a record high for USD 40,293 million funds raised and 794 cases settled, but entering a downside track thereafter. For 2019, the expected deal number may edge up based on the performance on the first half of the year. The expected total deal amount, however, would slump to almost half of 2018.
The retreat in consumer market investment was not limited to this sector, but a cross-sector phenomenon due to trade turmoil between the US and China started by the end of last year, plus the ongoing challenges associated with Brexit and global automotive downturn. Nonetheless, retail & e-commerce always hit as one of the hardest sectors as consumer's confidence tumbles when people are pessimistic about the economy and future.
What's the performance in different markets?
From January 1, 2016, to June 30, 2019, China leads the global retail & e-commerce growth in terms of the total money raised as the country is looking increasingly inward to domestic consumption to counter the downside pressure on the growth of manufacturing activity, industrial profits, car sales, exports and gross domestic product. The United States ranks second, followed by South Korea, India, Indonesia, etc.
The developed countries such as the US, South Korea, UK, Germany, France and Canada still got the edge in the consumer market innovation while developing countries including China, India and Indonesia have been showing stronger market vitality. Four out of the top eight countries that have funded most are from developing regions.
When taking deal counts into consideration, we see a tendency for Asia and South America startups to close larger deals. In contrast, companies in North America and Europe have received smaller amounts of funding but embraced more players.
The maturity of VC/PE in developed regions, the geographic & demographic divergence between European countries and Asia emerging countries, and the difference in consumer habits altogether have contributed to the discrepancy in two genres of countries.
The average low deal amount in developed countries implies the possibility of company variety and dispersion, which will be proved below as we dig deeper.
How's 2019 H1 like in retail & e-commerce?
EqualOcean has sorted out companies that received investment from VC/PE in the first half of 2019 worldwide and selected 60 companies that raised for more than USD 10 million during this period. For the companies selected, the funding stages were evenly distributed. 50% of funding rounds claimed at early-stage ventures (angle, seed, series A and series B) while the rest belonged to late-stage ventures and private equity. 85% of companies did not exist until 2010 when online payment and mobile e-commerce rise after several years of infrastructure preparation.
China and the US remain dominated in deal count, the following countries rank resembled the three-year trend. However, judging by deal value, the distribution has altered in the first half of this year.
Only three of the top 10 countries in the first half of 2019 hail from the Asia-Pacific region, led by China and India with over 30% of the total money raised and rounded out by Indonesia. Mature regions for retail & e-commerce markets secured their position with more than 50% of funding worldwide, claiming the upper hand in the top 10 players.
Clearly, the above-mentioned VC/PE set-back in 2019 fall disproportionately to different regions. The multi and small scale funded startups in developed regions seemed to be more resistant to economic cycles as those countries' VC/PE did not put all their eggs in one basket and are more flexible in market turbulence.
Next, we will look into some key players in the retail & e-commerce industry. China and the US, as the two largest consumer markets, will be explained more.
Who are the key players in 2019 H1?
China posted trends for e-cigarette, pet market and fresh groceries stores, but not exciting enough
E-commerce which represents 23% of total Chinese retail market share, remained a strong position in the first half of 2019 with five deals out of 14 selected companies. Beidian, the social e-commerce platform under the mother-and-baby brand Beibei, tops with CNY 860 million (USD 126 million) raised. The investment is led by Hillhouse Capital, Xiang He Captial, Sequoia, Sinovation Ventures, Gaorong Capital, IDG Capital, Captial Today, and other well-known investment institutions.
At the same time, the new tobacco sector, influenced by the US e-cigarette unicorn company JUUL and the likes, has forayed to China. The market with the largest smoking population has bulked up substantially with more than 3,000 participants. RELX, China's leading e-cigarette brand recorded the highest sales in the JD 618 shopping festival, a unique promotion day similar to Chinese Single's Day shopping day. The turnover of e-cigarettes on JD.com increased 5.6 times over last year and 2.1 times over Single's Day performance six months ago.
In addition, Dailuobo and Pupumall, two fresh grocery chain stores received new rounds of funding to secure their further development in the saturated market. Dailuobo operates on a new model called “today's order, tomorrow's take” with most of its stores located in densely populated communities. On the other hand, Pupumall represents the front-warehouse model that only operate online and delivery from the warehouse directly to consumers' home.
The singles economy in China breeds its derivatives - pet market. Official statistics released by the National Bureau of Statistics showed that the value of China's pet market reached USD 25 billion in 2018 and is expected to grow 13% this year. This particular industry has grown out of nothing until today’s hundreds-of-billions-of-dollar business.
The US sought for ultra-personalization and verticle development
The retail market is negotiating a change in the competitive structure of the industry. A myriad of newer, smaller, and tech-enabled competitors are stealing share while players from other sectors are developing their own retail platforms. The result? A marketplace in which more brands have exposure. -- Deloitte 2019 Retail Industry Outlook
Unlike China's one-stop online shopping habits, the US are prone to go to various personalized websites for different items. Below are cases of vertical e-commerce business companies:
StockX is a platform for buying and selling limited edition and high demand sneakers. With most of their users being male, it also unveils an increasing trend for male consumption. The company raised USD 110 million in Series C led by DST Global, General Atlantic, GGV Capital, etc.
Away, best known for its designed luggage, made its first debut in 2016 and took the USD 32 billion industry by storm within three years. As of August 2018, Away has sold over 500,000 suitcases and accessories, generating a massive USD 125 million in revenue.
The vertical players also include ThirdLove, a company producing and selling bras, underwear, loungewear and nightwear, and Madison Reed, a brand of hair care and hair color products.
Moreover, the San Fransisco-based Imperfect Product is also an interesting startup that delivers ugly produce for about 30% less than grocery store prices. The "ugly produce" movement had been monetized, and it was becoming a profitable business.
Though seems more innovated in business ideas such as customized consumption, shared consumption, personalized shopping experience in the US, but both these two largest consumer market did not surprise the increasing consumers with the expectation of technology and have-it-all experience.
Below are the rest of the selected 60 companies.
Though the ever-growing array of human needs and desires would secure the retail & e-commerce market's position in the long run, companies need to take more bold moves to disrupt themselves with the willingness to innovate.