August 5th, 2024: Companies are trading down talent, top items from Paypal’s Q2 2024 earnings call, designer brand Prada posts revenue gains, and Temu announcements signal a company shift
It’s August 5, 2024 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Companies Are Trading Down Talent
Top Items From Paypal’s Q2 2024 Earnings Call
Designer Brand Prada Posts Revenue Gains
Temu Announcements Signal a Company Shift
- 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….
Companies Are Trading Down Talent
About five or six years ago I noticed a trend that the middle of the job pool was being hollowed out. In other words it went from leaders, managers and individual contributors to instead removing those middle managers.
Now I notice something different and the trend seems to be moving upstream. A generation of leaders with 10+ years of eCommerce experience seem to be being phased out due to cost structure. Who wants an employee with a $200-300k+ salary seems to be the mantra.
We talk here about consumers trading down. Merchants trading down service providers but we have not talked too much about people.
In short people are also being traded down
This has put a lot of experienced folks on the market looking at the same time. But can’t be everyone right? Many companies cannot rely solely on junior talent to grow because they are in complex situations that require expertise. In other words, only hard work and technology are not enough always.
If you are a CEO looking for senior talent - it is plentiful right now. While I am not a recruiter or pretend to play one on TV, I do know a lot of amazing talent looking for homes. Sadly in the United States it has now become almost best practice in eCommerce to use overseas talent which is often both cheaper, more talented, and more reliable than talent based in the United States.
[References:]
Our Second Story
Top Items From Paypal’s Q2 2024 Earnings Call
1 - Paypal’s CEO seems to recognize the major issues.
The CEO again reinforced that the company has to improve its rate of innovation, as well as the need to upgrade its talent. I somewhat have to ask, what was the old CEO Dan Schulman doing? He has now moved onto a venture capital firm I guess so we can screw up more companies at scale?
2 - Paypal CEO is good at spinning.
The company says that their desktop share has not moved at all and that their US share is driven by large Enterprises. The problem with their current large Enterprise marketshare is that new eCommerce platform players are working to penetrate that market.
Also, who still talks about desktop marketshare now that mobile is the default for all but the largest transactions?
3 - Guest Checkout is a Key Focus
The company has focused many resources on its Paypal Fastlane opportunity which looks to me like a carbon copy of Fast or Shop Pay. The company is attacking guest checkouts and new credit card entries across the world.
Finally, the company is also trying to spin the rise of Apple Pay - which coincidentally just overtook Paypal as the fastest growing and largest digital wallet for physical retail payments.
Speaking for myself, I never even bring my credit cards into stores anymore, I almost exclusively use Apple Pay.
Internationally, I think Paypal’s prospects are much greater because Shopify and Apple Pay are less prevalent, but many of the largest countries in the world don’t need Paypal because they have an incumbent. That’s certainly the case in places like China and India.
[References:]
Our Third Story
Designer Brand Prada Posts Revenue Gains
Is it just me or even in this sea of trading down there are a few standout brands that are not being traded down. I’m looking at you Abercrombie, E.L.F. Cosmetics, and now Prada’s hit brand miu miu.
Prada just reported first 6 months revenue in 2024 that was up 17% from the prior year period for miu miu, and up over 5% on its namesake Prada brand.
The crazy thing about Prada’s performance is that other luxury brands are really struggling and primarily due to the decline in spending power of the Chinese consumer. This includes brands like Louis Vuitton, Gucci, Hermes, and even smaller players like Hugo Boss.
Fashion is a “hit” business so these things are difficult to predict. But it does go to show you that if you have a product hit on your hands, it will defy the current trading down environment. Creating a hit product is not something that you can just wish into existence, however. And so the average luxury company out there will continue to rise and fall on the spending power of the Chinese consumer.
[References:]
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And Our Last Story
Temu Announcements Signal a Company Shift
The number of reports in the market are increasing that Temu is going to be adding a new part of its model to expect sellers to hold inventory and store things locally, which sounds to me a lot like the Amazon Marketplace.
First, this could work fine for the very top-selling items because you have forecast visibility, but it will struggle for the newer items that Temu is known for.
Second, and building on the above point, this is very familiar to anyone who has done business in Chinese marketplaces like TMall etc. For big promotional events you have to store inventory locally to participate. I expect that Temu will continue to run that playbook for its Chinese suppliers.
There is a lot of discussion about direct competition between Temu and Amazon, and I just don’t see the erosion at this stage. The American eCommerce market is very mature and it will take more than a cheap foreign entrant to disrupt Amazon.
There a literally hundreds and thousands of companies that have tried to compete with Amazon head on and fail.
What Temu could disrupt however, is a bunch of underperforming North American retailers that don’t have the kind of manufacturer to consumer model and deep pockets that Temu does. That and the promotional aspect does make sense for Temu to add local shipping and fulifllment to its model but not because I believe it’s going directly after Amazon.
[References:]
https://www.marketplacepulse.com/articles/amazon-and-temu-swap-strategies
It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
Supply Chain Visibility Startup Altana Raises $200M in Series C Funding
Supply chain visibility platform Altana has raised $200M in Series C funding which will be invested in product development. This is a huge hurdle to climb and puts a big bullseye on Altana in a market that is trading down service providers. Will they be able to live up to it?
Second
Publicis Groupe To Acquire Influential
Publicis Groupe is to acquire Influential, an influencer marketing company that has 3.5M creators at the service of 300+ global brands, for an undisclosed (rumored $500M) cost. Publicis continues to acquire complimentary companies to offer brands more opportunities to market to consumers. Influencers have become an important if expensive part of any modern marketing strategy.
Third
UptimeAI Secures $14 Million in Series A Funding
UptimeAI, an operational excellence platform for heavy manufacturing industries, has raised a $14M Series A funding round that will be invested in its technology. I guess Manufacturing plants create data that can be used by AI, right?
Link: https://www.uptimeai.com/resources/series-a-funding-annoucement/
Fourth
Eyewear Maker EssilorLuxottica to Acquire Supreme for $1.5B
Global eyewear maker EssilorLuxottica has acquired streetwear brand Supreme from VF Corp for $1.5B. Why would EssilorLuxottica acquire Supreme? To add collaborations between EssilorLuxottica brands and Supreme? Really? This seems like the highest bidder for a trouble brand Supreme and is more than likely something that will be spun out again in another couple of years.
AND FINALLY …
Sandal Brand Birkenstock Raises $1.5B In IPO
German sandal maker Birkenstock raised $1.5B in its IPO, valuing the company at $8.6B, which lost 13% in market value on its first trading day. The company was overvalued in private markets and the footwear sector has not had great returns from new public entrants recently. That said, Birkenstock is one of those forever brands which continues to attract even new young shoppers each generation.
Today’s final word for the week of August 5, 2024 is: <Gold>. As in the Olympics. It’s amazing to see the display of human talent and determination out there. Simone Biles and Katie Ledecky were some of the standouts in my mind from all the events, although it’s fun to watch some of the more obscure events like 3 on 3 basketball and synchronized diving as well. USA! USA!
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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. 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.