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E-commerce is still really hard — even after Jet and Dollar Shave Club fetched $4 billion

Sorry!

Image of Dollar Shave Club's CEO, Michael Dubin, from a promotional video next to a sign that says "our blades are f**king great" Dollar Shave Club

Up until a month ago, e-commerce startups were on the outs with many investors. The conventional wisdom in venture capital was that the risk-to-reward potential of companies in the category was typically not worth it, in part thanks to Amazon’s growing dominance.

But a funny thing happened on the way to group-think-land: Two gargantuan acquisitions shook the entire industry from the ground up.

Unilever bought Dollar Shave Club for $1 billion. Then, less than three weeks later, Walmart said it planned to purchase Jet, a startup whose shopping site was barely a year old, for a cool $3.3 billion.

Just like that, e-commerce was back!

Some positive ripple effects will certainly spread through the startup commerce industry as a result. Those deals served as a “wake-up call” to traditional retailers and packaged goods incumbents that they may have to make acquisitions or risk being disrupted by digital-native retail startups, said Kirsten Green, a venture capitalist whose firm was the only one to back both companies.

The acquisitions will also likely give executive teams at traditional retailers and consumer packaged goods companies (e.g. Unilever and Procter & Gamble) more support from their boards of directors when looking to make a big deal.

“You’re no longer going to be out on an island doing a deal of great importance,” said Greg Bettinelli, an investor with Upfront Ventures who specializes in e-commerce startups. “People on these boards will look back to what Unilever and Walmart did and say, ‘It’s not just Facebook and Salesforce making these kinds of deals anymore.’”

At the same time, the risk amid the industry jubilation is that shaky e-commerce startups might be lulled into thinking a savior awaits in the form of a struggling brick-and-mortar retailer looking for a digital jolt. Fair-weather investors are also already storming back into the space, asking for meetings with entrepreneurs whose pitches they once dismissed, according to several founders.

The problem with this type of reaction should seem obvious, but I’ll spell it out anyway.

Building an e-commerce startup hasn’t gotten any easier in the last month. It’s hard. Like really, really hard.

These startups still often require a lot of capital because they deal in physical goods, which they have to pay to produce, store and ship. Compare that with companies like Uber or Facebook, whose main product is a piece of software that gets used over and over again.

Digital has made advertising e-commerce products and sites easy, but the internet is saturated with ads and most don't have the benefit of physical stores to help build awareness.

Many also face the constant risk that Amazon can stomp them out on any given day.

“I fear [the two acquisitions] will attract more investors, but for the wrong reasons that will not adequately evaluate the investment opportunity,” said Mike Jones, a Dollar Shave Club board member whose startup incubator, Science, put the first investment dollars into the startup.

That is to say, it seems more likely these two deals will turn out to be exceptions rather than the rule. In the wake of the Dollar Shave Club sale, Jones published a blog post that alluded to the reasons why a startup like Dollar Shave Club became a big business while more than 12 other direct-to-consumer commerce startups at Science didn’t.

Among the reasons were high profit margins from the beginning, great repeat purchase behavior and the focus to “Nail one scalable marketing platform” — the Dollar Shave Club launch video, for example, has been viewed 23 million times — before moving to others.

Dollar Shave Club and Jet had another thing in common that makes them, and their acquisitions, unique: super-talented founders on whom the acquiring company is making huge bets.

Jet CEO Marc Lore will run Walmart.com in addition to Jet when the deal closes, and report to Walmart CEO Doug McMillon, who is locking him in for an unusual five years.

And Dollar Shave Club CEO Michael Dubin — “the type of magical marketer you only meet every decade or two,” according to an investor, Aileen Lee — is getting the space to operate his company as an independent entity inside of Unilever.

It’s not crazy to think the momentum from these two deals will lead to some other big digital commerce acquisitions over the next year. I’d actually expect that.

But the $4 billion spent on these two companies doesn’t change the fact that e-commerce is still damn hard. And that you still shouldn’t bet on a desperate brick-and-mortar savior swooping in to save your startup’s day.

This article originally appeared on Recode.net.

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