The historical challenges of eCommerce and how companies overcame them

eCommerce evolution

Almost everything you buy online has a 4–5x mark-up embedded in the price. That blue shirt you just bought for $100 and looks fabulous on you costs less than $15 to make.

You’re not paying that high of a mark-up because eCommerce businesses are greedy. Most of them actually struggle to make money, and the ones that do typically don’t make a lot. The gap between price and COGS is the result of three structural hurdles that eCommerce companies face, which have historically eroded profitability:

  1. Inability to accurately predict demand: It’s very difficult to forecast demand before launching a product…


Product selection framework

Photo by Igor Miske on Unsplash

Last year’s forced stay-at-home experiment pulled forward many trends, the most notable of which was eCommerce adoption, which today accounts for 23% of total retail sales in the US, up from 16% last year.

Given this, you’d be inclined to think that any eCommerce company would have at least doubled its stock price in 2020. You’d be wrong!

It’s the restaurant-food aggregator saga all over again: While eCommerce platforms (i.e., Shopify) and aggregators (i.e., Amazon) heavily benefited from increased traffic, many pure eCommerce players (i.e., …


A story of creators, entrepreneurs, and individual IPOs

A couple of years ago, The Sun surveyed 1,000 children, asking them what they wanted to do when they grew up: 34% of them wanted to be YouTubers, and another 18% wanted to be bloggers.

This shouldn’t come as a surprise. In the past decade, social media platforms turned regular people into celebrities, helping them amass a large social following and accumulate wealth in a relatively short time frame:

  • Charli D’amelio, a 16-year old TikTok star, gained 100 million followers and accumulated a net worth of $8 Mn one year after creating her account.
  • Ryan Kaji, an 8-year-old YouTuber, generated…


The only financial model you need for your eCommerce startup

A year ago, I wrote about how direct-to-consumer companies are disrupting the traditional retail model and how recent shifts in consumer behavior and the supply landscape are set to accelerate the shift in the Middle East region.

Back then, I argued that the democratization of influence (social media) coupled with the decentralization of distribution channels (eCommerce) and the rise of asset-light supply chains (contract manufacturing) made it easier for anyone to set up an online store and sell products online.

In specific, you can easily sell products online by doing taking the following steps:


Experimentation and idea validation process

Jesse Horowitz and Ben Cogan founded Hubble, the first direct-to-consumer contact lens manufacturer in 2016. However, before they did anything meaningful, the cofounders ran two core experiments to validate their idea and confirm that people would actually buy lenses from a newly established company:

  1. They ran Facebook ads on a mock product to test whether they can get enough people to sign up for such a service
  2. They collected emails through Facebook lead ads (more on those later) and followed up with them to see if they would be willing to visit one of their partner optometrists for a lens…


NFTs and the rise of the collaboration economy

In June 2017, Matt Hall and John Watkinson released 10,000 CryptoPunks, a set of tokenized 24x24 pixel art images built on top of Ethereum. Each Punk was unique and could be officially owned by only one person.

Originally free and available for anyone to claim, the value of these tokens (or NFTs) has since exploded and the most expensive one was recently sold for $7.6Mn.

CryptoPunks sales: Top 5

What can you do with a Punk once you’ve bought it? Nothing at all, well beyond bragging that you own one. …


A restaurant’s guide to navigating innovation in the industry

Photo by Nick Fewings on Unsplash

A few weeks ago, I wrote about the food delivery industry, analyzing the economics of food aggregators and how the industry's recent changes could impact its stakeholders.

Last week, I came across a letter from a restaurant owner to a new food aggregator, sharing their pain and asking them to reconsider their acquisition strategy, which prompted me to dig deeper into the impact of food delivery wars on restaurants.

This is the second part of my ‘Food economy’ series, throughout which I plan first to provide an overview of the evolution of food delivery and its economic impact on restaurants


A story of SPACs, PIPEs, and dual-engine flywheels

Last week, Anghami became the first Arab technology company to list on the NASDAQ after merging with a SPAC. As part of the deal, the company is expected to receive anywhere between $40Mn and $210Mn in cash from the SPAC and a separate PIPE investment to help accelerate its growth.

Yes, I also had to reread this paragraph to digest it fully. What’s a SPAC, a PIPE, and why was this deal structured this way instead of the traditional IPO route that most companies undertake when going public?

This piece aims to answer these questions and is split into two…


Overview and predictions for the sector

As the world went into lockdown last year, most people turned to online shopping, which accelerated eCommerce adoption and increased its share of total US retail sales by 75% last year (from 8% penetration in 2019 to 14% in 2020).

Retail giants such as Walmart, Best Buy, and Target saw their market capitalization nearly double in 2020 on the back of enormous eCommerce sales growth. Industries that power the eCommerce ecosystem also heavily benefited from this trend, with companies like FedEx (logistics) and Shopify (eCommerce platform) seeing incredible growth.

In particular, one industry was a significant beneficiary: ‘Buy Now, Pay…


A breakdown of the industry’s dynamics in MENA

Picture from partner.talabat.com

As cities worldwide went into lockdown last March, most businesses were forced to shut their doors and forgo revenues for a few tough weeks. You would think restaurant owners had an easier time, given they worked with food aggregators to power the on-demand food economy. You would be wrong.

Let me explain. Since its inception, the “food economy” hasn’t been good to any of its stakeholders:

  • Restaurants complain of the astronomically high commission rates (up to 30–35%) paid to food aggregators, feeling stuck with no clear alternatives.
  • Customers often complain of inconsistent quality and delays.
  • Food aggregators (and their investors)…

Imad El Fay

Partner & Venture Builder @HBInvestments | @McKinsey alumn, @Harvard alumn | Nutella lover!

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