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KEEP AN EYE ON E-COMMERCE IN 2017

February 16, 2017

In 2016, e-commerce startups struggled to gain momentum--One Kings Lane sold for $30 million, a small fraction of its $900 million valuation, and private e-commerce companies received the lowest amount of dollar funding since 2013. Mainstays in the e-commerce industry, like Amazon and Alibaba, powered through, however, taking with them new ventures and innovative strategies.

Amazon remains dominant in the e-commerce space and shows no signs of slacking off in 2017. The retail giant is building its presence in markets outside of its electronics and media base and currently has at least 66 million paying Prime users. The site recently added virtual Amazon Dash buttons to enable impulse purchases of frequently replenished items such as toothpaste and detergent. The physical forms of the button, which are placed throughout the home on household items such as the washing machine or the refrigerator have been available since 2015, but now virtual buttons can be found on a Prime user’s homepage.

Amazon is also looking to incorporate virtual reality into the shopping experience proven by its recent job posting seeking a creative director of VR to “envision the future of Amazon’s VR solutions.” Some retailers offer VR to see how an outfit will look on or how a chair matches other decor. Time will tell what Amazon has in store for it.

Chinese e-commerce site Alibaba has similarly innovative ideas in the pipeline for 2017. In a recent interview with CNBC, Alibaba founder Jack Ma implied they are looking to create more horizontal partnerships, rather than taking Amazon’s approach of absorbing logistics assets like warehousing and delivery systems. Alibaba reported net income of RMB 17.12 billion ($2.47 billion) with total revenue of RMB 53.25 million ($7.6 billion) for Q3 2016.

Alibaba affiliates are also experiencing significant growth and success. Local services platform provider Koubei, which was founded by Alibaba and Ant Financial (an offshoot of Alibaba) in 2015, received $1.1 billion in a recent financing round.

Alibaba hasn’t stopped there--they recently acquired Intime, a company that operates department stores and shopping malls throughout China, for $2.6 billion, giving Alibaba a foothold in offline retail with the hopes of bringing more brick and mortar sellers online.

This steady and aggressive growth from industry giants means serious hope for budding e-commerce ventures, as well as more traditional startups, as they seek funding and IPOs. Not a single e-commerce startup went public on the stock exchange in 2016, but the outlook for 2017 is much more positive, as Snapchat and other tech startups have already established IPO plans.

Three young e-commerce companies were named by Recode as likely to go public this year: Casper, Chewy.com and StitchFix. All serve more niche industries than Alibaba and Amazon but have strong performance records and spokespeople who have alluded to possible IPOs. Casper, a New York-based “bed-in-a-box” mattress retailer, did $100 million in sales in 2015 with expected double-digit growth in 2016, may be the longest shot of the three to go public. Meanwhile, online pet supply retailer, Chewy, projected nearly $900 million in revenue for 2015 and $1.5 billion for 2017, raising over $236 million since its initial Series A investment in 2013. Stitchfix, a personal styling and retail services for women, has not gone through a fundraising round since 2014, suggesting a strong cash-generating business.

VC firms and retail giants continue to fund e-commerce startups and undertaking new concepts to drive e-commerce using automation, VR, and rapid expansion to make 2017’s outlook strong.

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February 16, 2017

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