E-commerce isn’t what it used to be, so FinTechs & tech startups will have to adapt 💆🏾♀️; Mastercard’s earnings as a reflection of the economy & 3 growth trends 💳; Meta, what’s the Meta with you?
Good Morning FinTech, 1 August
Good day Everyone,
And happy Monday! Someone famously said there’s no better way to start the week than reading Linas’s Newsletter. Okay, it was me again… 😎 But you will have no choice but to agree with me after today’s issue. We’re going to look at the e-commerce space, which isn’t what it used to be (which means FinTechs & tech startups have to adapt), Mastercard’s earnings as a reflection of the economy & 3 growth trends for the payments giant (steal them if you’re working in payments!), and Meta, which is facing existential challenges on every front right now (it’s not looking good…). So let’s jump straight into the intriguing stuff:
E-commerce isn’t what it used to be, so FinTechs & tech startups will have to adapt 💆🏾♀️
Spotting the trends 🔍 One of the craziest news last week was Shopify’s massive layoffs - because of unsuccessful bets & a difficult macro environment the Canadian e-commerce heavyweight had to say goodbye to 10% of its workforce, or nearly 1,000 employees.
Already then I said that this news gives us some hints for the future of FinTech (Shopify is a FinTech too) and digital businesses per se. Today, we can start spotting more trends that further strengthen the earlier guidance and provide us with a clearer picture of what we can expect in the future.
More on this 👉 Here are the things you can’t ignore:
Let’s start with Shopify. In addition to the massive layoffs, the stock market poster child for the e-commerce boom of 2020 and 2021 had also posted a quarterly loss and downwardly revised forecasts. Also, SHOP 0.00%↑ shares are down about 80% from highs last fall, which only symbolizes the broader sector woes.
Shopify is obviously not an outlier - others in the e-commerce software space, including relatively recent market entrants like BigCommerce and Global-e, are also down sharply. Even internet development heavyweight Wix WIX 0.00%↑ has lost more than 80% of its value past year.
But not only startups are suffering. The shares of retail giant Walmart WMT 0.00%↑(that has a sizable footprint in US e-commerce spare too) also tanked after the firm said it has to cut prices to reduce merchandise levels, which brings profits down. This is primarily happening because of inflation running at multidecade highs, hence, budget-strapped consumers are cutting back on discretionary spending.
Finally, the situation for retail-focused SaaS startups and investors isn’t very convenient too. Last year, investment in e-commerce software companies hit an all-time high, with more than $4.8B in global venture funding, as per Crunchbase data. This year started hot as well, with a decline in funding in the past couple of months only slightly offsetting a rollicking first quarter. Zooming out and looking at investments in the e-commerce space for the past 5+ years, we might say that it probably peaked last year (though we still have some time in 2022):
So what does this tell us? 🤔 It’s clear that e-commerce isn’t what it used to be, so FinTechs & tech startups will have to adapt. Here’s the takeaway: