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Whether you are researching the eCommerce market size to make investments or finding eCommerce prospects, this question will confound you.
eCommerce is not a homogenous thing.
Some retailers have an eCommerce presence (called ‘e-tailers’ by some). There are eCommerce companies and then there are marketplace sellers that sell on Amazon, eBay, Lazada, Mercadolibre, etc.
Then, thousands of companies use shopping carts but sell nothing that qualifies them to be an eCommerce 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 eCommerce market size and it’s not trivial”.We have tackled these complexities for you in the sections that follow.
We are a (so far, the only) data science-based eCommerce market intelligence firm focused solely on aggregating over 5.4M eCommerce companies and providing insights about them. Our customers are the world’s leading investors, hedge funds, fulfillment, tech and payment companies.
Our database tracks about 7 million eCommerce companies (the best and largest database you can get in terms of cleanliness) by looking at various sources. We have built our own natural language processing (NLP) and machine learning (ML) models to understand what each company does and bottom-up aggregate the insights.
We also partner with some 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 built ground up using a combination of technology and human review.
We will comment on the methodology we have used as we go further.
Every company has a different estimate, that there are between 10 million to 25 million eCommerce companies out there. It is very confusing for anyone out there to rely on this number. To solve this problem, we have defined an eCommerce website.
Defining an eCommerce business
PipeCandy has a broad definition of an eCommerce company. An eCommerce business is a business that has a website on which commercial transactions can be executed, i.e., a user can pay online and receive a product/service in return.
Specifically, an eCommerce site is one that:
And provides a product/service in return.
This definition includes the brick and mortar retailers that have an eCommerce site. However, it excludes the several thousands of independent marketplace sellers that sell on platforms like Amazon, eBay, Zalando, etc. The marketplace platforms themselves, however, are included in estimations.
Based on our definition of eCommerce company:
But you must be wondering if we are right because Shopify alone claims that at least 1.75 million merchants use Shopify. Builtwith says 3.8 million. Similarly, if you look at Magento, there are some 185,679 sites that use the platform, as per BuiltWith.
So, is it fair to say that these two platforms power about 30% of the world’s eCommerce sites? 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 eCommerce companies count 20 million? That’s hard to believe.
PipeCandy has built a dictionary of sorts to discover items sold in each eCommerce company and classify 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.
Roughly about 3.9 million, as we said initially and about 722,000 are B2C companies selling physical goods.
There are close to 687,113 eCommerce 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 30,409 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 eCommerce presence and we see them fall under the ‘less than a million dollars’ web sales segment.
A significant slice of them will graduate to higher revenue tiers in the coming years. However, 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.
Retrospect: How did the retail industry fare in 2021?
Global retail sales in 2021 were estimated to be $25.04T and eCommerce was about 19% of that figure, which is about $4.9T.
Following a sharp 5.7% fall in retail sales due to the Coronavirus pandemic, there has been a steady growth from $23.26T in 2020 to $25.04T in 2022.
According to digitalcommerce360, US online sales returned to pre-pandemic growth levels after a staggering 31.8% in 2020 to 14.2% in 2021. US retail sales were estimated to be about $6.58T increasing 17.9% from 2020-to 2021. The eCommerce sales were estimated at $870.8B in 2021, a 14.2% increase from 2020. The eCommerce sales in 2021 accounted for 13.2% of total sales in the US.
One small step for eCommerce, one giant leap for US retail.
In 2018, eCommerce accounted for about 10% of US retail ($523B). In 2021, that figure increased to 13.2% ($870.8B).
In 2021 eCommerce penetration of US retail surged to 19.5% ($788B), that’s a $186B jump. How many industries do we know where $186B in spending moves from one channel to the other in just one year?
The primary reason for the shift in eCommerce spending in 2019 was Amazon. Until Covid struck, the narrative was that nothing would happen if the ‘powers that be’ banned online sales in the US. 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. eCommerce is the vitamin. So, it is a ‘nice to have’ and not ‘must-have’) It’s just the sheer execution genius of Amazon that took a ‘nice to solve’ problem and made a $600B ($601.7B 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.
We’ve kept marketplaces out of the conversation for a while now. How are they faring? How big are they? In the future, eCommerce will be dominated by marketplaces. Look at China and the US – two of the world’s top economies. In each one of them, eCommerce is owned by marketplaces. In fact, of the 250+ privately held companies with more than $1B valuations worldwide, 35-40 are eCommerce 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 eCommerce and want to be a billion-dollar bay, you have to be a marketplace.
67% of the global eCommerce sales come from marketplaces. $3.23T spent on the top 100 online marketplaces globally in 2021, growing 18% from 2020, according to digitalcommerce360. The leading three marketplaces – Taobao, Tmall and Amazon – account for 60% of the global spend. In addition, 53 of the top 100 marketplaces have a GMV of more than $1B.
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Welcome to the @withassembly family, PipeCandy! #innovation#ecommerce#technews
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