Lydia Jett - Investing in Ecommerce

Key Takeaways

1. Tailwinds As Providing Protection for Businesses: Lydia is heavy on investing in tech-tailwinds for secular growth. Shift to Ecomm as a tailwind (largely played out but varies).
2. E-commerce Penetration Varies by Geography:
1. Different Penetration Rates: Current e-commerce penetration rates are not uniform. Advanced economies like the U.S. and China have considerably higher online shopping rates than emerging markets such as India, Indonesia, or Russia.
2. Underlying Assumptions Can Be Misleading: Initially, Lydia believed that successful e-commerce models from the U.S. or China could be directly replicated in countries like India, Korea, or Indonesia. She soon recognized each country has distinct characteristics affecting e-commerce growth. E.g. while the U.S. has vast geographic expanses affecting access to goods, Korea is under-retailed. Lydia bullish about growth in emerging markets.
3. Importance of Speed as Value in E-commerce: Regions like India and Indonesia are highly value-driven, seeking cost-effective options. Korea's Coupang, with its fully integrated supply chain, exemplifies this principle, offering faster services than competitors.
4. Potential of Video-Based Commerce: Lydia believes video-based content can significantly enhance customer engagement and e-commerce conversion rates. Platforms like TikTok have demonstrated the popularity of video content, and there's potential for this trend to reshape the U.S. e-commerce landscape.
5. Importance of Vertical Integration in E-commerce: Increased delivery density and innovative packaging solutions, provided there is rigorous focus and significant capital investment. Coupang invested $3 billion and emphasized efficiency before scaling, allowing them to enhance packaging density and rethink the entire delivery process.
6. Margins over Pure Growth: Transitioning the focus from just revenue growth to achieving healthy margins. Prove margins on a small scale (e.g., specific geographies or customers) and ensure that the core business model is economically viable. Need more operational discipline, much more healthier balance required.
1. Core unit economics mousetrap broken, biz needs to economically viable, otherwise it’s a perma-cash incinerator. Lot’s of these mistakes were made.
7. Lessons Learned / Softbank: The Vision Fund 1 backed over 80 companies with an average check size of $600 million. This massive capital injection into the tech sector led to a surge of players from public market investors to individual syndicates.
1. Yet, a vital lesson was that too much capital can lead to a lack of discipline and focus, causing bloat and fragile businesses.’
8. Focus on Core Unit Economics: Growth equity investors understanding the core economics of a business - analyze unit economics, cohort retention, and engagement changes over time (every GE fund does this). Businesses should ensure they collate and parse relevant data, preparing for these types of conversations. Lydia emphasizes the need for a strategic finance person to help organizations navigate these crucial KPIs.

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