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Checkout is What’s Hot in Commerce Start-Ups and M&A

As a longtime participant in digital commerce, my eyes instinctively roll when I hear the words “seamless checkout technology.” Many of us have spent the better part of two decades optimizing every customer experience before checkout, only to see clumsy and primitive transaction experiences bleed transactions are far too high a clip. I remember years ago when I worked on an Internet ISP that had a 19-screen checkout process that lost 99.8% of would-be customers.

Most shopping experiences aren’t that bad anymore. Happily, some significant improvements have been made over the years, but there’s still a big gap that needs to close if digital is to achieve its full potential as a sales driver.

Enter the revolution at checkout. We are in the midst of a period of massive innovation and consolidation of technologies at checkout. Merchants are focusing increased resources toward enhancing their results during the critical moments just before a transaction. Now the scramble is on to be the one-stop-shop of best -of breed solutions for all checkout tech categories.

Shopify’s Aggressive Vision

Growth juggernaut Shopify exemplifies this rush to investment, acquisition, and consolidation. Over the last several years, the company has acquired or invested in more than a dozen technology and solution providers to help make its platform the innovation leader and a one-stop shop for conversion optimization and checkout technology.

More than a million companies rely on Shopify. Adding these technologies to their solutions quiver strengthens their hold on these clients and increases the average revenue from retail businesses of all sizes.

Many of Shopify’s acquisitions are small organizations and teams with active founders who agree to become part of the Shopify team. Its investment stakes are an intriguing mix that help the company ensure it has access to critical technologies, especially as mobile upends retailing.

Some examples of Shopify acquisitions include:

  • Return Magic helped retailers create branded portals to manage returns more efficiently.

  • AR company Primer made an app enabling customers to visualize home improvements like tile and wallpaper in their own homes.

  • Oberlo is a business that facilitates drop shipping by connecting merchants directly to manufacturers and wholesale marketplaces.

Shopify invested in e-commerce company Yotpo, which offers a suite of e-commerce marketing and merchandising tools for SMS, loyalty, reviews, and visual user-generated content. The company also has a stake in Loop, a top provider of returns management services for mid-sized and large companies. Shopify also invested in Swyft, a company that calls itself a tech platform for self-service retail. Swyft offers combination hardware + software solutions for self-service retail, package lockers, shrink prevention, food service automation, and last-mile delivery.

The company has also acquired several mobile app development studios and product development firms, presumably to beef up its expertise as it works to usher in better solutions for m-commerce store development and management. These include Boltmade, Tiny Hearts, and Tictail.

Shopify's rival Big Commerce has also been active in the acquisitions space. The company has acquired Zing, a provider of advanced mobile commerce technologies that connect to POS companies like Square, Lightspeed, and NCR Silver. The company has also purchased Quote Ninja, which streamlines and systematizes the quotes process for companies, and Feedonomics, which helps optimize product listings and shopping feeds.

Both BigCommerce and Shopify also use their app stores to make it easy for retailers to integrate innovative optimization and checkout tech into their programs. Big Commerce, for example, offers about 1,000 partner apps and shopping widgets in its app store. Shopify even more.

Market Newsmakers

The story doesn’t stop with Shopify and BigCommerce. Here are a few data points that show how retailer and investor interest in this space is already high and continues to grow:

Toolbars and Extensions: Paypals $4B acquisition of Honey signaled how the financial giant saw enhanced conversion technology as a critical element of its go-forward strategy. The extension is a key part of the Honey business that drives marked improvement in transaction sizes and conversion rates. Its points-based reward system, Honey Gold, also contributes to higher conversions and rewards larger purchases. Rakuten, RetailMeNot, and CapitalOne are also investing heavily in the sector. CapitalOne Shopping website traffic averages 30M a month, according to SImilarWeb. Less well-known but still sizable offerings like the Shoprunner extension are also in the fray.

Conversion Optimization: At least three dozen providers offer conversion optimization services, from exit intent to personalized offers, upsell, and cross-sell. Some providers, including RevLifter and Upsellit, will work on pay-for-performance or SaaS, enabling affiliate leaders to incorporate their solutions within existing affiliate programs easily. Some solutions are known more for email-based retargeting, while others provide on-site solutions for everything from exit intent to bundling and cross-sell. Revlifter, for example, focuses on “hyper-personalized deals” delivered on-site and on dedicated deals pages. Upsellit is well known for its email retargeting, lead gen, and targeted offers tech.

Post-Conversion Platforms: Solutions like Narvar are trying to enhance the post-sale customer experience to improve shipping, delivery intelligence, tracking, and simplified goods return processes. The company has raised an impressive $64M in three rounds. Narvar also announced its acquisition of Lumi, a packaging and printing marketplace, in December of 2021.

Returns Automation: This fascinating category is helping merchants deal with the massive costs of merchandise returns. With retailers routinely reporting 10-30% return rates, it’s easy to understand why there’s so much interest and activity here. Solutions like Loop encourage customers to choose alternative items or immediately spend return credits to help retailers recoup some otherwise lost revenue. They are also expanding into logistics and inventory management to help retailers deal with physical goods that return to warehouses. As mentioned earlier, Shopify is an investor. Others in this hot hot hot segment include Returnly, Return Logic, AfterShip, and Happy Returns. Paypal acquired Happy Returns in May 2021. Returnly was acquired by Affirm, a BNPL leader, in 2021. Aftership has raised $66M in two rounds. Loop raised $65M in a Series B in 2021.

Shopping PPC Optimization: There’s PPC, and then there’s Shopping PPC, and the road rules are different. Companies like Optimyzer focus on optimizing shopping PPC programs for maximum conversion ROI. Many of the top providers in this sector are platform-specific, like Bidnamic, which specializes in optimizing PPC strategies, programs, and bidding on fast-growing Google Shopping.

Loyalty Programs: Rewarding the best customers for additional purchases and referrals isn’t new for retail, but activity in the segment is hot as data giants like Oracle, SAP, and Epsilon compete with payments leaders like Square, SaaS platforms like AnnexCloud. Brierly, Clarus, Loopy Loyalty, Open Loyalty, and service providers including Capgemini, Concentrix, Merkle, and Publicis.

As you can see, the checkout and conversion optimization sector is full of innovation, and many investors are scrambling to be a part of the seismic shifts taking place in the moment of truth for digital commerce. Expect more new companies, acquisitions, and tech categories throughout 2022 and 2023.

With all these major investments and acquisitions, expect to see a great deal of additional investment in shopping cart optimization over the next 12-24 months, as the concept of e-commerce-as-a-service takes hold across the industry. That should result in higher conversion rates for all channels, including affiliate.

Affiliate publishers should keep close track of the conversion rates driven by their brand partners. With all this investment, publishers should see gradual increases in conversion rates from their brand partners over time. Publishers have the right to expect brands to innovate on this front.

We should also see more brands include performance-based tech partners in their programs to better monetize traffic. By enhancing the conversion rate for affiliate traffic, these tech providers can help raise the ROI for all affiliate marketing initiatives. Further, tech providers that do not yet offer a performance-based pricing option would do well to consider doing so, as affiliate marketers tend to be more willing to innovate and test concepts than marketers focused on other channels.

Would you like to discuss this live and in-person? Attend Martech Record's upcoming event in New York City on May 23rd. See the agenda and register here.

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