#172 – Back to Growth, Not Back to 2020

Q1 2026 E-commerce Review

Jun 14, 2026

Hi 👋- The pandemic pulled e-commerce forward. The last few years gave much of it back. But Q1 suggested the industry may finally be finding its footing again, with stronger demand, sharper costs, and early signs that AI is doing more than decorating earnings calls. As always, thanks for reading.

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Q1 2026 Results – Back to Growth, Not Back to 2020

The last time e-commerce looked this healthy, we were wearing masks, riding Pelotons, and baking sourdough. In the first quarter, demand strengthened and margins expanded. Mentions of consumer jitters and discretionary softness faded, while companies reached back to the Covid era for the right comparisons. Amazon’s unit volume rose 15%1, its fastest pace since the pandemic, while operating margins hit a record2. eBay’s frog-to-prince transformation continued, with GMV accelerating across the board. Shopify GMV growth topped 30% for the fourth consecutive quarter. Etsy returned to positive territory and posted sequential buyer growth for the first time in two years. Wayfair, meanwhile, kept gaining share in a still-difficult home category. The sourdough may be gone, but e-commerce has found its footing again — and this time, it comes with better margins.

Source: Company financial reports. Notes: Amazon doesn’t explicitly break out e-commerce growth in one clear number. However, Amazon online store revenue (first-party e-commerce), third-party seller services (third-party e-commerce growth and changes in seller services penetration and pricing), and paid unit growth give a composite picture of above-market growth.

Macro & Consumer – The Dog That Didn’t Bark

The most notable consumer trend this quarter may have been what companies stopped saying. After two years of earnings scripts filled with references to value-seeking, trade-down behavior, and discretionary softness, the macro caveats became less prominent. The picture was not uniformly sunny, but it was notably less cloudy. North America continued to outperform Europe: eBay called out broad-based strength in the U.S. and a more challenged European market, while Shopify posted its fastest North American growth in more than four years.

If there was a cautionary note, it came from ThredUp, which described a “slightly more discerning consumer” amid elevated gas prices. The pressure showed up early in the second quarter through lower average selling prices and conversion rates. That suggests the strain has not disappeared so much as narrowed, with more price-sensitive shoppers likely still under pressure. But elsewhere, the tone was firmer. Etsy said the consumer environment remained stable, with resilient U.S. buyers across income cohorts. At the other end of the market, Shopify called out strength in high-end retail, while The RealReal saw GMV growth accelerate for the second straight quarter. The consumer was not exactly throwing confetti, but they were still filling carts.

Costs – The Pencil Gets Sharper

Since 2022, e-commerce companies have reset cost structures and reduced headcount. Wayfair is the starkest example, with operating expenses down 40% from peak. Others were less drastic, but the direction of travel was the same. With the largest adjustments now in the rearview mirror, the work has shifted from restructuring to fine-tuning. AI only raises that bar. Across the industry, incremental headcount and resource requests are facing greater scrutiny in a world where every team is expected to explain what AI can do first.

Shopify shows what that can look like. Over the past three years, the company has kept headcount roughly flat while compounding revenue at 27% per year, creating significant operating leverage3. Amazon, meanwhile, continues to squeeze costs from its physical network, with outbound shipping and fulfillment expenses growing more slowly than unit growth. Its continued investment in automation and robotics suggests the cost story is not finished. The important shift is that margin expansion is no longer just a layoff story. It’s becoming a productivity story.

AI – Product Velocity, Not Yet Demand

No earnings call in 2026 would be complete without AI, so here we are. The strategic framing keeps getting bigger. Amazon CEO Andy Jassy called AI a “once-in-a-lifetime opportunity,” and AWS growth accelerated to 28%, its fastest pace in more than four years. Amazon also sees a useful flywheel: as customers increase AI spending, they often need more storage, compute, and data infrastructure as well. In other words, generative AI may not just be a new workload for cloud providers. It may also stimulate demand for the old ones.

For e-commerce companies, however, the clearest returns so far are more prosaic: internal efficiency and product velocity. The early payoff is less about robot shoppers buying socks and more about engineers, product teams, and operations groups moving faster with the same — or fewer — resources. Amazon said five AI-focused developers rebuilt a core operational system in 65 days, after the original took 40 to 50 engineers roughly a year to build. Etsy described AI as a force multiplier, allowing the company to build and iterate on new features in weeks rather than months. Shopify said AI models now write well over 50% of the code deployed internally, allowing developers and product teams to run more experiments in parallel. The engineer’s job, in Shopify’s telling, is shifting from writing every line to exercising judgment over design, architecture, and technical quality.

That speed is starting to show up in the buyer and seller experience. Search, discovery, personalization, and listing creation were the most common areas of investment. The ROI case is still more mosaic than smoking gun. The evidence is encouraging but circumstantial: demand is healthier, margins are expanding, and AI is touching more workflows, but no single use case has clearly changed the trajectory. For now, the story is incremental gains compounding across the operating model.

The caveat is scale. AI traffic is growing quickly from tiny bases. Etsy said traffic from AI agents rose 15x year over year, but still represented less than 1% of total. Wayfair called LLM traffic de minimis. AI is not yet rewriting e-commerce demand, but it is beginning to change how e-commerce companies build, test, and operate.

Supply – The Closet Wars

One sidebar worth watching is the fight for supply, especially in C2C fashion. The RealReal has long argued that demand is not the constraint; getting enough quality supply is. In the first quarter, ThredUp began sounding more similar, while eBay also hinted that supply acquisition is becoming more competitive. Its acquisition of Depop from Etsy makes the point louder. The companies play at very different price points, but the strategic problem is the same: in resale, the best inventory still has to be coaxed out of closets – and more platforms are now knocking.

Q2 2026 – The Cart Keeps Rolling

The momentum is expected to carry into the second quarter, with companies generally guiding to results in the same neighborhood as the first quarter. The broad message was continued follow-through: healthy demand, steady margin discipline, and fewer signs of consumer wobble. Etsy sounded notably more optimistic, saying its outlook had improved since its fourth-quarter report in mid-February and that it expects fundamentals to improve over the course of 2026.

Source: Company financial reports. Note: Q2 2026 growth rates reflect the midpoint of guidance.

E-commerce is not back to the mania of 2020. It is better than that: growing again, operating with more discipline, and finding new ways to do more with less.