According to an estimate, the Global retail e-commerce market is going to be $25 trillion this year. To capitalize on this opportunity, many new e-commerce startups are arriving in the market. One of these is Huboo, which raised $1.2 million a month ago. Today, a startup that builds tools to help large companies sell their products to consumers online, has announced a growth round. The name of the startup is Commercetools.
Commercetools is a German startup that gives a set of API that facilitates sales and other functions. The startup just raised $145 million in a new funding round initiated by Insight Partners. This new funding makes the total valuation of the company to $300 million.
This funding has come at a time when the German retail and tourist company, REWE, is spinning out Commercetools. REWE acquired the startup back in 2015. After the acquisition, Commercetools took a path not uncommon for a tech company acquired by a non-tech company. The strategy of the company was to be acquired by REWE and then keep its e-commerce in-house. However, the company has continually worked with outside clients. According to the CEO, Dirk Hoerig, the company is growing by 110% annually.
Some current clients of the company include Bang & Olufsen, Yamaha, Carhartt, and Audi. There are also big giants in retail products and services. Ultimately, Commercetools decided to bring funding from outside and start the business again as an independent startup to increase its growth. The current deal will make REWE an important shareholder. Moreover, Hoerig said that the company raised $30 million from outside sources, even before REWE acquired it.
The e-commerce business has grown with less momentum in the last two years than the previous years. However, it is still expanding at a good rate. In the current growth, the individual retail brands want to connect more directly with their customers. They don’t want any third parties to interfere, like Amazon, which has dominated the online market in the past.
This has given great encouragement to the companies who help non-tech companies to expand their business, by providing them tools to build e-commerce activities. They provide these companies with “headless” tools.
Shopify is a popular company backed by Insight Partners. It provides e-commerce tools to small and medium businesses. That is why it has 800,000 customers today. However, Hoerig said that Commercetools provides its services to bigger companies that have revenue over $100 million. Moreover, the company doesn’t plan to expand to smaller businesses anytime soon. Hoerig said in a statement, “We don’t want to compete with Shopify.” The company isn’t also planning to expand itself into logistics.
Still, Commercetools has many competitors in the market. Hoerig said that their main competitors are Oracle, IBM, and SAP. These companies already provide services to large enterprises. There are also others, like Microsoft, which are expanding their services for different enterprises. Hoerig states that big enterprises choose to side with Commercetools because it provides a more modern approach.
This list clearly shows that the e-commerce market for tools is quite fragmented. “Even SAP has only 2% market share,” said Hoerig.
Today, Commercetools provides many services, like powering chatbots, APIs to power webshops and mobile sites, IoT services, social commerce services like Instagram marketing, augmented reality and the latest architecture for the marketplace. Currently, Commercetools has integrated with Frontastic, Magnolia, Bloomreach, and Adobe.
The company has big plans on how to use the new funding. It will use the funding to expand its business throughout the world, including North America. It will also focus on the B2B offering, meaning that it will continue to build better tools for other businesses. Companies like Alibaba are quite strong in this aspect. The company will also focus on another area, which is providing better online-to-offline technology.
“We have a strong track record of investing in retail software leaders and we are quite excited to invest in Commercetools,” said Richard Wells from Insight Partners. “We also believe that the company has the potential to become a leader in the e-commerce sector.”
