October 5, 2017 by Ashwini Murthy

Last updated on April 27th, 2021

Whether you are researching about the e-commerce market size to make investments or for finding e-commerce prospects, you would be confounded with this question.

E-commerce is not a homogenous thing.

There are retailers who have an e-commerce presence (called ‘e-tailers’ by some). There are e-commerce companies and then there are marketplace sellers that sell on Amazon, eBay, Lazada, Mercadolibre, etc.

Then, there are thousands of companies that use shopping carts but sell nothing that qualify them to be an e-commerce company – like a retired management consultant who built a couple of management templates and implemented a Magento site to sell them online!

“Bottomline: There are so many moving parts when it comes to estimating the e-commerce market size and it’s not trivial”.

We have tackled these complexities for you.

How does PipeCandy fit in?

We are a (so far, the only) data science-based e-commerce market intelligence firm focused solely on aggregating over a million e-commerce companies and insights about them. Our customers are the world’s leading investors, hedge funds, fulfillment, tech and payment companies.

How do we estimate the number of e-commerce companies?

Our database tracks about 1.82 million e-commerce companies (the best and largest database you can get in terms of cleanliness) by looking at various sources. We built our own natural language processing, and machine learning models to understand what each company does and bottom-up aggregate the insights.

We partner with some of the capital market and firmographic data providers to get corporate revenue (which is different from web revenue!) and other such insights. The rest – technology usage data, fulfillment insights, SKU insights, etc. are all built ground up, by us, using a combination of technology and human review.

We’ll make comments about the methodology we used, as we go further.

So, how many e-commerce companies are there

  1. In our estimate, there are between 4 million and 5 million e-commerce companies in the world (excluding China). 
  2. North America (USA & Canada) has about 1.82 million e-commerce companies. If you exclude B2B, and companies selling digital goods & services, there would be around 722,000 companies selling physical goods.
  3. Pure-play e-commerce companies around the world are less than 100,000, which means that e-commerce is more or less synonymous with omnichannel and ‘pure-play’ is an exception. You might think otherwise, because e-commerce as a category became visible because of pioneering pure-play companies like Amazon and eBay but retail is so big that once they started taking e-commerce seriously, the omnichannel e-commerce retailers or e-tailers have started to outnumber pure-play by almost an order of magnitude (yes, we are using ‘order of magnitude’ in a mathematical sense.)

But you must be wondering if we are right because Shopify alone claims that at least 1 million merchants use Shopify. Builtwith says 1.6 million. Marketplace Pulse estimates that as of Q4 2020, the total number of merchants on Shopify had crossed 1.7 million. In the same manner, if you look at Magento, there are some 202,000 sites that use the platform, as per BuiltWith.

So, is it fair to say that about 40% of the world’s e-commerce sites are powered by these two platforms? We don’t think so. Or, to look at it the other way, if these two platforms power around 10% of the websites that do commerce, then is the overall e-commerce companies count 18 million? Most definitely not!

Methodology matters

Tools like Builtwith consider ‘presence of code snippets’ as a qualification criterion to decide if a company is into e-commerce. Presence of a shopping cart isn’t always a good indicator of e-commerce activity – especially if you’re considering prospecting or investing. If you ignore 100s of 1000s of (not exaggerating at all!) irrelevant websites (dubious websites, Chinese and Russian language spam mills, sellers of digital goods whose main business is not selling online, websites that belong to a single corporate entity), we estimate that the top 4 or 5 e-commerce platforms power about 30% – 40% of the total e-commerce websites. It’s worth noting that we did include adult websites into the estimate as several of them buy technology, advertisement inventory, and payment tech. Some of them ship adult toys and are hence, relevant to the fulfillment companies.

Within e-commerce, there is a rampant misclassification of websites based on the items they sell (‘merchandising categories’ as we call them). This is because most data providers have classified e-commerce companies as a subset within retail and forced them into categories that fit into SIC or NAICS codes. Besides, the process traditionally has been manual, leading to interpretations or sometimes inadequacies of the person that tags them.

PipeCandy has built a dictionary of sorts to discover items sold in each e-commerce company and classified them into logical merchandise categories. So, if we say that a company belongs to the ‘Fashion’ category, it most definitely will belong to that category.

How many e-commerce companies are there in the US?

Roughly about 1.8 million, like we said in the beginning. About 722,000 are B2C companies selling physical goods.

 

There are close to 651,000 e-commerce companies with online web revenue < $1M. That’s 90% of the market. For most of you, these are too small or just getting started. Only 10% have >$1M in online web sales. That’s about 67,000 companies. However, we won’t be quick to dismiss the companies with less than $1M web sales as insignificant. Several large national and regional retailers are setting up e-commerce presence and we see them fall under the ‘less than a million dollars’ web sales segment.

In the coming years, a significant slice of them will graduate to higher revenue tiers. Their current spend patterns mirror the corporate entity’s numbers (derived mostly from brick and mortar revenue) and so if you are planning your ‘Go-To-Market’ strategies as a vendor, keep this data point in perspective.

How does US e-commerce revenue compare to the US retail revenue?

Global retail Vs. US retail 2020

Global retail sales in 2019 were estimated to be $25 Trillion and e-commerce was about 14% that figure, which is about $3.5 Trillion

In 2020, however, the Coronavirus pandemic brought a decline in total retail sales by about 5% to $23.8 Trillion. Global e-commerce sales, meanwhile, saw a 28.5% jump to $4.5 Trillion.

According to digitalcommerce360, online sales accounted for 101% of all retail gains in 2020. This means that sales from other channels such as physical stores, showrooms, catalogs, etc – declined.

For the same period, US Retail Sales was estimated to be about $5.6 Trillion. Factoring out sales from ticketing, travel, (industries that practically collapsed due to Covid-19), and items that aren’t frequently bought online such as gas and sales from restaurants, bars, we see that US retail sales was an estimated $4.04 Trillion. Ecommerce, meanwhile, grew by 31%, to clock $788 Billion, registering the highest ever penetration in US retail at 19.5%.   

Global e-commerce Vs. US e-commerce 2020 

One small step for e-commerce, one giant leap for US retail  

In 2018, e-commerce accounted for about 10% of US retail ($523 billion). In 2019, that figure increased to 16% ($601.7 billion).

In 2020, with the onset of the Covid-19 pandemic, eCommerce penetration of US retail surged to 19.5% ($788 billion), that’s a $186 billion jump. How many industries we know are there where $186 billion in spend moves from one channel to the other in just one year?

The primary reason for the shift in eCommerce spend in 2019 was Amazon. Until Covid struck, the narrative was that if the ‘powers that be’ banned online sales in the US, nothing would happen. People would happily go and buy at Walmart and Kmart. The US wouldn’t stop functioning. Ecommerce, even in the US, would stay small and nascent. (It’s like the famous vitamin or painkiller argument – You don’t ‘need’ vitamins. But, if you have pain you ‘need’ painkillers. Retail is the painkiller. E-commerce is the vitamin. So, it is a ‘nice to have’ and not ‘must-have’) It’s just sheer execution genius of Amazon that took a ‘nice to solve’ problem and made a $600 Billion ($601.7 Billion to be specific) industry out of it in the US alone!

In 2020, Amazon lost this edge. The Covid-19 pandemic brought other top and emerging retailers to the fore. Several hundreds of thousands of brick-and-mortar retailers, CPG brands threw their online stores open and in the second half of 2020 alone, eCommerce saw 200,000 new stores in the US.

How many e-commerce marketplaces are there?

We’ve kept marketplaces out of the conversation for a while now. How are they faring? How big are they? In the future, e-commerce will be dominated by marketplaces. Look at China and the US – two of the world’s top economies. In each one of them, e-commerce is owned by marketplaces. In fact, of the 250+ privately held companies with more than $1B valuation around the world, 35-40 are e-commerce companies (if you include clothing & accessories brands with an online presence). That’s about 16%. Of them, nearly 33 of them are marketplaces. So, if you are in e-commerce and want to be a billion-dollar bay, you have to be a marketplace. 

Amazon:

  1. 27% of the $788B (US e-commerce sales in 2020) came from Amazon alone. That’s $216B. This is up from the $160B sales that Amazon did selling products in 2019. That’s a $56B increase in one year!
  2. Remember how the US e-commerce sales increased by $186B in the same year? $56B of that was just because of Amazon. Amazon’s market share of US eCommerce was at 38% prior to the Covid pandemic and in 2020, that has further dropped, due to a combination effect of several other online retailers and niche brands being born online due to Covid. The spurt in eCommerce sales was definitely noticeable in Amazon and it continues to be the number one online retailer but it’s grip on US eCommerce seems to be weakening post the pandemic.
  3. Of the $302B revenue from e-commerce in 2020 (not including AWS, Prime, Alexa) $80.46B came from seller commissions and services (including FBA which is Amazon’s shipping services that it does on behalf of its sellers). That’s 27%. The seller commission percentage for various marketplaces is here. % of units sold by sellers can be found here.
  4. Amazon has over 9.7M sellers worldwide, of which 1.9M are active sellers. But the ones that make at least $100,000 in profit a year (enough to support a person’s family a year in the US) are fewer than 200,000 sellers. So, these 200,000 sellers give $80.46B in commissions to Amazon.
  5. Amazon charges anywhere between 15% – 40% commission. Let’s assume it’s 15%. So, if $80.46B = 15%, what would the actual revenue of the Amazon sellers be? Approximately $536B. So, on an average, if there are 200,000 sellers that matter, each one is making approximately $2.7M (of course, this is not how it will be – some will make way more and some, way less, but imagine a market where 200,000 companies having $2.7M revenue each). This is the ecosystem Amazon has powered.

Did you like what you just read? Do us a favor by quoting our link if you are using these insights elsewhere. Selling to the e-commerce/retail industry or want us to talk about the e-commerce and retail market insights at your conference? Talk to us! We have the cleanest and the most insightful data out in the market!

PS: Shoutout to Mattia Pavoni from Tooso.ai for pointing out an error in the numbers. (Thanks, Mattia! It has been fixed.)

Ashwini Murthy

Content marketer @ PipeCandy

A writer by day. Illustrator by night. Currently trying to conquer the B2B marketing world one baby step at a time. Loves everything outside her comfort zone.