The infrastructure and tools behind the growth of e-commerce

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From Arjun Kapura

The pandemic has changed the meaning of the term “window shopping”. Today, with the acceleration of e-commerce around the world, there is an ecosystem of technical tools that enable consumers to virtually window-shop. The infrastructure that powers the global ecommerce ecosystem is scaling rapidly, and investors should understand the trends in the space to determine where the commerce infrastructure and overall tech stack are going.

According to McKinsey, e-commerce saw 10-year growth in the first three months of COVID-related restrictions last year. The acceleration of e-commerce penetration on both the B2B and B2C sides is arguably the most sustained industry shift resulting from the pandemic.

Companies have had to revise and upgrade their technological capabilities to meet this unexpected demand. With that you have the phase of Commerce 3.0 where start-ups decouple the front-end from the back-end of the infrastructure stack and offer both their developers and consumers more flexibility and agility.

What are the roots of Commerce 3.0 and what does it contain?

The first growth phase of e-commerce began in the dot-com era when companies first went online by developing websites that could take orders and deliver products efficiently. Pets.com, Webvan, and Boo.com are just a few examples that have raised hundreds of millions of dollars from investors only to go bankrupt within two years of going public. The few that survived thrived; Most successfully, Amazon has dominated the global retail landscape over the past decade.


The acceleration of e-commerce penetration on both the B2B and B2C sides is arguably the most permanent industry shift resulting from COVID-19.


The second phase of e-commerce was led by Shopifywhich enabled the establishment of online shops for smaller retailers with functions for order processing. This online presence was replaced by the existing stationary or Offline channel and has led to what is being considered Omnichannel retail today. Additionally, this rising tide has essentially pushed all historic brick and mortar retailers to essentially build, strengthen, and focus on their own e-commerce and omnichannel skills. Those who have not made this pivot successfully have with the “Apocalypse in retail“As evidence of this failure.

We are now in the middle of Commerce 3.0, or the creation of a technical infrastructure that enables consumers to enjoy the seamless integration of mobile, online and offline experiences. Commerce 3.0 is being driven by developers creating APIs and plug-ins to integrate online activities directly with retailers and provide them with personalized services, faster speeds and better functionality.

For example, Attentive is a leader in SMS marketing, which enables brands to turn browsers into buyers by running personalized advertising campaigns and growing subscriber lists. If you receive a message that you’ve added a pair of pants to your cart and there are only three pairs left in inventory, that message is likely from Attentive, which is fully integrated with the retailer’s inventory and backend. The amount and level of analytics they provide to retailers is not apparent to customers, which is why Commerce 3.0 is characterized by the invisible infrastructure that supports the growth and diffusion of e-commerce.

What’s special about Commerce 3.0 is that it headless in the sense that it separates the front-end user interface from the back-end of the tech stack. Historically, integration was integration monolithic in nature, firmly integrated with both ends. Every change in the user interface required adjustments to the backend, which led to a lack of flexibility and long delays. Headless commerce offers brands the opportunity to be agile and achieve faster loading times for websites with high conversion rates.


We are now in the midst of Commerce 3.0, or the creation of a technical infrastructure that enables consumers to enjoy the seamless integration of mobile, online and offline experiences.


What are the trends in this area?

The latest trend in headless commerce is the integration of specialized microservices, which has led to the rapid growth of applications that can be integrated across the board Shopify, BigCommerce, Magento, and WooCommerce while they also exist independently. This enables retailers to provide top notch service for a specific function. For example, a retailer could add Mindful of SMS Marketing, Shogun for building your shop window and Fast for one-click checkout. Coexistence is called the rise of. designated Modular trading where individual modules enable increased personalization, efficiency and speed.

To go one level deeper, there are also cloud platforms such as Vercel that enable developers to create headless applications using software development frame. Vercel has React, a customizable open source framework that assists developers by providing the tools and infrastructure to make it easy to deploy and use for end customers. This is the second tier of headless commerce that enables applications to scale and has attracted interest from both businesses and consumer-focused investors.

What should investors focus on today?

Investors have been drawn to this universe over the past 12 to 18 months, and a variety of investment firms have studied headless commerce startups, including those with a focus on enterprise SaaS, direct-to-consumer, and consumer Internet.

Many innovations within the headless commerce ecosystem are global. For example, Saleor is an incubation laboratory in Poland with a lean team that is able to scale and deploy applications. They recently got their seed round of Cherry Ventures, as well as the founder of Vercel and other well-known e-commerce players.

Most of the companies in this space are still in their early innings and have for the most part attracted rounds of seed and Series A investments. Investors like Accel, The accomplice, CRV have had this area in mind for some time and have invested heavily in the application and infrastructure stack. Other funds have raised dedicated pools of capital to focus on the wave of innovation that is likely to accelerate over the next 5 to 10 years due to the general tailwind the pandemic has created.

Investors are also searching for data and looking for applications that are best in their class in specific industries that appear on corporate websites because of their size, price flexibility and their preference for longer contract lengths.

What will commerce tools enable in the future?

With the advent of e-commerce tools and all of the creation of content, platforms are now being developed that serve individualized industries and the creative industries. Ecommerce enablement tools will focus on growing the creator economy by helping the development of marketplaces such as Soul man where consumers can purchase items from specific content creators in specific niches. Other areas that are still relatively emerging are B2B marketplaces, Reverse logistics and after-market platforms that will facilitate and promote these tools in the future.

While the pandemic has greatly accelerated the adoption of e-commerce, it has also spurred the growth of an ecosystem that is invisible to the consumer but has massive implications for the future of commerce. The simple act of window shopping and window shopping online is made possible by an entirely invisible ecosystem that scales quickly.


Arjun Kapura (’22) is a second year MBA and Venture Capital Fellow in Columbia with a background in consumer investment banking and corporate development. He also works with Left Lane Capital where his focus is on investing in internet and consumer technology.

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