Squarespace stock:SQSP

— In the e-commerce world, there’s Amazon, and then there’s everyone else. But companies like Squarespace are giving retailers a fighting chance.

On Apr. 16, Squarespace announced its plans to go public — via direct listing (i.e. same method Coinbase used to go public).

Not all e-commerce sites are built the same

Founded in 2003, Squarespace provides DIY tools to build, host and customize websites. Squarespace was one of the many e-commerce companies that benefited from a surge in online spending during COVID — US e-commerce penetration hit 21.3% in 2020, jumping from 15.8% in 2019.

At a first glance, Squarespace’s business looks healthy — fast growth with profitability (something very few competitors have):

• Fast-growth: $621m in 2020 sales — up 28% from 2019
• Profitable: $30.6m in 2020 net income — down from $58.2m in 2019

To compete, differentiate yourself…

When it comes to e-commerce, two names dominate the space:

• Amazon (AMZN
  ) — the marketplace that sells nearly everything, controlled 38.3% of the US e-commerce market in 2020
• Shopify (SHOP
  ) — which has become a top choice for e-commerce retailers to set up and run their website, saw its sales surge 86% in 2020.

Instead of fighting head-on with the e-commerce giants, Squarespace could be turning its focus towards restaurants. In March, Squarespace spent $400m to acquire Tock, a restaurant reservation and services site.

According to data from enlyft, Squarespace has the highest number of customers in the restaurant sector — an area that’s growing faster than the broader e-commerce market.

For investors… The future of e-commerce and Squarespace stock

Growth in the e-commerce industry is expected to slow to 14.3% in 2021 — nearly half the 27.6% growth rate in 2020. Squarespace and other e-commerce companies have a big question ahead of them: Can e-commerce sustain its growth post-COVID?

• Failure to sustain growth expectations beyond COVID could negatively impact their stocks.
• While the listing date isn’t known yet, Squarespace’s strong numbers make it an interesting add to your watchlist.

What to watch for: Shopify and Amazon’s first-quarter earnings report on April 28 and April 30 could give a better idea of the future of e-commerce post-COVID.

Dive Deeper: Shopify has big plans to take on Amazon and its stock could just be getting started