April 3rd, 2023: A recap of Shoptalk 2023, venture startup outcomes, Fanatics and NHL, Recapping the headless eCommerce presentation
It’s April 3, 2023 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Recap of Shoptalk 2023
New Data About Venture Startup Outcomes
Fanatics Becomes Uniform Supplier for NHL
Recapping My Headless eCommerce Presentation
- and finally, The Investor Minute which contains 5 items this week from the world of venture capital, acquisitions, and IPOs.
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BUT FIRST in our shopping cart full of news….
Recap of Shoptalk 2023
Well another long Las Vegas trip has passed and thankfully this trip did not end like the movie Hangover. Although the night of the White party certainly made it seem pretty close.
Here are a few themes.
First, If you asked 100 people what was the biggest theme of Shoptalk, all 100 of those people would tell you AI, and specifically generative AI.
Last year everyone was looking for NFTs to make a splash in retail. Investors should have stuck to their knitting as AI already had outcomes and was still heads down on the next generation.
To me, the biggest question is not what impact generative AI will have on retail - that much is clear and it’s going to be profound. I am most interested in seeing what impact it will have on organic sources of traffic like SEO, videos on social media and community building.
A good friend of mine Gireesh had this quote about AI, however.. Try asking your favorite AI startup how large their data science team is. If the answer is zero, then really what are you promoting here? Not much.
Second, the continued rise of the importance of wholesale in brand-building was another theme that continues to gain in importance.
Third, are you kidding me with the huge floor of speed dating meetings? I’ve never seen anything like that in my life. Experiences with the meetings were mixed from my informal polls. Some got a lot of value and others found it worthless.
Another theme: what happened to the Shopify rebels? If you’ve been watching Shopify for the past 5 years, you know it’s been a popular theme for Shopify to say it’s “arming the rebels.” Well, I’m here to tell you that Shoptalk 2023 has officially crushed the rebel alliance. Unfortunately for the rebels the people who crushed it turned out to be new Enterprise Emporer Bobby Morrison at Shopify.
I sat front row at Shopify’s meeting and if I closed my eyes long enough, I thought I would find myself in a discussion about microservices and MACH principles.
I appreciated Kasey Lobaugh’s research about where the market is going and a lot of it range true in how many brands like Mountain Dew and others are creating more and more micro-brands to appeal to different segments of the market rather than relying on mass advertising to push the same version of a product to everyone.
Shopify is trying to position themselves to speak to this audience and straddle the line between low cost of ownership, flexibility, and fast time to market. If that’s the case, then someone should really fire whoever runs Shopify’s Twitter account. 2021 just called, folks and they want their memes back. The first person that needs to move up-market is that account. Which reminds me, new Shopify CRO Bobby Morrison needs a counterpart. If Shopify is smart, a CMO is the next hire. It’s a risky but important move and unclear what will happen here. But up-market Shopify will soon find it’s not about features. In fact, too many features too quickly are a negative. Market positioning is much more important. Watching Tobi’s evolution away from product-led growth will be interesting. It’s proceeding too slowly now for this observer.
Finally, headless eCommerce seemed to be having a moment, particularly in the Enterprise retail market - the segment above a $1 billion in revenue. Technical leadership seems to understand the vision. Business leadership is unfortunately not even in the room for half of these conversations. Never mind if they are in the room, they don’t understand what is being said or why it’s important. Proponents of microservices need help.
As Watsonians know, I am a MACH Alliance Executive Advisory Board member, and am interested in promoting the development of Enterprise technology solutions. How to get business stakeholders on board with technology evolution is something I spend a lot of time thinking about. — particularly in large retailers whose custom infrastructure has reached its end of life.
Overall I thought Shoptalk was pretty well run. The sessions could have been better and the food was so bad that most people ate elsewhere. Some of these complaints are hardly unique to Shoptalk, however.
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Our Second Story
What New PitchBook Data Says About VC Startup Outcomes
PitchBook released some new data that revealed a few interesting things. About 26,000 companies were put through their analysis. My top takeaways from the report were as follows:
First, with regards to startup exits, or what happens to startups when they grow up. in the top decile of companies, about 62% will get acquired, whereas 27% will not exit. For the bottom 90% of startups, the ratios flipped and 60% will not exit at all.
Second, for angel and seed investors it’s obviously more risky which is well known to this investor class. 80% of the bottom tranche of seed rounds will not exit at all. But if you can pick well, then you can be rewarded handsomely. For the top 10% of companies with seed investments, 60% will get bought.
Third, the data reveals how much more certainty you get from early stage VC rather than angel investing. 65% of the top decile of early-stage Series A and B venture-backed companies will get bought. For the bottom tranche of companies, 40% will still get bought, which is better than nothing. Not to mention you have a lot visibility into companies in later stages.
Really nothing new here to say as both investors and startup owners know the risks, but seeing the numbers attached to it was interesting and should reinforce the benefit of superior investor diligence in selecting that top 10% of companies.
[References:]
Our Third Story
Fanatics Still Crushing It: Becomes New Uniform Supplier for NHL
This week RetailDive reported on a new Michael Rubin victory: kicking out Adidas as the primary supplier of the uniforms for the NHL Shop.
* They signed a 10-year agreement with the National Hockey League
* Fanatics can offer more capabilities than Adidas regarding digital operations and fulfillment for the league.
* Fanatics was already running NHLShop so it was close to the business previously.
Fanatics continues marching forward into major sports leagues, as well as college athletics -- meaning there is a lot more upside to come. The best thing about the Fanatics business is that it was founded by a true operator in the industry who just made smart decisions consistently, and built an empire out of always being on the right side of the deal.
Even when Fanatics gets into something that looks like it will go upside down (NFTs) they get out and cut their losses rather than distract themselves from the many opportunities in front of them.
At this rate, is it too much to think that Fanatics could acquire its former customer Dick's Sporting Goods one day? (Just to give you some comparison: Dick's market capitalization is $12 billion compared to $31 billion for Fanatics). Stranger things have happened.
At this trajectory, it may not only be possible for Fanatics but even likely if brick and mortar is in their future. Which it very well could be a great complement to the business model going forward.
[References:]
And Our Last Story
Recapping My Headless eCommerce Presentation
For those who didn’t attend Shoptalk in Las Vegas or missed my session, I gave a talk on 8:30 Monday morning about Implementing Headless eCommerce with my friend Dimple Rao, VP of Product Management and User Experience Design at Chico’s FAS.
Here are the top 3 takeaways from the talk which keep in mind these takeaways were aimed on the higher end of the market.
First, retailers that view their technology infrastructure as a product innovation engine which can drive both revenue and margin gains are much more likely to benefit from a headless approach as compared to retailers which view technology as a project-based cost center to be managed.
This is because stitching together a solution based on a collection of microservices requires a long-term commitment to maintaining a more complex infrastructure than just buying all components from the same vendor.
Second, while many people think a headless user interface is necessary to build a custom user experience, that may not always be the case. Many modern cloud-based platforms already have quite a bit of flexibility and continued innovation here may mean that your use cases can be covered without replatforming at all.
Third, it’s very important to line up the proper internal stakeholders before you begin a headless journey due to the investment levels involved. This includes your Board, executive team, and an important cross-section of both business and technical stakeholders. All sides should agree what the financial and business goals should be for the organization, and why the current situation is blocking the achievement of these goals. This is an important step which might seem like it’s a waste of time or obvious, but trust me it is not. When times get tough on a project, if project team members don’t understand why they are on the journey, then it’s very easy to get off track and lose momentum.
Finally, one of my top tips of a headless project is to gain momentum early. And ensure that early momentum matches one of the Board of Director’s critical multi-year priorities. This shows the business the art of the possible and can help an organization build momentum to invest further.
If you’d like a copy of my slides, please visit the show notes.
References:
https://docs.google.com/presentation/d/1kBMOS9GDeYqrgEkhK-rPBp4xEH-gj_ANaNccq24Pgp8/edit?usp=sharing
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Hey, Watsonians, this is Rick. Want to get my take on a burning question and have me answer on this podcast? You can start a topic on the RMW Commerce Community and just ask!
The Community is full of eCommerce diehards just like you sharing thoughts and ideas on the industry. There’s currently a raging debate going on right now concerning Amazon’s future in the grocery business. Tim Reilly and Miles Thomas have really done a deep dive here that I think a lot of people could benefit from reading.
You can visit community.rmwcommerce.com to contribute.
It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
Private Equity IP Licensing Firm WHP Global Receives $375 million Investment from Ares Management
This is a good outcome to see for the firm where I am a digital advisor for the firm and lets the management team find new acquisition targets in an economy with many potential targets. In 2020 my firm RMW Commerce helped plan and execute the launch of the digital strategies for their first brands Anne Klein and Joseph Abboud. Both of these brands are growing according to plan thanks to the Yehuda Shmidman, Effy Zinkin and the entire WHP Global team.
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Second
Overhaul, a Supply Chain Security and Visibility Firm, Raises $73 Million in Equity and Debt
Overhaul’s software attempts to predict and mitigate freight shipping delays. While I’m sure this is useful, I am starting to wonder how many supply chain visibility and risk monitoring firms we need in the market. In the next couple of years some of these companies are likely to be rolled up.
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Third
Fast-fashion retailer SheIn about to raise $2.7 billion as it prepares for a US IPO
Shein has been on a tremendous growth trajectory in the past few years but in a predictable fashion is being challenged by other Chinese retailers like Temu. Can Shein maintain its growth?
Can someone tell me the difference between a Chinese retailer collecting data on US customers and a Chinese social media platform with regards to the government’s view of regulation? Asking for a friend.
Fourth
Manufacturer Small-Batch B2B Wholesale Marketplace Platform Conscious Raises Series A to Continue Expansion
Conscious is targeting the fashion, home goods, and jewelry categories. Buyers from US and European countries are connected with manufacturers from up to 70 countries from around the world.
Conscious Marketplace wants to popularize what Shein and other Chinese companies are doing by offering a huge network of manufacturers to respond more quickly to consumer trends than waiting for each season. This is an approach popularized by Shein which adds several thousand styles to its app each day. Not that this is sustainable, mind you, but the pace of production is hard to match by a traditional supply chain. It only makes sense that venture capital would try to replicate this model.
AND FINALLY …
Private Equity Firm SilverLake Acquires Survey Management Software Qualtrics From SAP
It looks like SAP unloaded Qualtrics for about the same $8 billion price they paid for it, but given it was acquired 5 years ago, it looks like SAP is losing some money on this deal. Between us, I’ve always been blown away by how little functionality Qualtrics provides for relatively simple survey functionality.
Link: https://www.reuters.com/markets/deals/silver-lake-cppib-stuck-125-bln-deal-buy-qualtrics-2023-03-13/
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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.