The last few years have seen less investments but larger deal sizes. Why? This is the subject of the latest benchmark from Mattermark and RJMetrics, The Ecommerce Investor Report. In looking at investment data and analysis, as well as data from $14.6B in transactions, the report provides key KPIs and the growth patterns that predict ecommerce success.
(Feel free to skip straight the the report if you’d like.)
To accomplish this, the teams at RJMetrics and Mattermark covered three areas:
- Ecommerce Funding
- Ecommerce Performance Indicators
- Customer Retention Patterns
By taking these into consideration, investors are given the tools to identify potential top performing companies, and the analyses they should explore as part of their due diligence. On the flip side of that, ecommerce companies can use these show VCs these numbers to help land that investment.
1. Ecommerce Funding
Since 2013, deal volume has gone down every year, and 2016 doesn’t look like it will break this trend.
But, while volume is down, the deal size is growing, steadily growing from $3M in 2011 to $9.4M, so far, in 2016.
Danielle Morrill offers an explanation as to why deal size hasn’t waivered, “The implication is that investors, instead of falling prey to fear following the high-profile implosion of former industry-darling Fab and others, are still content to invest large sums into the more mature ecommerce startups still in the market.”
2. Ecommerce Performance Indicators
Throughout the report, we refer to companies in the top quartile (top 25%) as top performers: a group who grows and behaves much differently than the rest. The study highlighted four KPIs and found these data points:
- Revenue: By the end of three years in business, top-quartile companies generate a cumulative revenue that’s 9x higher than their counterparts. (Tweet this!)
- Orders: By the end of year one, top companies have processed nearly 2x the number of orders as their counterparts. (Tweet this!)
- Customers: By the end of year three, top ecommerce companies have a customer base that is 2.5x larger than the next-best group. (Tweet this!)
Additionally, when we looked at new versus repeat customers, we found that after three years of business, top-performing companies generate nearly 60% of their revenue from return customers.
It’s important to keep in mind that along with these stable retention rates, top-performing companies also boast the high acquisition numbers mentioned earlier. This is why their performance is dramatically better than their counterparts.
3. Customer Retention Patterns
Along with the KPI indicators of top-performing companies, the report digs deep into three areas of customer retention: the time to customer loyalty, first purchase size as an early indicator of CLV, and number of loyal customers. Here are some highlights:
- On average, top companies see customers making their second purchase on average twelve days faster than their counterparts.
- In year three of business, top ecommerce companies have 13.4k customers making their 4th (Or higher) purchase, nearly 5k more than the other three quartiles combined.
- Customers that make 4 or more purchases have first order values at least 15% higher than average.
This last point is particularly interesting; it’s data is pulled from this graph:
When you bucket customers by the number of orders they place, then look at how their first order values compare to the average, we see definitively that loyal customers have higher first purchase values. Repeat purchasers spend more on their first purchase than the average, and one-time purchasers are the only group that spends less than the average.
What We Didn’t Include
If you want to dig deeper into this data, you can access the full Ecommerce Investor Report here. It has fifteen interactive charts, and is packed with data-driven guidance for investors. Or, if you’re interested, you can check out our Holiday Customer Benchmark or Ecommerce Buyer Behavior report for more insights like these.