April 8th, 2024: UPS wins US Postal contract from FedEx, Beyond.com has a new vision, Home Depot acquires SRS distribution, and Amazon removes Just Walk Out From its Amazon Fresh stores
Today’s episode of the Watson Weekly podcast is sponsored by Commercetools.
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It’s April 8th, 2024 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
UPS Wins US Postal Contract from FedEx
Beyond.com Has a New Vision
Home Depot Acquires SRS Distribution
Amazon Removes Just Walk Out From Its Amazon Fresh Stores
- and finally, The Investor Minute which contains 4 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 Wins US Postal Contract from FedEx
It seems to me like for some time, the industry has felt this wounded animal in FedEx, and it's pretty clear that this will not stop until new management is brought in.
- FedEx's laugh at Amazon, and subsequent silly spat, which we know who ended up winning that one.
- The continued rise of regional carriers in the last 10 years based on the success of zone-skipping as a rate reduction strategy.
- Fred Smith stepping down as CEO in 2022.
- FedEx failing to integrate its air and ground networks for over 20 years.
- FedEx's declining volume throughout 2023, along with other carriers, as part of the decline in volume of traditional mid-market customers.
In the face of all this, the fact that the UPS won a "significant" new contract from the US Postal Service for its air cargo is almost an afterthought.
Obviously it's a lot of consistent volume that FedEx will have to replace. No doubt FedEx will spin the next earnings call as our "revenue per piece has skyrocketed". Which, it's not wrong.
But in a volume game like supply chain, your success needs to be a volume story. If you are Amazon, your guaranteed volume shipper is Amazon.
If you're UPS, it's a different story. Millions of small businesses rely on UPS. UPS is making a concerted push into large healthcare customers.
There are some on this channel which have thought about having FedEx merge with Walmart. That's not going to happen - at least not in the current form. What is likely to happen next is one of two things:
* A new activist investor with a new hero CEO will arrive, or
* The company will be re-broken up and sold for parts.
All this leaves us with a key question - what is the value of FedEx at this point?
To me three things:
* Over 2,000 FedEx office (nee' Kinkos 2004)
* FedEx Ground
* FedEx Air (the heritage)
If something is going to happen with Amazon or Walmart, it's totally possible those FedEx office locations are perhaps one of hte most lucrative elements left standing.
[References:]
Our Second Story
Beyond.com has a New Vision
The new Chairman of Beyond.com (Marcus Lemonis) spoke at the International Housewares Show recently and outlined his new vision for Beyond.com. Mr. Lemonis spoke for about half an hour and I listened in to hear it first hand, then I listened to Chandra Cholt, the new CEO.
If you haven't heard, Marcus Lemonis has ended the saga at Bed Bath that started with activist investors installing Mark Tritton as CEO, and ending with what shutting down $1.6 Billion in revenue flowing through Overstock.com. He controls Beyond (dot) com, and has installed Chandra Holt as CEO.
In 2019, Mark Tritton was installed as CEO of Bed Bath and Beyond by a group of activist investors.
He was run out of the company after a failed turnaround in 2022 which never seemed to have a chance.
Let’s skip forward to June 2023: Overstock acquires Bed Bath and Beyond intellectual property for $20M and some pocket lint.
Aug 2023: Overstock announced it was rebranding as as Bed Bath and Beyond
Nov 2023: Marcus Limones joins Beyond board as co-Chair
March 2024: Chandra Holt named new CEO of Beyond, which is supposedly a family of brands.
Now in April 2024 Overstock.com has relaunched on Shopify
Follow this logic:
Beyond is a gallery of brands, explicitly chosen for a reason not to commit to one brand.
They want to build a grid of brands where every homeowner or renter, in every income bracket is represented in that grid.
Plan to go after luxury down to deep off-price flash sales.
Give customer & vendor a great experience builds trust.
If you build trust, you can build a portfolio that allows you to sell mortgages and insurance.
Wants to sell high margin financial services like mortgages to people at a below-market price, on top of a commerce business.
Is this rescue job from The Profit a mission of mercy, or the world’s greatest grift? The financial services element so explicitly outlined in the beginning makes me nervous about this company’s future.
Marcus bought the company because of nostalgia of going to Bed Bath and Beyond as a kid. It sounds like a strange reason to buy a company. Furthermore, Marcus mentioned he QUOTE “kicked all the idiots out of the room which were running the company into the ground, especially the fatal decision to turn off Overstock.com”.
In terms of a new vision for Beyond.com, Marcus mentioned that “* Home is one of the hub of life, and there is a plan to launch a number of new eCommerce sites around the home.”
What brands are represented?
They recently acquired zulily and are looking for more acquisitions, including a small brick and mortar footprint.
Zulily & Overstock are the company’s off-price brands.
The full-price brands are:
Bed Bath and Beyond
Backyard.com which apparently is going to be the country’s largest supplier of cornhole, because suddenly you see Marcus and Chandra talking about cornhole a lot.
Baby and beyond
Kids and beyond
College Living
Wamsutta
They will launch also launch a competitor to sur la table and williams sonoma in the luxury tabletop space.
Sounds very ambitious. I think the entire model is a dropship operation. Which how do you and the vendor both make money? If Marcus wanted to build an unprofitable dropship business, shouldn’t they have just acquired Wayfair which had negative EBITDA last year?
To bottom line all this, what I am hearing is that the entire Beyond portfolio of brands plans to be barely breakeven, and they plan to fund the business with high margin loans and insurance. Which, sounds either ridiculous or predatory to me. If I buy a couch for someone, why would I buy a home mortgage from the same vendor.
What is your right to win and competitive advantage in home mortgages ? If it does work, it sounds predatory. Which means grift is involved and consumer’s trust will be taken advantage of.
If it doesn’t work, the company will need another turnaround shyster in another few years because this is the only place the profit is going to come from.
In the meantime, it does look like the company is just becoming a network or dropship eCommerce eCommerce sites, with perhaps a few stores attached to them. Which sounds like what Wayfair used to be before they IPOd and consolidated all the sub-brands into Wayfair.com.
[References:]
https://www.youtube.com/watch?v=4V9om9yKpfs
Our Third Story
Home Depot Acquires SRS Distribution
It happens a lot in business. You have a traditional segment (say the consumer/SMB). Now you have a fast-growing segment (the professional/Enterprise). While growth in this new segment might continue for a while, sometimes unlocking the next phase of growth requires doing business differently.
In Home Depot's case, the traditional organization can offer stores and digital tools, but if you are an independent professional building contractor, you need improved and deeper selection, and improved fulfillment and service options.
In it's announcement, Home Depot mentioned being able to serve "a complex project purchase occasion". This means buying many different items, with dependencies and fit concerns, over a number of months, sometimes across multiple job sites. Home Depot realized there was an adjacent network of independent distributors and service locations that it could grow into, and so it did.
In the eCOmmerce software world there is not an exact analogy but this would be like Adobe or Oracle acquiring someone like Accenture. Owning the sale, configuration, and distribution into large accounts.
Could it happen? Sure. Will it happen? Not likely. Most software companies want to stick to their lane.
The retail world, on the other hand is changing. Building service, fulfillment and distribution is becoming table stakes. What's likely to happen in a case like this is Home Depot will make further similar acquisitions, perhaps across other verticals, and its competitors and partners in private equity will take notice too.
More value chain verticalization seems on the horizon in this environment.
[References:]
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And Our Last Story
Amazon Removes Just Walk Out From Its Fresh Stores
The Information released a report that Amazon is walking away from its Just Walk Out technology in its Amazon Fresh stores.
And with this, I am reminded of a quote from Jeff Bezos in 2019 as I think about "Just Walk Out" technology. You know, the system that made it difficult to just walk into a store.
During Amazon's re:Mars conference in 2019, Bezos told his employees: “We need big failures if we're going to move the needle — billion-dollar scale failures,” Bezos said. “And if we're not, we're not swinging hard enough.”
In that sense, JWO was a smashing success of a failure. Not only is the idea worthy of Amazon-scale ambition, but it was likely ove a billion dollar failure in terms of development time, resources, opportunity cost, and failed potential.
So perhaps Amazon can be forgiven for swinging hard. However, swinging hard without thought is not a virtue. The idea made it out of the lab too quickly, and sometimes it felt like the inmates were running the asylum here.
After all, Amazon could not even keep Just Walk Out Amazon Go Stores going in downtown Seattle. Nevertheless they persisted.
"Look, it didn't work for us, but trust us it will work for you!" Wrong. Because of Amazon's struggles to scale either its convenience store or grocery concept, it tried to resell this failed JWO idea to others -- to limited success.
An even bolder new approach is needed, and I'm not even talking April Fool's here.
If Amazon wants to reinvent the grocery market, I suggest it think much differently. Perhaps in much the same way that it thought when Kindle disrupted the publishing world and created a revolution. How to get food directly from the farm to my mouth.
Jeff Bezos took the Alexa idea from Star Trek. While this has been interesting, I'm not sure what money it has generated. What I really want is the "replicator" in Star Trek to make food for me, and for that device to be scalable in the home.
That would be another Amazon-scale ambition that would disrupt an entire food supply chain in much the way Kindle did to publishing. Of course, it sounds silly right now. But artificial proteins are already being created today.
It's only a matter of time before the idea of a 3D printer and a total disruption of the food supply chain are combined into one idea. Perhaps that would be another multi-billion dollar swing that Amazon might attempt in a few years.
[References:]
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It’s That Time Friends, for our Investor Minute. We have 4 items on the menu today.
First
Guess? Announces $200M Share Repurchase Program
Guess? plans to repurchase $200M of common stock, exchange $14.6 million of convertible notes for $12.1 million in 2028, and repurchase 326k shares for $10.3 million. Guess? is trying to get its finances back in order and return capital to investors via special dividend of $2.25 per share.
Link: https://www.retaildive.com/news/guess-board-200-million-share-repurchase-debt-restructuring/711860/
Second
Walmart Announces Second Class of Beauty Accelerator Program
Walmart accounced its second group of up and coming beauty brands that is part of its Walmart Start beauty accelerator aimed at helping startup beauty brands launch inside Walmart. Walmart is rethinking how it can use its ecosystem to help startups and consumers find what they need.
Third
Kidsy Raises $1M In Pre-Seed Funding
Kidsy, which aggregates overstock and open-box products for kids and babies, has raised $1M in pre-seed funding. Is this a long-term business, or is this a feature? It’s not clear how this business competes with Facebook Marketplace.
AND FINALLY …
Pandion Secures $41.5M in Series B Funding
Parcel shipping network Pandion has announced $41.5M in Series B Funding and the addition of new senior leadership. The new funding will be invested in technology and its distribution network. Sounds like a final-mile network.
Today’s final word for this week is: “Niche”
Does it seem to me that all incumbent eCommerce platform players are not really trying to compete with Shopify that hard? Every single player in the ecosystem from my point of view from Salesforce to Adobe to BigCommerce to Commercetools, as well as upstarts like VTEX and Shopware, nobody is trying to take the fight directly to Shopify’s base. Perhaps it’s a smart approach, but when you cede the mainstream of the market to your competition without a fight, don’t be surprised when they come to your niche later, too. It still seems that the eCommerce platform market still needs a lot more competition.
[PAUSE]
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. You can find the Watson Weekend by searching for it on iTunes, Spotify, or Youtube.
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.
