E-commerce has experienced a surge in capital market activity driven by an increase in demand due to the COVID-19 pandemic. From 2019 to 2020, e-commerce capital transactions increased from $42 billion to $57 billion. The expansion has escalated in 2021, with capital raised already increasing by 28.6%, surpassing $73 billion by the end of Q3 and expected to increase substantially before the end of the year.
J&A has tracked the activities of the market to find e-commerce trends relevant for retailers, brands, and potential investors seeking opportunities. This report analyses historical data and explores upcoming trends in the post-pandemic e-commerce world.
Why Companies Have Opted for E-Commerce
Traditional retail required updates to meet the needs of the current globalized and tech-savvy world, especially in 2020 due to the effects of the COVID-19 pandemic. Retail trends are moving towards e-commerce in developed nations, and the effects of economic lockdowns accelerated the process. Established retailers use cross-border e-commerce as a strategy to broaden their business presence, enlarge their customer base, strengthen brand awareness, and tap into new markets.
Digital connectivity enabled marketplaces and online shopping platforms to thrive. Globally, 48% of people own a smartphone, and 60% have regular internet access. That access has empowered 80% of consumers to make purchases online. With B2B purchases also on the rise, J&A expects the revenue generated from businesses to hold a larger revenue share than B2C sales.
- The global e-commerce market is expected to generate close to $5 trillion in 2021.
- Pre-pandemic expectations for e-commerce sales in 2021 will be exceeded by over $147 billion.
- In 2021, an estimated 19.5% of all sales revenue will be generated from online sales, increasing by 45.8% in just two years.
- In 2024, 21.8% of all retail sales are forecasted to be from online sales.
E-Commerce Capital Market Activity
Capital markets transitioned in 2019 and 2020 to sustain the changes generated from the COVID-19 pandemic.
- Private equity and venture capital-funded deals saw a decrease from 2017 through 2020.
- In 2021, private equity and venture capital activity increased by 130% due to the sector’s increased customer engagement and thus, revenue increases per company.
- Mergers and acquisitions transactions yielded over $8 billion more capital in 2020.
- IPO activity increased by 390% and reached $12 billion in 2020.
- All capital raised by every transaction type increased post-pandemic, while the overall deal count plateaued.
- Mergers and acquisitions activity increased by almost 75% in 2021 as e-commerce platforms increased their customer base through the COVID-19 pandemic.
Segments that raised capital from private equity and venture capital in the e-commerce industry vary in trends. Non-essential online shopping and e-commerce platforms acquired more financing than traditional staple online sales. The low interest in food products from investors reflects this trend. J&A expects this trend to amplify the overlap between non-essentials and day-to-day products.
- As catalogs are often showcased in marketplaces and websites, catalog retail is the most common industry related to e-commerce.
- Platform software includes large firms like Shopify, WooCommerce, BigCommerce, Ecwid, FastSpring, and others. Capital raised and M&A deals for online marketplaces are close to 10% of all e-commerce deals, and J&A expects this trend to hold for the upcoming years.
- Clothing, along with application software services, comprises over 13% of the e-commerce capital market activities.