Hi Shopifreaks!
Two things before we get started today:
1) Did you know that I run a digital marketing and development agency called Ideas Focused?
I don't talk about it too much in this newsletter (other than including my agency in the sponsors list), as to not turn this publication into a self-serving advertising channel for myself. However the flip side of the coin is that many readers aren't aware of my background.
I was corresponding with a reader a few days ago who was asking my advice about growing their e-commerce business and seeking referrals of who to work with, unaware that I offered the services they were looking for in-house. Having read my newsletter for a while now, they said that they “are confident I know what I'm doing” in this space and want to begin working together.
So, if you were also unaware — I offer strategy, development, and marketing services for growing e-commerce brands and SaaS companies. My areas of expertise include content marketing, SEO, Google search marketing, and affiliate program development.
Earlier today I shared a case study on my LinkedIn, showcasing the results of working with a client for the past four years. You can also read testimonials on my website: www.ideasfocused.com.
If I can ever be of assistance to you or your company, don't hesitate to request a consult on my website.
2) Thanks for your positive feedback about my What's Next series on LinkedIn.
Here are my most recent interviews:
- Michael Dong, CEO of 1send – a way for brands to engage with their audiences on Facebook Messenger with message broadcasts, not chat bots!
- Yash Chavan, co-founder of SARAL – a platform that streamlines influencer marketing by automating tasks like finding influencers, outreach, and managing relationships.
- Mark Dodgson, CXO of Relevant Bits – launching their new product Context which helps merchants create personalized shopping experiences on Shopify stores.
Thank you to everyone who has participated in my interview series. If your e-commerce tech startup would like to be featured, fill out this short interest form and I'll be in touch.
And now, onto your regularly scheduled content…
In this week's edition I cover:
- TikTok has half a million US merchants?
- Amazon hears your concerns about its low inventory fee
- Shein wants to be America's next everything store
- Kohl's is re-launching same-day delivery
- Nordstrom launched a different kind of marketplace
- Roblox now sells real items in its virtual worlds
- Amazon tripled its profits last quarter (but still needs your low inventory fee)
- Walmart is closing its health services — but not its pharmacies
- Amazon, Starbucks, & McDonald's executives don't realize it's them, not you
- BigCommerce hired a new President
All this and more in this week's 172nd Edition of Shopifreaks. Thanks for subscribing and sharing!
Stat of the Week
TikTok reported that more than 500,000 merchants were selling to US users on its app at the end of 2023, more than double the number from three months earlier. Worldwide, TikTok’s e-commerce platform had more than 15M sellers in December, adding more than 6M in the second half of the year.
1. Amazon delays its new low inventory fee (again)
Amazon is delaying its controversial new low inventory fee for the second time as it looks to satiate the hundreds of thousands of sellers it outraged with the original announcement. Here's a quick backstory:
December 2023 – Amazon announced a low inventory fee that requires sellers to maintain a certain level of inventory based on historic sales or get charged, as well as an inbound placement fee that is charged to sellers if they don't distribute their inventory to at least 4 different Amazon warehouses. The fee announcements, especially the low inventory fee, caused a ton of backlash from third party sellers and caught the attention of the FTC last month who began examining them.
April 2024 – Amazon decided to delay its new controversial low-inventory fee that was to take effect on April 1st. Technically the company said it would still charge affected sellers as planned, but will credit them back at the end of the month, referring to this grace period as a “transition period” that will show sellers how they would be affected by the new low-inventory fee without yet having to pay for it.
Read Shopifreaks Edition 168 (story #1) for a detailed recap of these new fees and the controversy they evoked.
May 2024 (Present Day) – Amazon once again delayed the new low inventory fee, announcing via its seller forum that the company would be extending the grace period through May 14th. In addition to the delay, the company also made some general changes to the upcoming fee structure:
- The low-inventory fee will not apply to products that have sold fewer than 20 units in the last week.
- Any fees incurred due to excessive inbounding and processing times caused by Amazon will be credited back to sellers by the 15th of the subsequent month.
- Amazon will provide an exception on low-inventory fees for products that are part of Prime-exclusive sales for the four weeks following Prime Day.
It's great that Amazon has made those concessions above, but the added stipulations don't help at all with creating transparency around seller fees or with enabling sellers to forecast the costs they'll incur selling on Amazon.
Sellers want a simple fee structure, and Amazon has become the opposite of that. Some experts allege that the confusing and costly fee structure is designed to push out small sellers.
Jon Elder, CEO and founder at Black Label Advisor, said, “Amazon needs to cut the fat. Amazon is not going to say this out loud, but they want the most successful sellers to stay, sellers who are already doing millions a year, who are extremely optimized. Space can’t be taken up by stale inventory.”
Amazon justifies the new fees as being part of its commitment to its customers. The company wrote, “Having sufficient inventory that is spread across our fulfillment network ensures that we have enough product close to customers so we can deliver it faster. We’ve seen that when products have sufficient inventory levels they will, on average, generate measurably more sales.”
2. Shein is aiming to become America's newest everything store
Shein has been courting brands like Colgate-Palmolive, Hasbro, Suntory Beverage & Food, and Bella Aurora in an attempt to sell more household names on its platform.
The company, which is known for selling its own cheap clothing and accessories, is moving into other categories like beauty and household items to better compete with Amazon on its turf. So far Shein has given brands and retailers access to its platform in nine European countries, United States, Brazil and Mexico.
Shein says that the inspiration for adding new categories is that customers were already searching for those types of products and brands across its platform.
Christina Fontana, senior director of brand operations, said, “Everybody associates Shein with fashion, but we are doing all verticals. Our consumers want brands, [so] if that's what they're looking for, that's what we're going to give them.”
Shein has the largest fast-fashion market share in the US. Its annual profit doubled to $2B in 2023 from the year before, and the company is currently eyeing an IPO at a $90B valuation. A crucial element to its success is that Shein is in control of its entire supply chain.
Is it wise for Shein to enter into “everything store” territory and put its reputation at the mercy of other manufacturers? Does Shein's clothing lose a bit of its cool factor being sold next to Colgate Optic White toothpaste?
Harvard Business School professor John Deighteon told Fortune that Shein's strategy of incorporating more brand names into its platform will help the company dodge increased attention over allegations of copyright infringement and the proliferation of counterfeit product listings. If the site is flooded with thousands of listings from familiar and trusted brands, he feels that Shein would essentially be telling regulatory bodies that there's nothing to see here.
Other experts feel that given Shein's massive logistics network, it's a natural progression to enter into new verticals. Berkeley professor Steve Tadelis said, “I really think this is a smart business decision of saying, ‘We have an amazing logistics network, let's start expanding it into other areas where we could procure cheap products.'”
In other Shein news…. Customers can now return Shein purchases at Forever 21's more than 300 US stores. The company is executing the returns program using the buy-online-return-in-store solution from Happy Returns, which was acquired by UPS at the end of last year. In August 2023, Shein acquired a one-third interest in SPARC Group, which operates Forever 21, so it was expected that we'd begin to see a deeper relationship between the two companies begin to form this year.
3. Kohl's is launching same day delivery with Instacart
Kohl's is re-entering the same-day delivery business — this time leveraging the Instacart app and its network of drivers. The company says that Instacart enables 109M US households to obtain delivery in as fast as an hour from 1,172 Kohl's stores across the U.S.
Customers ordering Kohl's deliveries on Instacart can still earn their Kohl's Rewards loyalty points, as well as place orders for either same-day or scheduled delivery, with the same prices as in-store. Product categories eligible for same-day delivery include accessories, home goods, beauty & skincare items, and pet supplies.
Kohl's was actually an early pioneer in same-day delivery, initially partnering with the now-defunct platform Deliv in 2015, but the company hasn't offered the service again since Deliv was acquired by Target in 2020 and subsequently ceased operations.
This partnership with Kohl's is part of Instacart's push to expand the range of retailers it partners with beyond grocery. It currently also delivers for Best Buy, Big Lots, and Staples, among others.
I'll be the one to ask the question we're all wondering right now — is same day delivery really necessary?
I don't remember the last time I ever desperately needed a product from Kohl's in less than an hour. However I guess that's the benefit of partnering with Instacart for the deliveries instead of building out your own network of drivers. If a customer really needs a product from Kohl's quickly, the option is now available. As for the rest of us, we'll go back to remembering that Kohl's exists when we drive into a Walmart plaza and see it in the neighboring strip mall.
4. Nordstrom launches an online marketplace
Just what online sellers needed — another marketplace! But wait, this one's different…
As part of its mission to enhance its e-commerce business, Nordstrom introduced a new digital marketplace on its website, initially showcasing a selection of products from Mulberry, Adore Me, Cynthia Rowley, and DXL.
This move catches Nordstrom up to retailers like Macy's, Walmart, and Michaels, which have all created third-party marketplaces in recent years.
As opposed to casting a wide net, Nordstrom is being very particular about which sellers to allow on its marketplace, carefully selecting brand partners “to ensure that our marketplace experience drives the relevance and inspiration that Nordstrom customers expect from us.”
Definitely a smart move by Nordstrom to build a curated marketplace, as opposed to following in the footsteps of competitors who have taken heat for allowing their marketplaces to be flooded by unscrupulous sellers and cheap products.
Miguel Almeida, Nordstrom’s president of digital and customer experience, said, “Our goal isn’t to be the everything store, but to offer customers more breadth, depth and newness in the categories that they come to us for, from some of the most coveted brands in the market.”
Customers who shop on Nordstrom's new marketplace will have the same access to loyalty benefits, customer care support, styling and alterations, and easy returns, just like they do when shopping directly with the retailer.
5. Walmart and Roblox team up for e-commerce
Walmart is now able to sell physical goods directly to users inside Roblox for the first time. The introduction of real-life e-commerce of tangible items is a milestone for Roblox, which aims to become an all-encompassing destination for virtual life.
Here's how it works:
- Virtual users are greeted with a new storefront that showcases virtual copies of physical items sold at real-life Walmart stores.
- The customer can try out the virtual item on their avatar.
- Customers can then load a virtual browser window inside Roblox that imitates the experience of shopping on Walmart's website.
- From there they follow the traditional form of entering their payment and shipping details within the virtual checkout. (Missed opportunity! They should have had the virtual avatar fumble with a self-checkout kiosk while an angry Walmart employee avatar stares them down. LOL)
- After purchasing, the customer receives an order confirmation e-mail from Walmart, which takes over the sale.
- The customer receives the virtual version of the item immediately, and the real one is sent in the mail.
Roblox VP of Economy Enrico D’Angelo said, “We are excited to start testing real-world commerce as a key step towards enabling it in the future for our community of creators and brand. Shopping for virtual items is already an important element of how people engage and express themselves on Roblox daily, so our goal is to gather feedback, test the technology, and learn what resonates with Gen Z customers the most when it comes to shopping for physical items.”
Roblox also expanded access to its video ad inventory to all advertisers last week, following a six-month beta test. Advertisers can now purchase video ads through Roblox's self-serve tool, with plans to allow advertisers to purchase ads through PubMatic in the near future.
Video ads in Roblox take the form of screens and billboards embedded within Roblox’s virtual worlds. The launch of video ads is part of Roblox’s aim to get brands to view it as a full advertising platform rather than a testing ground for their innovation budgets.
6. Amazon is apparently doing really well after all those layoffs
Amazon reported its first-quarter earnings last week and it turns out the company is doing really well. CEO Andy Jassy and CFO Brian Olsavsky informed investors of several company milestones on its recent earnings call:
- Amazon exceeded estimates for net sales and earnings per share, and tripled its profits in the previous quarter.
- The company reported $10.4B in profit on revenue of $143.3B, compared with a profit of $3.2B on $127.4B in sales in the same period a year earlier.
- Net sales at its online store rose 7% to $54.7B and at physical stores rose 6.3% to $5.2B.
- Third-party seller services rose 16% to $34.6B and subscriptions rose 11% to $10.7B.
- Its Amazon Web Services division saw net revenue of $25B.
- Amazon's introduction of ads to its streaming service is resonating with advertisers.
- Ad sales overall rose 24% to $11.8B.
- AWS is seeing strong customer demand for generative AI and non-generative AI workloads. The company expects that demand for these services will increase, but warns that spending on infrastructure will grow along with it.
- Amazon's AI-powered assistant, Q, is now widely available. The company calls Q its “most capable” generative AI tool for “accelerating software development” and “leveraging companies' internal data.”
Amazon also boasted about its delivery speeds on the earnings call — claiming that it delivered to Prime members at its fastest speeds ever, with nearly 60% of Prime orders delivered the same or next day in the 60 largest US metro areas.
Meanwhile, Amazon sellers are hearing those numbers and looking at that new low inventory fee like — umm, excuse me?
The question of whether Chinese marketplaces like Temu and Shein are giving Amazon a run for its money is still on investors' minds, but it wasn't addressed during the call.
GlobalData Managing Director Neil Saunders said, “The question of whether Amazon is losing customers to marketplaces offering even lower prices, such as Shein and Temu, is worth asking. And from our data, we believe this is happening at the margins. However, the propositions are still sufficiently different to allow Amazon a defensive position. This may, however, change over time as other marketplaces start to broaden out their offer.”
7. Walmart is closing its health centers
Walmart is planning to close all 51 of its health centers across five states, changing course from its originally stated plan of expanding to 75 locations this year. The company also plans to end its telehealth services, citing operational costs and reimbursement complexities that made its healthcare business unsustainable.
All centers stopped accepting new patients last week, however, Walmart said it would continue to care for existing patients during the transition, as well as help its healthcare associates transition to other roles as it winds down the business.
First launched in 2019, Walmart's health centers offered medical, dental, and behavioral healthcare services like annual checkups, sports physicals, X-rays, chronic condition management, and treatment for minor illnesses or injuries, but apparently its model wasn't financially sustainable.
Walmart did not share specific closing dates for each center, but said it would share that information once decisions are made.
Walmart is not leaving the healthcare business altogether — just shuttering its medical services.
The company plans on keeping open its 3,000 vision centers and 4,600 pharmacies, which will continue to offer health screenings and testing.
With Walmart retreating from healthcare services, will Amazon continue to forge ahead? Amazon recently expanded its telehealth service nationwide after acquiring the primary care provider One Medical last year for $3.9B.
8. Amazon, Starbucks, and McDonald's executives are out of touch
Amazon, Starbucks, and McDonald's executives say US consumers are becoming more prudent with their spending — now looking for deals, seeking lower priced items, and being more particular about where they spend their money.
Amazon CFO Brian Olsavsky said, “Customers in the US are being very thoughtful about their spend. They look for deals, they trade down and look for lower ASP products.” He added that customers were buying “a lot more consumables and everyday essentials,” which tend to be cheaper.
Starbucks CEO Laxman Narasimhan said, “We continue to feel the impact of a more cautious consumer, particularly with our more occasional customer,” noting that it had affected traffic and sales across the industry. “Many customers are being more exacting about where and how they choose to spend their money, particularly with stimulus savings mostly spent.” (Mostly spent? LOL. How long does he think that $1200 lasted?)
McDonald's CFO Ian Borden said, “The consumer is price weary. Everybody is fighting for fewer consumers or consumers that are certainly visiting less frequently.”
RBI CEO Joshua Kobza (RBI owns Burger King and Popeyes) said, “We've seen consumers become a bit more sensitive to price, resulting in moderating check growth.”
Or maybe the true story is that consumers have ALWAYS been prudent with their spending, and these corporations simply took their price increases too far so people went elsewhere? Maybe the country is NOT headed into a recession and we're all just sick of your price gouging?
9. Other e-commerce news of interest
Travis Hess is joining BigCommerce as the company's new president, charged with leading its global strategic and operational expansion. Hess has spent more than 15 years in senior leadership positions at e-commerce companies, most recently as managing director of Accenture, and he's also served on partner advisory boards for Shopify, Klaviyo, SAP/Hybrid, and Rackspace.
Social media overtook paid search as the world's largest advertising channel, with Western platforms growing the fastest driven by Chinese brands targeting US and European audiences. Social media ads are forecasted to reach $247.3B this year, up 14.3% from a year ago, with TikTok estimated to earn $23.1B of that.
16% of U.S. parents surveyed said their Gen Alpha children have an online-shopping addiction, with 22% saying their kids prefer online shopping to other forms of entertainment including watching TV. Almost half said their kids buy themselves clothes online, and 32% said their kids are interested in beauty products. Sounds to me like 16% of U.S. parents could use a lesson on parenting.
TikTok said in its latest safety report that it blocked 37M attempted product listings and 2M seller registrations from July to December 2023. The company said it also remove 133k individual products after they were listed on the site and deactivated the accounts of more than one million sellers because of policy violations.
Wix launched a new feature called Wix Proposals that helps users create attractive proposals to convert leads into new clients, collect digital signatures, and manage setting up payments. The feature is powered by the Prospero business proposal platform, which is now integrated directly with Wix’s business management tools.
The Canada Revenue Agency wants to obtain large troves of Shopify merchant information including bank account info, total transaction value, birth dates, and social insurance numbers in order to check if they've paid all their taxes. Shopify has been fighting the “outrageous” request for over a year now, also arguing that it doesn't keep much of the requested information on hand, which the CRA doesn't believe.
Sam's Club is turning to AI to speed up the process of exiting its stores, allowing customers who pay either at a register or through the Scan & Go mobile app to walk out of the store through large scanners instead of having their purchases double-checked manually by employees. Since unveiling the technology this past January, Sam's Club deployed the scanners at over 120 stores in the US, with plans to expand to all its stores by the end of the year.
Kajabi, the platform for content creators to sell online courses, launched a no-code mobile app offering that lets users host their own customized native app through the App Store and Google Play. The platform previously offered a mobile app for hosting online courses, but this new product allows creators to control the user experience, send push notifications, add custom links to the menus, offer in-app purchases, and more.
Federal prosecutors are investigating the internal practices at Block, with suspicions that its subsidiary Square processed thousands of transactions involving countries subject to economic sanctions as well as multiple crypto transactions for terrorist groups. Most of the transactions discussed with prosecutors were not reported to the government as required, and Block did not correct the company processes when it was alerted to the issues.
Speaking of Block, the company announced its strategy of regularly purchasing Bitcoin for its corporate balance sheet using a dollar cost averaging strategy. The company plans to allocate 10% of its monthly gross profit from Bitcoin products towards investments in the cryptocurrency itself.
The Save Mart Companies which operates Save Mart, Lucky, and FoodMaxx grocery stores, is deploying Instacart Caper Carts, which use computer vision and AI to automatically identify items as they are placed in the cart, at select Save Mart and Lucky stores in the coming months, followed by a broader rollout later this year. The company is also implementing the Instacart FoodStorm order management system, which enables Caper Cart customers to place orders for made-to-order items like fried chicken or custom cakes and pies directly on the cart screen while they shop and receive a notification once it's ready.
ToysRUs.co.uk is seeking a partner for its e-commerce site, which launched in 2022. The company confirmed to suppliers that it is “transitioning to a non-transactional website” as it seeks a new e-commerce partner, but that the website will “continue to promote the Toys R Us brand including our much-loved mascot Geoffrey, while also fully supporting the opening of TOys R Us stores at WHSmith throughout the UK.” Really Toys R Us — an e-commerce partner? Haven't you been down that road before and been majorly burned?
Carvana, the online used car retailer, told investors on an earnings call that it became the most profitable public automotive retailer in the US for the first time after setting new all-time company record this past quarter. The record performance impacted its inventory, with the average time from posting a vehicle on its website to a customer purchasing it decreasing to 13 days in March.
Sam Ash Music, the 100-year-old family operated music instruments retailer, is closing all 42 of its remaining stores nationwide. The company noted on its website that the “unfortunate news also presents a fantastic opportunity for great deals” and marked down all of its products with sale prices that are still higher than what you can buy the same products for on Amazon right now.
Rue21 filed for Chapter 11 bankruptcy for its third time in the past twenty years and began the process of closing all 540 of its stores. The company has assets worth up to $500M and liabilities of almost an equal amount, according to its submitted documents. Sounds like a great acquisition target for Overstock! LOL.
A professor from Columbia University asked US courts to affirm the legality of Unfollow Everything 2.0, a browser extension that makes it easier to stop following friends, groups, and pages on Facebook. The lawsuit seeks a declaration that the browser extension does not violate Meta's TOS, the Computer Fraud and Abuse Act, or California's Computer Data access and Fraud Act, also arguing that through Section 230, US lawmakers sought “to promote the development of filtering tools that enable users to curate their online experiences and avoid content they would rather not see.” The developer of the original Unfollow Everything was banned from Facebook in 2021 and never released version 2.0 because Meta threatened to sue him if he did.
Amazon, Walmart, Target, and Babylist have pulled weighted infant sleepwear like swaddles, blankets, and sleep-sacks from their shelves amid ongoing concerns over the safety of the products and after receiving a letter from the Consumer Product Safety Commission asking major retailers to remove them from stores. Studies haven’t been able to irrefutably demonstrate the risks of weighted infant sleepwear, however, experts are adamant that weighted products are not safe for infants and claim that the proposed benefit does not outweigh the danger — which is pretty much the same argument lawmakers are using to force the sale of TikTok.
Remember that couple from Utah who accidentally shipped their cat to Amazon in a return package? Well, the cat and her family have since been reunited. After she was discovered, an Amazon employee took the cat to a vet where her microchip was scanned. The couple was contacted and promptly flew to California the next day, rented a car, and drove back home with the cat.
10. Seed rounds, IPOs, & acquisitions
Swap, a platform that manages supply chain logistics for DTC retailers including shipping, tracking, package protection, returns, and cross border custom, raised $9M in a Series A round led by QED Investors. The funds will be used to support the launch of Swap Global, which provides delivered duty paid shipping, automated tax remittance, and express customs clearance.
GoodEarth Distribution, a national distributor of industrial and ecommerce packaging and software provider, acquired ReStockIt.com, an online distributor of office, restaurant, cleaning, and industrial supplies, from Acme Paper & Supply Inc for an undisclosed amount. The deal marks the second time that ReStockIt.com has changed ownership.
Chowdeck, a Lagos-based restaurant and grocery delivery platform that offers 30 minute deliveries, raised $2.5M in a round led by Y Combinator. The company will use the funds to improve its operations for a better delivery experience, as well as fuel its growth across Nigeria.
Rally Commerce, a platform that combines headless commerce with a Web3 token approach, raised $6M in a round led by Rainfall Ventures. The company says that its checkout is platform-agnostic, which allows merchants to replace their existing traditional checkouts with Rally's, or build a headless experience, using its software as the checkout and orchestration layer.
Monocle, an AI-powered platform that uses behavior and customer data to provide real-time personalized incentive strategies, raised $7.5M in a round led by F2 Venture Capital. The company plans to use the funds to scale the business by growing its commercial team and further developing its product roadmap.
Renda, a Nigeria-based logistics startup that simplifies order fulfillment and retail distribution for businesses in Africa, raised $1.9M in a pre-seed round led by Ingressive Capital. The company will use the funds to improve its product and expand into more cities in Nigeria and Kenya, the two markets where it's currently present.
Made With Intent, a Manchester-based platform that helps retailers predict and target customer intentions by analyzing over 250 signals from online shoppers and providing real-time predictive intent metrics, raised £1.5M in a round led by Mercuri. The company will use the funds to launch it segmentation platform to make online shopping more personalized and fitting for customers.
Hyde Park Venture Partners, a Chicago-based early-stage irm, raised $98M in new capital commitments for its Fund IV, bringing its total assets under management to $320M. The firm is known for being an early backer of companies like ShipBob, FourKites, G2, LogicGate, and Dentologie.
T-Mobile completed its acquisition of Ka’ena Corporation, the parent company of Mint Mobile and Ultra Mobile. The $1.35B deal was first announced last March, and the FTC finally approved the deal over a year later. Ryan Reynolds will continue to serve as Mint’s ambassador, and the company will continue to offer its $15/month 5GB data plan.
SellerX, a Berlin-based e-commerce aggregator, is acquiring Elevate Brands, a US-based aggregator that's previously raised $250M, for an undisclosed amount. The all-share transaction will include a new investment of €60M in the combined entity from Sofina and other existing investors.
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PAUL
Paul E. Drecksler
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