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Not a day goes by without announcements for all sorts of funding along the e-commerce spectrum. Demand side, distribution, etc. are all getting funded and personally I find it incredibly exciting. I’m working to distill my thoughts into a richer investment thesis (I’ll post for feedback) but in the meantime I wanted to reflect on the potential for even greater consolidation in the sample/flash sale vertical. 

We’ve already begun to see some of this activity in the past, but with major rounds of funding for One Kings Lane, Gilt, and Beyond the Rack in the past 7 months I only expect to see more as they continue to consolidate their market position and weaker/smaller competitors begin to wilt under the pressure of keeping up with competitors who have greater scale and velocity. I’m a big believer in the utility of very vertically oriented e-commerce (e.g. www.Fab.com) but my gut tells me that at some point (soon) better capitalized competitors will come along and establish a portfolio of flash sale properties in different verticals and start to look a lot like the way HomeAway does in the home rental space. Mind you, I’ve said nothing about either Amazon’s MyHabit or RueLaLa, both of which are big big players in the space with deep pockets. Furthermore, the proliferation of niche sites like StitchFix and TrunkClub are great properties in their own right but might find themselves in an acquisition setting earlier than expected given the environment they’re working within.

As it stands today, vertically differentiated e-commerce sites are still launching and are still finding success. The question to me is when will the bigger players find it more convenient and cheaper to acquire the brand and assets (customer and designer relationships) than to launch their own products. Thus far Gilt has been willing to launch new verticals but I think they’ll find better acquisition targets sooner than later
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