5 Brilliant VCs Share The Biggest Ecommerce Opportunities of 2016

5 Brilliant VCs Share The Biggest Ecommerce Opportunities of 2016

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There’s an interesting trend happening in enterprise ecommerce today. Market fragmentation is the new norm, with a greater diversity of retailers competing for the same sets of eyeballs. The end result?

When it comes to reaching your target market, there’s more opportunity and more competition than ever before. Anyone can start an ecommerce store that takes on enterprise leaders—which is why your brand needs to think like a startup and operate with agility.

Partnering with a range of startups in multiple markets, venture capitalists (VCs) are in a strong position to report on trends. Studying patterns for a living, these industry leaders are able to see trends before they have a chance to become big: insight that’s relevant to an ecommerce company first. What trends are going to get big in ecommerce?

To answer this question, we’ve asked 5 VCs to share their top emerging opportunities. Here’s what they shared:

1. High-Consideration Purchases are Big Emerging Markets

 

David Beisel | Seed stage VC investor at NextView Ventures

In the first and second waves of ecommerce, brands needed to overcome a major hurdle: consumers weren’t accustomed to shopping online. Today, that friction is virtually non-existent and there’s a strong emerging market opportunity as a result.

“High-consideration products include items that are priced high and/or require quite a bit of time and reflection before purchasing,” says Beisel. “We’re investors in a lingerie company called Peach that faces this challenge. We’re seeing increased comfort levels with these high-consideration purchases and an emerging opportunity for companies to make a name for themselves in this space."

Some examples to consider include mattress retailer Nest Bedding, who uses showrooms across California to demo their mattresses, and Shopify Plus to sell exclusively online [Read the case study here].

There's also True & Co, a retailer specializing in women's braziers, has created technology to help shoppers find the proper fit, and Renoviso for small home renovations.

“Consumers are seeing trust in companies that don’t have a physical retail presence,” said Beisel. “They’re placing confidence in a brand before making the decision to try it out.”

2. Influence Will Become the Ultimate Form of Currency

Andrew Mitchell | Seed stage VC investor and founder at Brand Foundry Ventures

It’s tough to stand out from the noise online, especially for ecommerce leaders who are selling many of the same products. The most successful retailers are outsmarting these competitive market dynamics to build their own followings on and off social media.

“We’re in the midst of a revolution,” says Mitchell. “It’s a generational and behavioral shift in terms of how we interact with the internet itself. The bottom line is that people want to go where other people are hanging out. It’s about connecting your audiences to your larger business story.”

Mitchell points to Birchbox as a company that has succeeded in establishing itself as an influencer.

“The company had harnessed so much knowledge about how to apply and use makeup,” says Mitchell. “It’s this expertise that helped make the company so successful on YouTube, which is partially what led me to invest in the company back in 2010. The internet offers an amazing platform and opportunity for companies to tell their stories.”

Storytelling will become an ecommerce company’s influence vehicle.

“What’s in jeopardy the most is really loyalty,” says Mitchell. “Through content and storytelling, you can continuously engage your customers.”

3. Brick and Mortar Will Stay Important to the Retail Equation

Sam Kaplan | Venture Capitalist at Burch Creative Capital

Five years ago, it was trendy to say that brick and mortar is dying. With bookstores closing up shop, it was safe to assume that online retailers were positioned to take over - and they did. But Kaplan is noticing a trend that is somewhat hidden: consumers are still conducting a portion of their shopping in-stores.

While no one questions the economic advantages of an ecommerce business model, customer experience is more important than ever given the vast array of options at each customer's disposal,” says Kaplan.

“Accordingly, more and more of both our portfolio companies and those who are pitching us view a single (or very small number), inexpensive retail outpost or showroom as a necessary step to build their brand name with consumers in a way where they are able to control the experience much more than through wholesale.”

In other words, early stage companies are realizing how important customer experience is to business success - and there are some elements that are impossible to replicate in a digital realm.

One example that Kaplan cites is Outdoor Voices, a recreation apparel company that operates a single retail store in Austin, Texas. The company uses its in-person location build its reputation and to learn more about its customer base. This approach will never be replaced by a presence that is 100% digital.

“Five years ago, when Warby launched and Bonobos was on the rise, the idea that brick and mortar retail was dying became very trendy,” says Kaplan.

“Fast forward to today, that may have been a bit overblown. Today, these brands not only have retail spaces--they have retail spaces in prime locations.”

4. Mobile Will Widen Ecommerce’s Reach

Eugene Zhang | General partner and founding member at TEEC Angel Fund

Especially in developing nations, mobile is emerging as a “first screen” for many audiences who don’t have access to a computer or dedicated Internet. It’s this trend that will bring ecommerce to new parts of the world. As big as ecommerce has become, the space is about to become a lot bigger.

“Ecommerce will continue to grow, and penetrate more verticals in many local markets,” says Zhang. “The space will widen its reach cross-border.”

There will be an increased need, as a result, for ecommerce leaders to reevaluate their internationalization strategies. Even though ecommerce, and mobile, reduce costs for consumers, there are still challenges that need to be overcome.

“Businesses will have to overcome cultural differences and foreign regulations,” says Zhang. “Technology and modern global logistics will play an important role in enabling consumers to purchase affordable products directly from overseas retailers.”

There’s a big opportunity for established ecommerce leaders who play their cards right.

5. "The Funnel" Will Be Flattened & Commerce Will Be Native

Ashish Mistry | Managing partner at BLH Venture Partners

The value propositions of ecommerce are accessibility and ease-of-use. Customer experience is an important part of this mix, and an interesting trend is that shoppers are expecting products and services to come to them.

“An interesting way that brands are deepening the customer experience is by using social media to sell,” says Mistry.

“Millions of consumers are on social media daily, and recently companies have been racing to find ways to convert sales directly from social platforms.

For instance, Amazon and Dominos have enabled ‘tweet to order’ functionalities, and Pinterest has introduced ‘shoppable’ pins that allow viewers to buy the product in a Pin with a click. By stripping away the middle man of an ecommerce site, this tactic allows users to directly purchase an item without leaving their Twitter feed.”

Tommy Walker wrote about this in "The Death of Advertising as We Know It" where commerce will start becoming native to wherever they are online. Audiences won't need to come to you in order to buy from you. Build distribution channels through the platforms that they’re already leveraging to research and discover new products. There’s a big moment of opportunity ahead.

Final Thoughts

What do you think of these VC predictions? How do these tips fit into your own business? Share your thoughts and feedback in the comments section below.



About The Author

Ritika Puri is a marketing consultant, business sociologist, and entrepreneur who runs Storyhackers. She enjoys helping companies reach and engage with audiences who love to learn. As a Shopify contributor, she enjoys writing about data, technology, marketing, and emerging opportunities.