Welcome to the E-Commerce Winter

Every tech downturn has a locus of weakness—the companies that fall first and spread the carnage. But few in Silicon Valley thought retail and payments companies would be among the biggest victims.

The implosion in public tech-driven retail and payments companies has been breathtaking—with investors losing tens of billions of dollars. Amazon shares have tumbled more than 40% from pandemic-era heights. Companies that help process online transactions took an even bigger hit. PayPal has plummeted 77% from its 2021 highs, and Shopify, which sells software to help small businesses sell online but makes most of its revenue from processing their payments, is down 82% from a November peak.

Startups that rushed to grab a toehold in the ecosystem of how people shop and pay online are now staring down the prospects of down rounds—or worse. The carnage includes Stripe-backed online-checkout startup Fast, whose April collapse came weeks before the broader startup bloodletting kicked into high gear. On the retail side, Amazon rollups—debt-fueled startups that snatched up third-party Amazon brands to build a new breed of online super seller—are reeling.

“You hear about the winter in cryptoland—what we’re going through now is an e-commerce winter,” said Russell Dieringer, founder of e-commerce research firm Stratably. “Clearly consumers have returned to stores more and faster than what the e-commerce industry planned or hoped for throughout the pandemic.

“That goes for even the smartest companies in the world, including Amazon and Shopify. We’re in the midst of a readjustment.”