| INTEGRATIVE INSIGHTS ON EMERGING OPPORTUNITIES |
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dgearhart@firstanalysis.com
- Point solutions have dominated the e-commerce technology market for nearly two decades. With their singular focus on just one component of the e-commerce process, point-solution technology providers can amass deep expertise, concentrate organizational effort, and rapidly evolve to create best-of-breed capabilities.
- In the past few years, however, the balance has begun to shift toward end-to-end solutions created by companies that acquire multiple point-solution providers or develop multiple e-commerce technology components internally.
- We see several factors prompting the shift toward end-to-end solutions, including commoditization of some point solutions, the drive to sustain or accelerate revenue growth, the need to profitably deploy cash accumulating on balance sheets, diminished concerns about channel conflict, and an increasing appreciation of the value companies can create by owning data streams from multiple e-commerce technology functions.
- We think companies shifting to end-to-end strategies will mostly elect to acquire point solutions given the challenges of internal development, including finding talent and long timelines, and the relative abundance of attractive targets. We highlight some of the e-commerce technology areas we think will command the highest valuations and innovative companies leading in these areas.
TABLE OF CONTENTS
Includes discussion of AMZN, BIGC, ECOM, FDX, INTU, LSPD, PYPL, SQ, WMT and three private companies
Point solutions historically dominated the e-commerce technology market
Evidence of shift to end-to-end solutions
Several factors prompting the shift toward end-to-end solutions...
... and we think the shift will accelerate
Expect "buy" to dominate "build" with focus on differentiated assets
Maturing market structure points to sustained opportunity
First Analysis E-commerce Optimization Index falls behind Nasdaq, S&P 500
Q3 e-commerce optimization M&A pace remains strong
Q3 e-commerce optimization private placements at low end of two-year range
Point solutions historically dominated the e-commerce technology market
Several distinct software components comprise modern e-commerce solutions that enable brands and distributors to interact with buyers online and take and fulfill product orders. For most of e-commerce, online sellers assemble the components from point-solution providers. We highlight the high-level functional areas in Table 1.
With their singular focus on just one component of the e-commerce process, point-solution technology providers can amass deep expertise, concentrate organizational effort, and rapidly evolve to create best-of-breed capabilities. They can partner and integrate with other e-commerce technology providers, both point-solution providers and suite providers, to enable their clients to easily implement full e-commerce solutions that meet their unique needs. With this nimble strategy, point-solution technology providers can grow quickly, leveraging a combination of their own and their partners' success.