The Covid-19 crisis has altered the landscape of internet-based commerce at breathtaking speed. Newer entrants like Shopify and Instacart have enjoyed a massive surge in their businesses. Shopify’s stock has rocketed to all-time highs, surpassing $84B in market cap for the first time. Instacart’s business has surged 450% since December and turned profitable in April—something that would have been unimaginable just a few months ago.

While there are certainly some short-term tailwinds that will be muted whenever we come out of this, some buying behaviors consumers have embraced are likely to last. Sitting mid-pandemic provides us with an opportunity to reflect on how commerce has evolved and where it likely is headed.

Where we have been

Two decades ago, at the birth of Web 1.0, e-commerce pioneers solved many of the immediate problems associated with buying and selling. The first problem was one of search and discovery. Marketplaces like eBay and Craigslist were among the early entrants to solve this problem, creating virtual marketplaces where buyers and sellers around the world could find each other. It was revolutionary.

A once-obscure startup called PayPal was the first real attempt at solving the “how to pay” problem; today, of course, PYPL has a market cap of close to $175B—showing marked resilience to the impacts of Covid-19. Commerce payments have become so core to the backbone of the internet that all of the major tech platforms, with the exception of FB (i.e. Amazon, Google and Apple), have jumped to create some sort of payment option for their users. In the last 5 to 6 years, a number of point-of-sale financing companies have sprung up (Affirm, Afterpay, Klarna) that enable users to purchase goods on credit.

The last major development we have seen is the creation of self-sufficient ecosystems. Square is a great example of this in the retail SMB world. Having started out as a hardware terminal + software platform to capture payments, Square has since branched into financing (Square Capital), P2P (Cash App) and a host of other services (e.g. payroll, loyalty & rewards, debit cards, etc.) Once you become a merchant in the Square ecosystem, you never need to leave.

Where we are headed

Where will commerce go from here? A key focus will be cleaning up problems that arose during the first wave of commerce infrastructure, fraud, for one. Verifying the true identities of buyers and sellers is a core issue that remains unsolved. New entrants like Au10tix and Veriff offer promising solutions. Check-out related issues involving conversion are a second concern. Solutions like Signifyd (end-to-end protection) and Namogoo (customer hijacking) have made meaningful dents in lifting conversion. As the fraudsters get more sophisticated, solutions to fraud within commerce (particularly those that utilize ML) will be in high demand.

Unsurprisingly, payments continues to remain an exciting area for founders to innovate. With more and more merchants transacting online, entering payment data into forms continues to be a repetitive and friction-filled process. Fundamentally there are two issues: (1) merchants need to be able to identify the user and (2) they need to be able to process the payment. One of the exciting new players to emerge in the last few months that addresses both these issues with a simple API and check-out button is Fast. The next generation of PayPal will look something like this.

The final big area with a lot of white space is the post-purchase experience—in other words, every part of the commerce flow after you click the final “Checkout” button. Much of this remains fragmented and broken; thankfully, a number of new entrants have risen to the challenge. Extend allows merchants to provide warranty coverage. Route supports the item tracking and shipping insurance piece. Starship facilitates last-mile robot-facilitated delivery. And merchants can handle returns through Returnly.

The future of commerce infrastructure is bright and there is much work to be done across fraud, payments, post-purchase and many other dimensions within the commerce stack. The next generation of commerce founders will certainly build many great companies in the post-Covid world.

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