With $21 Million Banked, Group Commerce Eyes Developing Markets
Group Commerce snagged $21 million in Series C funding yesterday to expand its white-label ecommerce offering. The round was raised from a handful of new and existing investors including Spark Capital (which has funded Foursquare and Signpost). It will be split between product development, existing customer support, and geographic expansion, according Group Commerce CEO Jonty Kelt.
The round comes months after the company entered the European market through the acquisition of Dealised’s European operations — a move that gave Group Commerce a small foothold in the U.K.’s media landscape. The company still has yet to make its big push onto the continent, but Kelt says the market in Europe is in many ways, as fertile as that in the U.S. — and far less competitive
“[The European market] is a little behind the U.S., but not by much,” Kelt told Street Fight in an interview. “In Germany and U.K. for example, [e-commerce] is 6-8% of percent of retails sales, as opposed to the U.S. where its 5.5%. And the competitive landscape, I’d say, is much less intense than in the U.S.”
Apart from U.S. firms like Nimble Commerce, which has been in Europe since 2010, Kelt says that there is not much in terms of competition. And the homegrown companies that do compete, largely lack the resources of the U.S. company’s.
The long-term opportunity, and one which Kelt says the company is pursuing albeit in the early stages, is in high-growth developing markets like Brazil, Russia, India, and China (or BRIC). Technologies with low-infrastructure costs like cell phones have seen atypical growth patterns in developing markets, hurdling preceding technologies before they even gain a foothold, and the e-commerce component of Group Commerce’s business could see similar growth.
“In some ways, [the developing world is] even more fertile ground than developed markets where things are set in stone, and traditional ways of doing things have existed for many years,” says Kelt. “However, there are cultural attitudes towards purchasing online and delivery which, might be quite different in China than they are in the U.S. or Europe.”
Brazil stands out as the most realistic entry point for the company and again, e-commerce is set to lead the charge. E-commerce in Brazil has been exploding – the Brazilian e-commerce market has seen 35% growth over the past two years and 26% growth projected for 2012. Although plans remain in the research phase, Joshua Neckes, Group Commerce’s Director of Marketing, sees Brazil as an opportunity for the company to extend partnerships to consumer brands. “We think international brands that have products which they would like to introduce to these emerging markets want to create the right type of contextual relevance around the product,” says Neckes. “In this case, would you rather sell through an e-commerce company like Amazon… a traditional retailor… or a media brand?”
The white-label e-commerce model relies largely on the availability of two primary assets: conglomerate media to scale partnerships at an efficient rate and logistics and delivery infrastructure to ensure fulfillment. As far as fulfillment is concerned, poor infrastructure in non-urban areas and inconsistent delivery infrastructure could inhibit the growth of its e-commerce initiatives.
Either way, companies like Group Commerce do appear to be looking increasingly to non-local, e-commerce markets as a major source of revenue moving forward. As far as media is concerned, the type of commerce, local or online, which they chose to adopt, will likely reflect the scope of their current advertising base, and in turn, audience.
Steven Jacobs is an associate editor at Street Fight.