The CQ: The Playbook for B2B E-Commerce
Our new investment in Balance, Eurie talks to Goldman Sachs, and we (finally, arguably) enter a recession.
The CQ is Forerunner’s weekly newsletter covering the most pressing consumer trends and analysis, as well as business-building insights from our investment team. Subscribe now to get the latest edition in your inbox every Saturday.
Portfolio Spotlight: Balance
The New Playbook for B2B E-Commerce; Our Investment in Balance
At Forerunner, we obsess about the purchase journey for the consumer—but sometimes, the consumer isn’t a person. It’s a business. And while B2C e-commerce has meaningfully evolved over the last decade, B2B e-commerce has yet to be modernized to the same degree.
The B2B opportunity is at the largest of scales. The global B2B e-commerce market is estimated to reach $25T by 2028, which would put B2B e-commerce at three times the size of B2C e-commerce with an expectation to grow twice as fast. Today, we are in the earlier innings of B2B e-commerce and we believe the tech stack will evolve and mature over the coming decade to be as robust as the B2C playbook for how to start and grow a business online—think Stripe, Shopify, and Klaviyo. From our early investment in Faire five years ago to more recent investments in Canal, CoProcure, and Buffalo Market, Forerunner has long believed in the potential here. And from partnering with these founders, we identified a critical opportunity that can shape the B2B e-commerce landscape in the years to come.
Enter our latest Series B investment in Balance, an all-in-one B2B payments platform for digital marketplaces, wholesalers, and manufacturers.
This Week’s Top Consumer Insights
As the economy barreled toward recession territory this week, consumers are experiencing both concern and reasons to be hopeful. On one hand, inflation is causing essentials like gas and food to increase in price, prompting consumer confidence to fall for a third straight month. On the flip side, according to the University of Michigan Consumer Sentiment Index, consumers are more optimistic inflation will level off in the next year, especially as the Fed continues to hike interest rates to curb the problem.
While consumer spend is still high overall, it is shifting to different categories as Americans think more critically about their budgets. Consumers still spend the lion’s share of their dollars at Big Box stores, but they are cutting back spend on online marketplaces and home to counter rising gas prices.
With inflation in the backdrop, workers are quitting their jobs to score higher salaries. Though salaries jumped 7.2% YOY for those who remained in their current role in Q2, salaries increased by 9.5% for those who switched jobs. The latter increase was outpacing inflation, which stood at 9.1% in June.
Third-party sellers bolstered Amazon’s revenue in its Q2 earnings report. Revenue from these sellers rose 9% YOY to $27B, which helped offset dismal revenue for Amazon’s own retail operations.
Instagram leader Adam Mosseri said there’s a reason that content from friends is disappearing from the Feed—people simply aren’t posting it. Stories and DMs are where people share photos and videos most frequently, not the Feed.
A lot of people fled to theaters this summer to see Top Gun: Maverick—but overall, amid streaming’s dominance, there are far fewer movies hitting the big screen and very few blockbusters. Three years ago before the pandemic, there were 63 movies released in North America by this point in the year; in 2022, there’s been a 38% dip and only 39 films on the big screen.
Rent prices across the country are up 14% from last year’s levels, but it’s still likely a better route than buying for the majority of consumers. Mortgage rates have increased from 3.22% at the start of the year to 5.51% this past week.
As the fall approaches, the U.S. has locked down 171M doses of Moderna’s new vaccine targeting omicron BA.4 and BA.5 in a $1.74B deal. Currently, BA.5 represents about 82% of new Covid cases.
As air travel heats up this summer, and delays/cancellations become more frequent, should you check a bag? While 92% of lost luggage eventually reaches its owner, 220K bags were still bungled by airlines in April 2022 alone—and 77% of those issues were the direct result of flight delays.
In another bid to keep users hooked, TikTok tests out ‘mini games.’
Weekly Wisdom: Eurie x Goldman Sachs
Eurie sat down with Katie Koch, Chief Investment Officer of Public Equity at Goldman Sachs, to share her path to investing, how Forerunner is advising companies given the current economic situation—and, of course, the evolution of direct-to-consumer. Here’s an excerpt about the DTC category:
“We invested in the DTC theme 10 years ago, because it was the beginning of new distribution channel advantage. But today, when are thinking of new brands coming to life, it’s more, ‘How is this brand representative of an experience?’ It’s not just a product, but a service—an ongoing relationship with customers. When we think about it that way, a DTC brand would be ŌURA. Some would consider it consumer health, but really, it’s a physical product. It’s a biometric tracker, and over time, the company provides you with insights on your daily health, readiness scores, sleep quality, and more. Over time, we think, ‘Can we integrate this product into the medical journey, working with physicians, trainers, and insurance providers?’ Ultimately, that is a DTC brand. ŌURA has a direct relationship with their consumers, and they are focused on providing a service for them. This taps into the emerging consumer preference for experiences and services. The DTC acronym is really about building a relationship and connecting directly with your customers. How can you deliver me more value? Curology is another company in our portfolio that had a really novel and innovative approach in the way they were bringing teledermatology to life. That service was given through digital means, and then the company can customize and personalize acne medication at scale. To us, those are the tenets of a business model with lasting power—and today, we’re thinking about how to reach consumers in other ways. Some consumers want to engage offline, be in stores, look at the physical bottle, and so on. The burden to new brands today is that you need to know where the consumer is. This person is not always online. They are not only on Facebook and Instagram. They are all over platforms, messaging, emails. The burden is high on customers to meet consumers all the places they are.”
Brian was listed among INSIDER’s top creator investors for companies like Metafy, FORA, and dumpling—here’s what he looks for in an empowerment economy investment.
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