December 9th, 2024: 3 observations from Cyber Week, the 3 coming wars in the next 5 years, and 5 reasons Klaviyo is growing faster than most anyone right now
Today’s episode of The Watson Weekly Podcast is sponsored by Mirakl - the global leading provider of eCommerce software solutions. Create a value flywheel for your business with AI-powered marketplace and retail media solutions from Mirakl. Over 450 customers across the globe are unlocking new revenue opportunities with Mirakl - what's holding you back?>
It’s December 9, 2024 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
3 Observations from Cyber Week
The 3 Coming Wars in the Next 5 Years
5 Reasons Klaviyo Is Growing Faster Than Most Anyone Right Now
- and finally, The Investor Minute which contains 5 items this week from the world of venture capital, acquisitions, and IPOs.
==
To hear new episodes of the show every Monday morning, subscribe now at rmwcommerce.com/watsonweekly and wherever you get your podcasts.
==
[PAUSE]
BUT FIRST in our shopping cart full of news….
3 Observations from Cyber Week
First, people stayed on the couch on their phones on Black Friday. Any available retail metric I have seen shows that in-store sales only grew 0.7% year over year compared to Mastercard SpendingPulse. This sounds incrementally positive until you understand that inflation is running at around 2.5% right now. In other words, stores took a beating.
Second, retailers and brand among my consulting clients and extended network experienced a customer behavior shift this year I think due to the shorter holiday period, and continually earlier discounts. In short, the week before Cyber Week was higher than last year among reports I have witness which meant that fewer consumers shopped Cyber Week. This phenomenon actually explains NRF’s data as well which reported a decline in the actual number of shoppers year over year during this period, despite their higher online sales estimates.
Lastly, in my experience you do not win Cyber Week. You only lose. This is highlighted by the great philosopher Rosie Perez in the movie White Men can’t Jump. In it she said the following:
“Sometimes when you win, you really lose. And sometimes when you lose, you really win. And sometimes when you win or lose, you actually tie, and sometimes when you tie, you actually win or lose. Winning or losing is all one organic mechanism, from which one extracts what one needs."
While Billy Hoyle played by Woody Harrelson never figures out this speech, any retailer or brand who has been through Black Friday can clearly understand the phrase — sometimes when you win, you really lose. All reports I have seen show a record amount of discounting this year compared to last year. Record discounting to generate similar growth levels to last year is not a sustainable trend.
[References:]
Our Second Story
The 3 Coming Wars in the Next 5 Years
We are in for a bumpy ride. The world we grew up in is over. A few new durable trends are being setup, and the transition is not temporary. This is the new normal.
I present to you -- the wars of the present and future.
1 - War on Humans
The megatrends putting downward pressure on the absolute number of humans hired are as follows:
* AI and Robotics - doing more, more accurately, with less. Entire new categories of jobs will exist in the future, which belies the fact that the current generation is left holding the bag.
* Wages - The humans that do have jobs will conclude that their time must be so valuable and productive that they will command more dollars for their unit of time. Encouraging companies to have fewer humans.
* Fractionalization - If a role be fractionalized, it will be. This puts downward pressure on full-time headcount.
Most normals are not fooled. When technologists say "AI will make us more productive" what Wall Street hears is "continuous upward improvement in net operating margin" not "We are going to hire more humans."
2 - The War on Outsiders
This is an accelerating trend of which Brexit is just one of the obvious examples. Almost every major continent and country has seen increasing political polarization leading each country to pull back within itself. This is the unraveling of a trend whose best example is probably the United States entering WWII and staying involved globally since then, for both good and ill. Call it the unraveling of peace through trade.
This will have three effects worldwide:
1 - Reduced immigration, putting upward pressure on domestic wages and forcing companies to fractionalize and look more globally for roles.
2 - Trade wars. See, last election. Supply chains will be the primary weapon in these trade wars.
3 - Shortening supply chains. The most cost effective supply chain will become the shortest one.
The Temu-ization of the world is perhaps the most poignant trend that local actors will stop and reverse. It is coming, despite the strapped local consumer.
3 - The War on Discounting
Strapped. Stretched. Resilient. Resourceful. Choiceful. Penny-wise. Stone broke.
Whatever you want to call it, the consumer is under siege. Who must have answers for consumers? Brands. Most brands cannot afford to exist in the "quality at any cost" realm. What replaces it?
Quality for value. Those who are perceived to have lost their value equation cannot get consumers in the door, sometimes at any cost.
Even when these retailers (Target being one of them) get consumers in the door, their execution is so poor that it does not matter. It's simple.
The consumer you knew, is not the consumer of the future. The consumer of the future is paying more for the same things. Education, housing, childcare. Brands who figure out how to exist in this world without discounting will be the clear winners. Everyone else will play second fiddle.
[References:]
And Our Last Story
5 Reasons Klaviyo Is Growing Faster Than Most Anyone Right Now
While it might be obvious why a marketing solution like Klaviyo is growing faster than an eCommerce solution like Shopify, I thought I would lay it out here. There are a number of reasons:
1 - Industry Verticals: Klaviyo as a marketing solution can easily expand beyond retail and eCommerce. On their website, they speak about restaurants and wellness today, but it seems like there should be a huge opportunity to expand beyond this into virtually any vertical that needs to acquire and retain customers - which is to say, all of them.
2 - Multi-platform: While Klaviyo is popular in the Shopify community, Klaviyo is popular outside as well. Many BigCommerce and other platform merchants also use Klaviyo. This gives Klaviyo more headroom.
3 - More Difficult to Replatform eCommerce Than Marketing: Unlike Shopify which is in an area where it is difficult to switch providers, it's comparatively much easier to switch marketing providers. (Of course this could have downsides too - in theory it could not be as sticky after switching). This gives Klaviyo growth tailwinds that eCommerce platforms must fight against, comparatively speaking.
4 - Trading Down Could Benefit Klaviyo: Merchants like consumers are in a value-oriented mindset. Klaviyo even though not cheap per se is comparatively cheaper than legacy platforms like Salesforce Marketing Cloud. Of course Shopify and other newer cloud platforms are benefiting from this similar trends too. Any marketing platform built more than 15 years ago, is likely not going to be as modern or integrated.
5 - Multi-Product Portfolio Synergies: Klaviyo has added a number of products over time to its traditional e-mail product: SMS, Reviews, CDP. Because of the nature of its platform, it tends to make it easier to integrate these channels together compared to these same solutions being separated. The beating heart of Klaviyo is now your customer data, not just your e-mail data. And over 400+ integrations allow them to gather that data.
The more products someone adopts, the sticker they become for Klaviyo... and their net revenue retention still seems quite solid despite a slight deceleration from historical highs.
This is not to say that Klaviyo might not experience issues. One key trend we will need to watch is their Enterprise penetration. Having grown up in the SMB space is limiting their up-market growth. Significantly more resources need to be dedicated here in both product and goto-market if they are going to be able to take more customers from other segments.
One key opportunity I would love Klaviyo to take a look at is CRM. To me, either Gorgias or Klaviyo is going to invest in a CRM. It is a very needed function as Shopify expands more into B2B, and one that I would not expect Shopify itself to build in-house.
[References:]
https://www.linkedin.com/posts/ecommercestrategyconsulting_5-reasons-klaviyo-is-growing-faster-than-activity-7266794014291464192-0k1n?utm_source=share&utm_medium=member_desktop
[PAUSE]
It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
ID.me Announces Closing of $67M Secondary Tender
ID.me has announced $67 million investment in the form of a tender offer which vaiued the company at a reported $1.8 billion. The company offers a digital wallet that contains data and verified credentials that can be shared with consent to complete forms and proof identity. In a time when trust digitally is a headline away - ID.me is positioned to grow their business globally as digital verification becomes more adopted.
Link: https://network.id.me/press-releases/id-me-announces-closing-of-secondary-tender/
Second
Volta, B2B Commerce Platform Raises $6.3M in Pre-Seed Funding
Volta, a European B2B commerce platform, has raised €6 million ($6.3 million) in pre-seed funding. The company offers solutions to midsize brands, wholesalers, and distributors by automating repetitive tasks to streamline operations. Interestingly, Volta defines itself as a "Shopify for B2B commerce" but focuses on Europe. Is this a case of a startup trying to get ahead and be acquired or is the market large enough for multiple companies?
Third
Anthropic and Amazon Deepen Ties with $4B Funding
Anthropic announced a new $4 billion investment from Amazon, establishing Amazon Web Services (AWS) as its primary cloud and training partner. Based on this new funding, Anthropic will use AWS-developed Trainium chips to train and deploy its future foundation models. The deals between Amazon and Anthropic benefit both parties - Anthropic gets a large customer who uses its technology, which AWS resells to customers via its Amazon Bedrock solution, and gets better pricing on AWS over several years. Amazon gets access to the latest models from Anthropic.
Fourth
Levanta Raises $20M in Series A Funding
Levanta, an affiliate marketing platform for Amazon sellers, has raised $20 million, which will be used to hire talent, expand its platform capabilities and accelerate growth. Amazon sellers increasingly use direct partnerships with creators to grow sales and revenues on non-Amazon channels. Who would believe that in 2024, affiliate marketing is still a part of marketing solutions brands use to scale revenues?
AND FINALLY …
Creator Advertising Platform Agentio Raises $12M Series A
Automated creator advertising platform for YouTube influencers to sell ad slots to brands Agentio has raised $12 million in Series A funding, which will expand its brand and creator network, scale its platform capabilities, and introduce integrations with additional social channels. Agentio offers a platform that makes purchasing advertising integrations within creator content simple. Brands want access to these audiences not available through traditional digital marketing channels.
And today’s word of the week for December 9, 2024 is “Marketplace”. Well of course we wanted to do this to introduce our new sponsor Mirakl, a company I have known and respected for many years going back to almost 2012. By any imaginable metric, Philippe and Adrien have built one of the iconic software companies in the eCommerce space and so having them as a title sponsor of the Watson Weekly feels like working with an old friend. Cheers to the ongoing partnership.
[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.....
[PAUSE]
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.