E-commerce 2.0
We at a16z could not possibly be more bullish on the prospects for e-commerce, and we believe growth is poised to accelerate. — Part of the reason for this is due to competitive market dynamics. As I've blogged before, e-commerce players have substantial cost advantages over their physical competitors.
Context & Ripple Effects
The 'E-commerce 2.0' label is doing double duty here: Lightspeed Venture Partners ran the same framing back in June 2007, arguing a new generation of online retailers had arrived — and five years on, a16z is reviving the term as a full-throated bull case built on e-commerce players' structural cost advantages over physical competitors.
What makes the post more than a manifesto is its timing and reach: it landed the same day GeekWire reported Andreessen Horowitz's $85M investment in daily-deal site Zulily, which has passed 10M members, and the story traveled across Business Insider, GigaOM, VentureBeat, TechCrunch, Forbes, Fortune and The Next Web. In effect, a16z published its investment thesis alongside the check.
First-order effects
- a16z has committed $85M of firm capital to Zulily, putting its own money behind the cost-advantage thesis it is publishing.
- Zulily exits the round with a top-tier VC endorsement and a public narrative — lower-cost online retail beating physical rivals on economics — it can carry into subsequent fundraising and merchant recruitment.
Second-order effects
- Rival venture firms now face a marked category: with a16z staking a flagship claim at scale, competing consumer investors must either bid against it for commerce deals or articulate why the cost-advantage case does not apply to their portfolios.
- Physical retailers competing in the categories Zulily and similar players target absorb pricing pressure from rivals whose cost base the a16z post argues is structurally lower.
Third-order effects
- If the cost-advantage pattern holds, capital keeps flowing into online-retail platforms as a recurring VC theme rather than a one-off — evidenced by the 'E-commerce 2.0' banner being reused across two fund cycles, 2007 and 2012.
- Retail competition increasingly gets adjudicated on cost structure rather than location or assortment, pushing incumbent physical chains toward their own online buildouts or acquisitions of the startups VCs are funding.
The trend: Venture capital cyclically re-brands e-commerce's structural cost advantage as a new investing era — '2.0' in 2007, again in 2012 — with each wave anchored by a marquee firm writing large checks into commerce startups.