2022 Year in Review

The biggest e-commerce stories of the year.

Inside.com Part of   Network December 29, 2022

Hey Insiders,  2022 was another significant year for e-commerce, and today my colleague Martin and I will be recapping 10 of the biggest stories of the year. Keep an eye out for the 2023 predictions issue coming out on the 30th.  Regards, Jigney

Multiple private and public market e-commerce companies, including Shopify and DoorDash, underwent layoffs in 2022. In July, Shopify reduced its workforce by 20% (1,000 employees), with CEO Tobi Lütke admitting the company overhired and incorrectly predicted that the COVID-19 pandemic would cause e-commerce sales to "permanently leap ahead by five or even 10 years." More: DoorDash CEO Tony Xu provided similar reasoning when he announced the food delivery giant would let go of 1,250 employees in November. Chinese e-commerce giant Alibaba laid off 9,241 employees in Q1 as part of cost-cutting measures. Indonesian super-app, GoTo, reduced its workforce by 12% (1,300 employees) due to uncertain macroeconomic conditions. E-commerce startups Carousell (10% or 110 employees) and Primer (33% or 85 employees) initiated layoffs in December.

Higher interest rates and a decline in tech stocks forced e-commerce and fintech startups to lower their valuations. In July, digital payments giant Stripe lowered its internal valuation by 28% to $74B. In November, Stripe reduced its workforce by 14% (1,120 employees), with CEO Patrick Collison admitting the company overhired. More: In July, buy now pay later firm Klarna raised $800M in a "down round" that saw its valuation decline by 85% to $6.7B. Klarna also underwent multiple rounds of layoffs, which affected 700 employees. Grocery delivery firm Instacart reduced its internal valuation from $39B in March 2021 to $10B in December 2022. The company also let go of an unspecified number of employees as part of cost-cutting measures ahead of a potential IPO.

In November, Amazon began laying off 10,000 employees in corporate and technology roles. The company also imposed a hiring freeze, introduced a voluntary buyout program, and retracted job offers. The moves are part of a cost-cutting review CEO Andy Jassy has initiated. More: Amazon shut down multiple projects, including its Glow kids video-calling device and Scout home delivery robot. Amazon bought healthcare firm One Medical and robot maker iRobot for a combined $5.6B. The company's revenue increased by 7.2% YoY in Q2 to $121.2B (the slowest since 2001) and 15% YoY in Q3 to $127.1B. Amazon raised the annual price of a Prime membership by $20 to $139, and the monthly cost went up by $2 to $14.99, the first hikes since 2018.

While Amazon aggregators raised over $12B last year, total funding fell to just $2B in the first nine months of 2022. The drop in funding was attributed to multiple factors, including rising inflation and interest rates, the Russian invasion of Ukraine, and a decline in tech stocks. More: Firms began to slow their acquisition pace, with Razor Group CTO Shreshtha Chowdhury telling the FT that the German aggregator was buying 1-2 companies a month, down from its all-time high of 12. Many aggregators shifted their focus from buying more brands to increasing the sales of those in their existing portfolios. Multiple aggregators, including Heroes and SellerX, initiated layoffs. In May, Thrasio reduced its workforce by 20%, including the bulk of its acquisitions team.

2022 saw U.S. e-commerce sales continue to increase but well below 2020's accelerated growth rates. U.S. e-commerce sales increased by 10.8% YoY in Q3 to $251.7B. The growth rate was up from 9.4% YoY in Q3 2021 but down from $49.7% YoY in Q3 2020. More: 2020's accelerated growth rates were inevitably going to slow down as vaccination rates increased, COVID-19 restrictions were lifted, and government stimulus ran out. Q3 2022 was the first time since Q2 2021 (15.4%) that U.S. e-commerce sales rose by double-digits. Online sales during Cyber Week (the period between Thanksgiving and Cyber Monday) rose by 4% YoY to $35.3B, according to Adobe Analytics. U.S. e-commerce sales are expected to exceed $1T this year for the first time in history.

NFT sales fell from ~$7B in January to $394M in November as demand for speculative assets fell in 2022 amid a shift in macroeconomic conditions. November's sales volume was the lowest of the year and continued a trend that saw NFT sales continuously decline on an MoM basis, with April being the sole month where they rose. More: The drop in sales was attributed to rising interest rates which has reduced demand for speculative assets. It has also been blamed on consumers having less disposable income due to inflation and concerns about a recession. The drop also correlates to a decline in crypto prices as the global crypto market is worth $831B, down from $3T in November 2021. The fallout from the cryptocurrency exchange FTX's bankruptcy has also weakened demand.

Quick commerce startups were shut down, scaled back expansion, or consolidated as venture investment in the sector declined in 2022. Quick commerce startups raised over $7B last year, but venture funding fell in 2022 as investors became more hesitant to back unprofitable companies. More: At the beginning of the COVID-19 pandemic, demand for quick commerce services was high; however, it began to fall as restrictions were slowly lifted. Multiple new firms, including Jokr and Zapp, entered the market, relying on venture funding to subsidize costs and fuel growth. Multiple startups, including Buyk and Fridge No More, were shut down due to an inability to raise additional funds or find a buyer. Jokr exited the U.S. market to prioritize Latin America in June. Turkish firm Getir bought its German counterpart Gorillas in December in a deal that saw both of their valuations fall.

The Chinese government's "Zero-COVID" policy led to slower revenue growth for e-commerce giants, including Alibaba and JD.com. In November, Alibaba revealed its GMV during its annual Singles Day event was "in line" with 2021's total of $84.5B. This marked the first time Alibaba didn't reveal exact numbers since the event's inception in 2009. More: Alibaba's GMV rose by 8.5% YoY in 2021, the slowest in Singles Day's history. Alibaba's revenue rose by 3% YoY in Q3 to $29B. JD.com's revenue grew by 11.4% YoY in Q3 to $34.2B. Earlier this year, the Chinese government imposed strict lockdowns in major cities such as Beijing and Shanghai to curb the spread of COVID-19. In December, the government began lifting restrictions and ending its "Zero-COVID" policy.

Meta scaled back on its e-commerce ambitions after overestimating the pandemic’s online shopping boom. Instagram, in particular, will scale back its shopping features and focus on advertising. More: Instagram’s Shopping page will disappear and will test a simpler, less personalized version called Tab Lite. Meta CEO Mark Zuckerberg originally wanted to bet on e-commerce to compensate for data lost from Apple’s curb on ad tracking. During the pandemic, Meta’s ad revenue soared as retailers used online channels to attract consumers staying at home, so the company wanted to offer a full-fledged commerce platform. Zuckerberg said Meta will now focus on elevating content from viral creators, bolstering advertising offerings, and building out the metaverse.

Throughout 2022, the Fed increased its benchmark interest rate seven times to reduce inflation. What started as a modest 0.25% increase in March was soon followed by six consecutive increases, leaving the federal funds rate between 4.25% and 4.5%. This included four successive hikes of 0.75%. More: The Federal Reserve wanted to reduce inflation, which hit a 40-year high of 9.1% in June 2022. E-commerce inflation declined by ~2% YoY in November, a sign that the rate hikes were making an impact. The month-to-month decrease of the Adobe Digital Price Index, a measure of online shopping that mirrors the basket of goods of the government's Consumer Price Index, reached 3.2%.

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Jigney Pathak is a Business Researcher at Inside who loves technology, finance & sports. He has a Bachelor of Business Administration with a finance specialization & has previously worked at Salesforce. Martin is a writer focused on tech and social impact. He has a BA in International Relations from El Colegio de Mexico and a MS in Foreign Service, Global Business and Finance from Georgetown University. He has worked at HSBC, the World Bank and for one of the Big 3/MBB consulting firms. He enjoys historical podcasts and learning languages. Editor Aaron Crutchfield is based in the high desert of California. Over the last two decades, he has spent time writing and editing at various local newspapers and defense contractors in California. When he's not working, he can often be found looking at the latest memes with his kids or working on his 1962 and 1972 Fords.

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