E-commerce continues to maintain its foothold in the economy, but future sales are potentially at risk for some businesses that rely on traditional e-commerce platforms, said the CEO of Fabric. Faisal Masud spoke to Modern Shipper on that and the e-commerce market in general in a recent interview.
In the past two weeks, both Amazon and Shopify announced quarterly earnings, and while the numbers were impressive, they still represent little more than the starting point for e-commerce’s potential. Amazon (NASDAQ: AMZN), for instance, reported revenues of $113.08 billion. The results were disappointing to analysts, who expected revenues of $115.07 billion. But it is still a very large number that impressed Masud, who dismissed the analysts’ expectations, which sent Amazon stock lower after the results.
“When you are a $113 billion-a-quarter retailer, I’m not sure how you can grow much more,” Masud said. “It was a staggering number.”
Likewise, Shopify (NYSE: SHOP) had a stellar quarter, reporting $1.12 billion in revenue, but Masud said it was interesting what Shopify executives didn’t spend much time talking about on the earnings call: their midmarket, enterprise and fulfillment businesses. There is a reason, he believes, and it is the reason why he thinks Fabric is positioned to grab market share moving forward: headless commerce (this is the separation of the front end and backend of e-commerce systems).
“No one is really coming [to Shopify Plus] anymore because headless is the future,” he told Modern Shipper. “I think Shopify [had] good results, but I think they are [heading to a more difficult future].”
Masud believes Fabric’s approach to commerce is what businesses will turn to for e-commerce, and business-to-business e-commerce is only in its infancy. According to a PwC survey, 66% of businesses said implementing digital marketing and sales over the next two years is a business priority and 40% said it is a top business challenge. Few manufacturers, though, have robust e-commerce platforms today.
Robert Bono, industrial manufacturing practice leader for PwC, said the challenges are nearly identical whether it is a B2B or B2C manufacturer. “It’s not new. We’ve been talking about this for several years, but the pace of adoption is different for different companies,” Bono told Modern Shipper in a recent interview. He said that the survey confirmed conversations he has been having with manufacturers in recent months. The survey found that some industrial companies are making plans to accelerate e-commerce sales growth from near zero today to 60% over the next several years.
It is these companies that Shopify is not likely to help, Masud noted. Acknowledging the power of the Shopify platform for the smaller seller (under $1 million), he said it has limitations as businesses grow.
“Now [businesses] have gone online, but you can’t go online with Shopfiy [and others like it] because they are ‘e-commerce in a box,’” Masud said.
Fabric is a so-called “headless commerce” platform, or as Masud prefers, a “composable commerce” platform. He explained the difference this way: “The traditional monolithic business platforms (Oracle, SAP, etc.) are where a big box holds many smaller boxes inside of it. So if one box broke, you broke the [entire thing],” he explained.
Existing e-commerce platforms are the same way. “You have to separate the two and the business logic has to be kept separate,” Masud added.
Fabric builds independent products that integrate easily with each other, giving a business the opportunity to expand the platform as needed.
“The future is API-driven, the future is cloud, and Fabric was born in a post-cloud and post-API world so we enable [businesses to create a custom experience],” Masud said.
For retailers, the complexity of integrating online sales and in-store sales, managing inventory for both, and growing an omnichannel/multichannel business is too much for traditional e-commerce-in-a-box platforms.
“We have this term we use internally, but if you are a midmarket retailer or brand, Fabric is the last platform you will ever use. If you are in the business of commerce, you shouldn’t have to change platforms,” Masud said.
While the COVID-19 pandemic accelerated digital sales growth, Masud said e-commerce is still in the early innings, and especially for the B2B segment, “there is a long way to go.” According to eMarketer, the global e-commerce market could surpass $5 trillion in 2021, and B2B-specific e-commerce could reach $20.9 trillion by 2027, DHL said.
In July, Fabric announced the closing of a $100 million Series B funding round led by Stripes, with additional participation from B Capital Group, Greycroft and existing investors including Norwest Venture Partners, Redpoint Ventures and Sierra Ventures. That came just months after the firm secured a $43 million Series A funding round led by Norwest Venture Partners with participation from Redpoint Ventures and Sierra Ventures.
Masud said the funding will be used to keep up with the company’s growth, and continue to enhance the company’s products. The CEO, who joined the company in August 2020, said Fabric grew between 5x and 6x from August to December last year, and has seen threefold growth since, amounting to 800% year-to-date growth in 2021.
“We are seeing incredible demand for our product,” Masud said, noting that “most of our sales are inbound.”
The new funding will help build that out. Masud said as Fabric is growing its sales team, it is looking for “solutions architects” rather than traditional sales personnel to fill the roles. More investment in research and development hiring will also take place and Fabric will look for “opportunistic M&A.”
The company includes over 100 years of leadership experience in its executive ranks, including executives with backgrounds at companies like Amazon and eBay, and Masud himself has built over a dozen businesses in his lifetime, he said.
“I’m very proud of where we are as a team. We have been able to build a leadership team that no other commerce platform has today,” Masud said. “You don’t see that talent from other companies [often] and that gives us the scar tissue to build [a competitive and leading product]. We think we have an inherent advantage in the industry.”