December 4th, 2023: Our Black Friday Cyber Monday wrap up, Shein files for IPO, Amazon becomes the biggest delivery business in the US, and Kohl’s decides eCommerce is not for them
Today’s episode of the Watson Weekly podcast is sponsored by Commercetools.
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It’s December 4, 2023 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Our Black Friday Cyber Monday Wrap Up
Shein Files For IPO
Amazon Becomes the Biggest Delivery Business in the US
Kohl’s Decides eCommerce Is Not For Them
- 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….
Our Black Friday Cyber Monday Wrap-Up
Well folks, it’s official. Mobile shopping has taken over Black Friday. Given the absence of discounts and inventory in stores, it looks like the American consumer chose to stay in their couch.
The couch has declared victory.
Black Friday stats I've read over and over confirm it. Retail stores growth seems flat to slightly up, while digital is up much larger. Consumers are valuing convenience - why get off the couch to get the same discounts I can get on the couch?
Mastercard Spendingpulse reported that Friday eCommerce sales increased 8.5% y/y while in-store sales increased 1.1%.
Of course all the eCommerce platforms like Adobe, Salesforce, Shopify and BigCommerce also released their holiday numbers, which I consider to be almost propaganda numbers. Useful for understanding momentum of the platforms, but not very useful to determine what the consumer is doing.
As of today, I did not see Spendingpulse release their Cyber Monday numbers, but other outlets seem to be reporting significant growth in Cyber Monday.
And as far as Cyber Monday goes, my how much you have changed. When Cyber Monday was coined in 2005 by the National Retail Federation, you had to go to work to access the Internet. And so Monday was the first day after Thanksgiving you could do any online shopping at all.
Fast forward to 2023 where 60% of total internet traffic is mobile, Cyber Monday means something different. Now, deals start in mid-October and Amazon’s Deal day effectively starts the promotional season which ends on Cyber Monday. It’s the last day that consumers expect heavy discounts to continue, which means it’s now a convenient bookend to the holiday season instead of being more Cyber than any other day.
In between mid-October and Cyber Monday, it’s a mobile world today, and that is likely going to continue in future years.
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Our Second Story
Shein Files For IPO
It looks like Congress and other regulators have just been put on a clock - Shein has filed confidentially for its IPO, likely in early 2024. Here are the details:
* JP Morgan, Goldman Sachs, and Morgan Stanley are all lead underwriters on the offering.
* The company was last valued at $66 billion.
Shein has done an excellent job making a number of moves recently, which has set the table for this moment:
- Getting in bed with the top investment banks like Goldman and JP Morgan doesn't hurt.
- Shein’s joint ventures with Forever21 and its parent company Sparc Group (owned by Authentic Brands).
- Starting re-entering the Indian market with a partnership and planning to diversify its manufacturing there and other places.
I have a few questions to consider in all this. First, who stands to win in this?
* First and foremost, Authentic Brands Group stands to win big, and on a relatively recent partnership. A lot depends on the valuation here.
* Other Chinese retailers may see this as paving a clearer path to the North American market. Bytedance is watching this very closely.
Finally, what's the valuation?
* How do you even value a company like this and what institutions will be interested? Existential risks abound, but ultimately there is a lot of money to be made that the brakes will not be put on this listing by Wall Street -- instead, Washington DC would have to do something about this.
But this isn’t a show about politics, so we’ll assume politicians will do what they do best, which is not much. That means for all of us, Shein is becoming a public company which should give it a new infusion of capital. I think the entire retail market in the United States should worry, not just the fast-fashion industry. Regardless of how horrible you might feel Shein is, Shein is also a learning, data-driven company the likes we may not have seen since Amazon itself.
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Our Third Story
Amazon Has Become the Biggest Delivery Business in the United States
Well the fantastical has happened - Amazon has won the delivery business in the United States. To be honest, this is kind of a yawn moment. Dave Clark who built a lot of the logistics network at Amazon predicted over a decade ago that Amazon would need to get seriously into the delivery business because no carrier could handle its volume.
Of course he was right. And Amazon at the time was ridiculed by pretty much everyone, but most especially Fred Smith of FedEx who said that Amazon would have to invest tens of billions of dollars to match FedEx’s capabilities.
Which of course thank you for that roadmap, that’s what Amazon went on and did. Amazon invests almost 20 billion dollars in supply chain each year, which is about 4-5 UPS’ every year.
Here are a few stats taken from a Wall Street Journal article on the topic:
* Amazon will have delivered more than 5.9 billion parcels by the end of 2023, after delivering more than 5.2 billion parcels by the end of 2022.
The success of the Amazon program in the last mile is primarily due to the delivery service partner which is a franchise program.
In truth, the Wall Street Journal headline was actually hit last year - so its title was misleading - but it’s still worth talking about it. The gap is only widening each year and it’s not even close. Each year that goes on, Amazon is just pulling away.
How long before Amazon is sending everyone’s parcels?
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And Our Last Story
Kohl’s Decides eCommerce Is Not For Them
In a world where almost no one can be just a retailer and make any money, that's exactly where Kohl's is headed: back to the safety of their 4 store walls. And with it, the direction they have chosen will seal their fate in a canon of declining retailers like Bed Bath and Beyond, Sears, JC Penney, and others.
Here are a few things mentioned in the recent earnings:
* Kohl's sales fell 5.2% y/y, but more importantly net income fell 39%.
* Store comparable sales were up slightly year to date.
And this is the money quote for me: "The digital business is what's really bringing us down." Oh really. That pesky digital business.
What about that pesky customer who is not consistently walking in your door?
Kohl's has had a patchwork of CEOs and strategies in the last few years, and activist investors continue to circle the firm. Did I mention that the middle market of retail is an active dead zone like that garbage patch in the middle of the Gulf of Mexico?
Usually, these activist shakeups do result in changes, though not all for the better. Many times, it's simply too late, or the new CEO is too confident they know just the right thing (in Bed Bath and Beyond, it was private label.... err. Wrong). Even if a business can improve, does it improve that much relative to the competition which has not stumbled?
In 2023, why would you step into a Kohl's if you could step into a WalMart, TJ Maxx or HomeGoods? Someone needs to ask this reasonable question before deciding their next strategy.
And to be clear for the last time: eCommerce is no longer a channel. It's an extension of your overall digital experience. If you are saddled with 10-15 year old technology stack that doesn't support the needs of your buyers where and how they want to shop, your business is already dead, you just don't know it yet.
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Hey, Watsonians, did you know that Getir acquired FreshDirect? If you were in our online community, you would! To stay on top of what’s going on in eCommerce and join the conversation, visit community.rmwcommerce.com today.
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It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
Keychain Raises $18M in Seed Funding
Pre-launch CPG manufacturing marketplace Keychain has raised $18M in seed funding. Have we not seen these manufacturing marketplaces before? What makes Kwychain unique?
Link: https://techcrunch.com/2023/11/14/cpg-manufacturing-platform-keychain-raises-18-million/
Second
Mars Acquires UK Chocolate Brand Hotel Chocolat
Mars has acquired premium chocolate brand Hotel Cholcat for £534 million ($662 million). Mars is following the premiumization trend by acquiring a struggling luxury chocolate brand.
Third
The Body Shop Sold To Aurelius Group
Natura &Co has announced the sale of The Body Shop to private equity firm Aurelius Group for £207 million ($257 million). Natura &Co continues to simplify its operations as it also sold Aesop to L’Oréal earlier in the year.
Link: https://www.retaildive.com/news/the-body-shop-acquired-private-equity-firm-aurelius/699951/
Fourth
Siena AI Raises $4.7M in Seed Funding
Siena AI, which develops a customer service automation platform, raised $4.7M in Seed Funding. Is this another version of conversational commerce? Why would brands want to offload customer service to a bot?
Link: https://techcrunch.com/2023/11/16/siena-ai-4-7m-ai-customer-service-agent/
AND FINALLY …
The Home Depot to Acquire International Designs Group (IDG)
Home Depot has acquired International Designs Group (IDG), which operates distributor Construction Resource, for an undisclosed amount. Home Depot is targeting the Pro customer who uses showrooms to decide on materials for projects.
Today’s final word for the week of December 4th 2023 is Relief:
Congrats folks, you made it through the busiest part of the season. It’s all downhill from here. Time to start thinking about 2024.
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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.