April 1st, 2024: UPS announces new initiatives in Analyst Day, Canada Goose announces shakeup, Shein's supply chain as a service initiative a "Pearl Harbor" moment and Commercetools releases an update
Today’s episode of the Watson Weekly podcast is sponsored by Commercetools.
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It’s April 1, 2024 and this is the Watson Weekly - your essential eCommerce Digest!
I’m sad to report that this will be our last show ever!
Whoops just kidding. Can’t stop, won’t stop.
Today on our show:
UPS Announces New Initiatives In Analyst Day
Canada Goose Announces Shakeup
Shein's Supply Chain As a Service Initiative a "Pearl Harbor" Moment for Retailers
Commercetools releases a company update
- and finally, The Investor Minute which contains 5 items this week from the world of venture capital, acquisitions, and IPOs.
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To hear new episodes of the show every Monday morning, subscribe now at rmwcommerce.com/watsonweekly and wherever you get your podcasts.
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BUT FIRST in our shopping cart full of news….
UPS Announces New Initiatives in Analyst Day Presentation
UPS just presented at an investor analyst day and I pulled out a few insights from their presentation.
First, it’s very interesting that the first real slide in the presentation was about the progress on healthcare revenue. Since 2016, the company has gonefrom $5 billion in healthcare revenue to now $10 billion today, with accelerated investment in the last couple of years.
The company claims in the next 3 years it plans to double its healthcare revenue from $10B to $20B.
This would be a significant jump as all of UPS revenue last year was $91billion.
Overall, the new plan is something they call the “1+2” plan from 2024 through 2026.
The company claims that market demand has reset, and UPS is pivoting towards growth.
UPS also says that once the Teamster’s agreement anniversaries, their cost comparisons will start to look a lot better by comparison also.
So what’s the 1 + 2? It’s about Year 1, and then Years 2 and 3, which seems a little confusing.
Year 1: focus is on volume and profit dollar growth.
Year 2 and 3: focus is on volume and profit margin growth.
After a reset in previous years, UPS claims that volume is returning to its core US and International small package markets. In the US small package, UPS is projecting 5.5% growth, while international they are projecting a lower 3.5% growth.
Another point the company made is excess capacity in the system. Before the pandemic, the company was seeing a 6 million average daily parcel volume capacity buffer. During the pandemic, this entirely flipped into a 6 million daily shortfall. Now, we have completely flipped in the other direction to a 12 millon average daily volume surplus. The elephant in the room question is how much of this average daily volume capacity is a hangover from UPS teamsters negotiations.
Finally, on trends. There are two main trends that I thought would be interesting to call out for the audience. One is a pivot from Asia to US supply chains to Asia to Mexico supply chains with distribution into the US from there.
Second is a supply chain diversification trend away from China and into 9 key opportunity countries. The countries on the list look like India, Thailand, Vietnam, Singapore, Malaysia, Taiwan, Japan, Korea and the UAE.
[References:]
Our Second Story
Canada Goose Announces Shakeup
According to RetailDive, there has been a big shakeup at the Canada Goose brand, the high-end coats you see so many places. Here are the facts that I learned:
* Canada Goose is cutting its corporate roles by 17%
* While the company last year promised to double its brick and mortar stores, likely that is being scaled back.
* The company’s COO John Moran is departing.
* Other analysts are also saying that the company’s direct to consumer strategy needs to be re-evaluated.
The good news about Canada Goose is that it does have a good product that people seem to like. The bad news looks more like an execution problem than a marketing problem, and execution is one of the easier elements to fix with the right people in place.
If I’m reading between the lines, consumers are trading down to cheaper brands, the company is left holding a lot of inventory, and got over its skis on the cost structure side. It’s never great when one of your executives has the title “Chief Transformation Officer.” It signals dark clouds ahead.
[References:]
Our Third Story
Shein's Supply Chain As a Service Initiative a "Pearl Harbor" Moment for Retailers
It's time to start paying more attention to the disruption happening in fashion as wrought by Shein. Shein made a surprise announcement recently as told by the WSJ during the week of Shoptalk. Shein looking to pioneer its small-batch manufacturing model to other brands and designers. Here are the details:
* Shein's Executive Director David Tang called it "supply chain as a service".
* The service would be the manufacturing, technology, and data infrastructure, allowing you to test consumer response to new lines.
If you didn't know, Shein's infrastructure includes access to thousands of Chinese factories that churn out tens of thousands of items daily in small batches.
All of retail is moving to "Netflixization" and this small-batch model. The reason this model is so disruptive is because it creates a structural competitive advantage in how much inventory you hold.
In retail, but especially fashion, inventory is everything -- especially for seasonal or trending items. And if fashion can do it, you know that a wave of startups and VC investment will smell enough blood in the water to move it to other categories, too. Even if it seems more difficult outside fashion, the disruption prize is too great to ignore.
As the largest brand licensing and operators in the world, ABG and SPARC Group are important -- and it pays to take notice when they talk.
Jamie Salter, whose SPARC group recently took one-third investment from Shein, said the following about Shein recently:
* "Shein makes a lot more than $30B..." (which would put it larger than Zara's Inditex)
* "I didn't see Shein and I didn't see Temu... I can't beat them. Their supply chain is too good."
* "Forever 21" is the biggest mistake I made..."
To me, these quotes are important context to Shein's supply chain announcement and not unrelated.
Amazon's supply chain innovation was on the distribution side. Getting inventory close to consumers and reliably getting it there. Shein's supply chain innovation is on the manufacturing side.
In terms of disruptive capability to retail, Shein's innovation is much more disruptive and will force all other big players to develop a similar model or die - Amazon, Walmart, Target, everyone. Even if these players would never adopt Shein's infrastructure, a response is still needed.
Perhaps some kind of investment model in India or other countries might produce a competitor to the approach. It's hard to imagine another country outside of India replicating this.
Time to sound the alarm, and not just for the fashion industry.
[References:]
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And Our Last Story
Commercetools releases a company update
When a private company releases public numbers, we must dig in. And there must be comparisons. CT released a few new interesting numbers, which lets us to compare them to Shopify, even if they are aimed at very different targets.
Why this matters is commercetools - based on public press reports - seems likely IPO sometime in the next 6 - 24 months, depending on market conditions. Hiring new big executives (especially CFO) on its own is enough confirmation, but releasing yearly financial updates seals the deal.
You might say that the MACH Alliance, which commeretools pioneered, is pretty much the only other industry narrative that has firmly taken hold in Europe and North America outside of Shopify's momentum - which has captured all oxygen.
What new information did we learn from CT?
* 2023 they achieved 65% growth in ARR.
* 45% y/y growth in GMV - now over $30B (including 45% B2B)
* 200 releases + new integrations (meant to counter a Shopify Editions narrative)
* Release and growth of Connect (meant to counter a Shopify App Store narrative)
* Served 500M users in 2023
* Processed 10 million orders in BFCM period.
Last year, the company reported:
* Reaching $100M in ARR. (Let's assume by now they have almost made it to $150M ARR)
In short, the signals are here to compare to Shopify from CT itself. So let's do it.
* How many customers?
I have seen Shopify estimates as high as 5 million stores.
CT we have to guess, but let's assume around 500 customers total with 1000 total stores, it seems like a good round number.
* Shopify ('23) $235B GMV, growing 23%, which would put Shopify 8X CT $30B GMV, with CT GMV growing about twice as fast.
* Shopify BFCM $9.8 billion at est $100 AOV = 98M orders, about 10x CT BFCM 10M orders - not surprising due to Shopify consumer focus.
* Shopify $1.8B ARR ($150M ARR Dec '23) is 13X CT ARR
First drop: CT average store GMV is 638x Shopify.
* Shopify average GMV per store = $47k/year.
* CT average GMV per store = $30M/year (higher if there are fewer stores, lower if there are less)
Quite a different market focus.
Second drop: CT average ARR per store is 83X Shopify.
* Shopify average ARR per store is $360/store.
* CT average ARR per store is $30k/store.
This means Shopify must work much harder to raise ARR - which is not to say revenue per store - since that is much larger due to not considered merchant services revenue. All investors, including Shopify management, recognizes the importance of ARR/MRR in SaaS, so it's an important metric. Combined with Net Revenue Retention you might say these two metrics are the most important SaaS metrics, period.
Also this says nothing about whether Shopify CAN manage big stores, but if you look at the company averages, it tells you so much about dedicated focus of a company on one mission, versus the Shopify approach of "win everywhere."
It really is a tale of two very different companies.
[References:]
https://www.linkedin.com/feed/update/urn:li:activity:7178712674841559041/
Now a word from our sponsor Commercetools:
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It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
Logistics player Iron Sheepdog Raises $10M in Series B Funding
Iron Sheepdog, a short-haul logistics platform, has secured $10M in Series B funding to invest in technology and expand into new markets. Nomination for the best name for a logistics startup? Victory hands down here.
Second
Digital Promotion Platform Ibotta Files for IPO
Ibotta, a digital promotion and performance marketing platform for consumer packaged goods (CPG), has filed for an IPO and plans to list on the New York Stock Exchange under IBTA. How much capital will it raise, and what will the first-day stock price be?
Link: https://www.pymnts.com/news/ipo/2024/ibotta-files-for-ipo-plans-to-list-on-nyse/
Third
Marco Secures $12M in Series A Funding
Marco, a Latin American trade finance platform for SME exporters, has secured $12M in Series A funding. The new funding will enhance Latin America's environmental, social, and governance (ESG).
Fourth
FabFitFun acquires PupBox from Petco
FabFitFun has acquired PupBox, a pet subscription box from Petco, allowing the women's shopping club to provide pet products to its members and new members. Who said the subscription box business is dead?
Link: https://www.retaildive.com/news/fabfitfun-acquires-petcos-pupbox/710638/
AND FINALLY …
eComID closes €2.75M In Pre-Seed Funding
eComID, a collaborative online returns solution, has raised €2.75M in a Pre-Seed Funding round, aiming to invest in its technology and attract new customers. Is this an AI solution for returns?
Today’s final word for the week of April 1, 2025 is: BRIDGE, as in the Francis Scott Key bridge in Baltimore. Seriously this is one of the most devastating videos to wach in recent memory. I hope everyone is recovered and they are able to repair things quickly.
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Did you know that RMW Commerce has a brand new podcast? Check out The Watson Weekend for an unfiltered and lively eCommerce chat each week with me, Rick Watson, my co-host Jess Lesesky, and an array of interesting guests and topics. All focused on eCommerce.
That’s all for this week! Till next time Watsonians.....
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Hi, I’m Rick Watson, CEO and Founder of RMW Commerce Consulting and host of the Watson Weekly podcast - your essential eCommerce Digest.
Our production partner for the series is CitizenRacecar. The show is produced by Jose Baez; Production Manager, Gabriela Montequin.
To hear new episodes of the show every Monday morning, subscribe now at rmwcommerce.com/watsonweekly and wherever you get your podcasts.