Aidan Connelly, Manager

COVID19 has had a significant impact on many sectors but none more so than e-commerce. Lockdowns, travel bans, and retail closures have forced consumers online in their droves and digital adoption of online channels has evolved rapidly in response to pandemic restrictions. For example, in the UK alone, e-commerce’s share of total retail sales rose dramatically from c.20 % pre-pandemic to c.35%, a material step-up year on year.

Although the shift to online spending has been underway for the past decade, it has now undoubtedly been accelerated with changes in consumer behaviour likely to be enduring and responsible for creating a ‘new normal.’

E-commerce tech businesses are set to be one of the real winners from this seismic shift and their success will manifest itself in two ways. Firstly, as Amazon’s ecosystem evolves, so too will its positive influence on e-commerce markets. Secondly, these businesses will benefit from brands’ need to respond to this shift by investing in e-commerce tech to remain competitive. 

The impact of Amazon’s growing influence

Amazon dominates the UK e-commerce market with c.30% market share pre pandemic. This share has been increasing year on year and is likely to have been spurred further along over the past 12 months. Amazon is a disruptive force in the industry and as its influence grows, there are likely to be many technology and service providers forming around the Amazon ecosystem as brands seek help with establishing themselves on the UK’s leading marketplace.

E-commerce tech is now vital for businesses to remain competitive

Today’s e-commerce landscape is becoming increasingly complex and crowded as customer expectations continue to grow. Competition is fierce with e-commerce newcomers competing for customers against other brands, retail giants and marketplaces such as Amazon. Unlike digitally-native firms, which are inherently optimised for e-commerce, these newcomers need to invest in e-commerce technology, digital marketing and customer support to remain competitive and deliver a world-class customer experience. The biggest beneficiaries of this investment are likely to be those technology providers which are:

  1.  e-commerce enhancers Technologies which improve the customer’s digital experience through personalisation, ultimately driving up basket size and conversion rates 
  2. e-commerce marketing tech & automation Technologies which allow brands to better leverage their marketing spend and automate marketing across channels 
  3. e-commerce enablers Technologies focused on the supply and fulfillment function where processes can be automated, costs reduced, and delivery times shortened to keep up with Amazon’s delivery capability which is what customers now expect.

As a sector specialist investor, we understand that consumer shifts, such as rapid e-commerce adoption, often drive fundamental changes in technology and services businesses two steps removed. We are proactive in identifying changes to the status quo that provide opportunities for us to invest early in growing niches where we can use buy and build as a tool to create market-leading businesses. 

This strategy has consistently proved successful in the past where we identified CX (customer experience) as an area likely to benefit from technological change 7 years ago and invested in Sabio. This is one example of a successful business which we have built over the past 6 years into a scaled pan European provider of customer contact technology solutions. 

We are actively looking for opportunities to invest in UK based e-commerce technology and services businesses where we can partner with management to build the next leader in the sector. To find out more please click here:

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