Asked in 2020 at founder at pipecandy, if the "e-commerce shift" that was happening in the wake of COVID-19, the answer was yes. But that does not mean that the same pace of growth in online commerce seen during the pandemic will continue.
In fact, as 2021 drew to a close, the data began to indicate that the e-commerce boom was slowing. The question at the time was whether we were seeing a reversion to the growth norms of the pre-COVID era or whether growth would slow further; in the latter case, it would imply that future e-commerce activity was boosted, rather than the larger digital commerce pie growing thanks to long-term changes in the economy. The new data from Pinduoduo, a large Chinese e-commerce company, and the final results of Alibaba and others from the fourth quarter of last year suggest that the forward pattern of recent e-commerce growth is the most likely.
For startups, it's mixed news. Certainly, any startup selling in the e-commerce market has more TAM than ever as potential.
But slowing growth means it will be more difficult to grow at previous levels, as outperforming the market segment enough to surprise venture capitalists will be more difficult. (But it's certainly not impossible, as the round of CommerceIQ nine digits).
The slowdown in the growth of Pinduoduo
In the fourth quarter of 2021, the Chinese e-commerce giant grew just 3% of its prior year results, released during the pandemic-accelerated Q4 2020 period. More easy: Pinduoduo it barely managed not to shrink compared to its late 2020 results.
In numerical terms, Pinduoduo reported $4.3 billion in revenue. That figure in its local currency was 27.200 billion RMB, below market expectations of RMB 30.1 billion. Investors expected much more growth than Pinduoduo could offer, but profits of more than a billion dollars helped calm the market.
Pinduoduo is not an outlier.
Attending to the Amazon Q2021 XNUMX results, the company's international e-commerce business shrank from the prior year period ($37.3 billion from $37.5 billion), while its online sales in North America rose 9.3% to 82.4 billion from 75.3 billion in the fourth quarter of 2020. In short, Amazon's e-commerce sales were up just 6% from the fourth quarter of 2020 to the company's most recent quarter.
There are more recent examples. The alibaba total revenue grew 10% in the fourth quarter of 2021, while its e-commerce business in China grew only 7%. The e-commerce and cloud computing giant had a better quarter of growth in its international digital commerce markets, but since that segment of total revenue is less than 7% of the company's total revenue, the result is not materially changed. the tendency.
In the case of Shopify, BetaKit described thus its results for the fourth quarter:
“The Ottawa-based company released its fourth-quarter 2021 earnings, revealing slowing revenue growth, Black Friday sales and a lower top line, as the COVID-19 pandemic, government shutdowns and the favorable stimulus that fueled the e-commerce boom are beginning to wane.” .
Slowdowns in growth are occurring for many companies as the pandemic subsides. This had already been anticipated. But not all sectors where growth soared were expected to return completely to the start. Why? The so-called secular changes in the economy. It is difficult to separate when the recent performance is due to the market assimilating a transformation towards a more digital world and what is a growth hangover due to the latest global circumstances. And where it is best seen is in e-commerce where companies are holding on to the benefits of earlier growth, with growth steadily slowing to a stalemate for many online retail giants.
The result of the slowdown in e-commerce is the rapid devaluation of companies that had skyrocketed during COVID. Coupang (South Korean e-commerce), for example, has seen its value fall from $50,50 per share a year ago to $18,68 today. For companies that saw Coupang as a company to watch after its IPO, that's terrible news.
Maybe the situation could anticipate you. But investors had priced the named companies as if their growth was continuing at previous levels, prompting some big price declines when results showed growth was not sustained.
We're seeing growth decelerations from many companies as the pandemic ebbs. This was anticipated. But not every sector where growth soared was expected to return fully to Earth. why? So-called secular shifts in the economy. And we are seeing that, as e-commerce companies are at least hanging onto prior growth gains. But with growth decelerating down to an idle for many e-commerce giants, it's hard to decide what measure of recent performance is due to the market digesting a secular transformation to a more digital commerce posture and what is a hangover from growth being pulled forward, instead of generated whole-cloth.
