E-Commerce Startups Have a Large Alternative

E-commerce feels prefer it’s in every single place. However the reality is that even throughout a pandemic, e-commerce accounted for lower than 15% of complete retail gross sales within the U.S.

In line with the United Nations, e-commerce solely makes up about 19% of complete world retail gross sales. 

E-commerce has an extended method to go earlier than it catches up with the remainder of the retail area. And that’s why I’m so bullish on e-commerce startups. There’s a lot room for disruption and development. And there’s no scarcity of market inefficiencies to repair.

The important thing for buyers is to seek out e-commerce startups which might be about greater than “simply e-commerce.”

E-Commerce Isn’t Simple

Constructing a profitable e-commerce enterprise is tough. There are a number of issues to determine, together with:

• How do you ship the product (the final mile)?
• How do you get the product to the supply individuals?
• How do you guarantee you might have a product that folks wish to purchase?
• How do you get individuals to find your product?
• How do you guarantee a superb buying expertise?

Supply is an insanely tough downside to resolve. So is achievement. Amazon simply makes it look simple.

Consequently, many retailers outsource packaging and delivery to corporations like Amazon and Instacart. Others outsource simply the supply.

Amazon and Shopify make establishing an e-commerce retailer pretty easy. Instacart makes it simpler for brick-and-mortar retailers to leap into the sport. And plenty of retailers depend on their merchandise being found on Amazon, Etsy and social media to generate gross sales.

However as huge and complete as the present instruments are, they don’t come near addressing the wants of the whole retail market. That’s why regardless of the apparent comfort of on-line buying — particularly in a pandemic! — e-commerce represents lower than 20% of the worldwide market.

Merchandise like alcohol, prescription drugs and tremendous recent produce simply don’t match neatly into the present e-commerce universe. And that presents a large alternative for startups.

Hidden Logistics

One of many largest errors individuals make is assuming what Amazon does is simple. It isn’t. Amazon runs one of many world’s most refined logistics operations. The scope of Amazon’s efforts is breathtaking. Take into account this timeline:

• In 2015, the U.S. Postal Service, UPS and FedEx delivered greater than 97% of Amazon’s packages.
• In 2019, Amazon shipped round 7 billion packages globally. Within the U.S., Amazon’s homegrown supply service delivered about 58% of these packages, in response to Digital Commerce 360. Exterior the U.S., Amazon delivered 48% of its packages. 
• In 2020, Amazon delivered about two-thirds of the packages it shipped in the US. The remaining have been delivered by UPS, Fedex and others.
• Within the coming years, Amazon will possible ship 80% or extra of its prospects’ packages.

As a way to make all of this work, Amazon has constructed huge achievement warehouses all through the nation. While you order one thing that’s fulfilled by Amazon, staff at these warehouses choose up the products, bundle them and ship them. Amazon’s delivery service then will get them to you.

Amazon’s inner methods are designed to optimize pace and effectivity to ensure prospects get the shipments as rapidly as doable.

However as massive and environment friendly as Amazon is, there are lots of issues that its system isn’t designed to deal with — like two-hour (and even same-day) supply of prescription drugs.

As a way to ship prescription drugs in just some hours, you possibly can’t have a warehouse positioned a number of hours away from the shopper. The drugs gained’t get there rapidly sufficient.

You additionally want pharmacists on web site to ensure nothing goes fallacious with shelling out the medication. And drivers skilled to ship prescriptions in a manner that meets regulatory compliance.

This isn’t one thing Amazon is about up for. So it opens the door for startups like NowRx to fill the void.

NowRx is one in all our favourite startups within the First Stage Investor startup portfolio. (For those who’re not a First Stage Investor member, click on right here to enroll.) It’s discovered tips on how to dispense and ship prescription medicines rapidly and legally. And simply as essential, NowRx has discovered tips on how to get sufferers and docs to make use of its service.

So whereas NowRx appears to be like like an e-commerce play, it’s truly way more than that. NowRx is working within the prescription drugs area — NOT in traditional e-commerce. It’s competing extra with Walgreens and CVS than it’s with Amazon. In order you consider NowRx’s potential, you need to just be sure you determine the proper rivals. In any other case, you might make a flawed funding determination.

One other instance of a startup being extra than simply an e-commerce firm is Leap Membership. Leap Membership is working in India. It delivers natural fruit and greens to customers inside 12 hours of them being harvested. And the entire groceries are ordered utilizing WhatsApp.

Like NowRx, Leap Membership’s enterprise is way more than e-commerce. Leap Membership has to create and preserve an extremely environment friendly provide chain of licensed natural meals. Getting natural meals delivered inside 12 hours of harvesting could be a serious achievement within the U.S. Doing so in India is exponentially tougher. 

First, Leap Membership has to ensure its natural meals sources are shut sufficient — and dependable sufficient — to persistently ship meals inside 12 hours of harvesting. It has to grasp how a lot must be harvested each day for farmers to create a viable enterprise. It wants to grasp tips on how to get the meals from the farms to New Delhi, the place it’s at present working. And since it’s outsourcing last (final mile) supply, it has to determine tips on how to get its meals into the palms of third-party supply individuals in time for them to courageous notoriously dangerous visitors. (Sitting in visitors for hours is a standard incidence in New Delhi.)

This isn’t your abnormal e-commerce startup. And that’s earlier than you get to the truth that everyone seems to be ordering by way of WhatsApp! (India is WhatsApp’s largest market.)

The standard e-commerce playbook wouldn’t work for Leap Membership. That’s why it doesn’t have to fret about competing with Flipkart or Amazon. As a substitute, it has to fret about different natural grocers and even farmers that may determine the provision chain and logistical challenges of just-in-time natural meals supply.

Rewriting the Playbook

Leap Membership and NowRx are simply two examples of e-commerce startups doing way more than promoting stuff on-line. They’re refined companies that throw out the standard e-commerce playbook as a result of it doesn’t apply to the markets they’re working in.

And since the standard e-commerce enterprise fashions don’t work, legacy e-commerce corporations like Amazon will wrestle to compete with these startups. Amazon (or Flipkart) simply isn’t designed for this.

In order you consider startups shifting ahead, don’t routinely dismiss e-commerce corporations since you suppose they’ll’t compete with Amazon. Generally, e-commerce startups are extra than simply e-commerce startups. And that’s the place the most effective alternatives lie.