January 24th, 2022: Toyota and Amazon launch Amazon Parts Store, 2022 Supply Chain Issues, Online Grocery Sales of Alcohol, and Kohl’s Investor Macellum Capital
It’s January 24, 2022 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Toyota and Amazon Launch New Amazon Parts Store in the UK
2022 Supply Chain Issues Looking Remarkably Similar to 2021
Online Grocery Sales of Alcohol to Reach Almost $2 Billion This Year According to New Report
Kohl’s Investor Macellum Capital Wants to Burn the Company Down
- 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….
Toyota and Amazon Launch New Amazon Parts Store in the UK
The auto parts market is heating up with Toyota/Lexus launching an auto parts shop on Amazon in the UK.
Since eBay's acquisition of Motors in the early 2000s (as I recall), eBay has been one of the kings of auto parts online, particularly for hard-to-find parts.
It's a niche that eBay is particularly well-suited for and as a result has been easier for the company to defend than some other niches (collectibles, sneakers, luxury resale, etc)..
If Amazon can nail a better payment and delivery experience for common auto parts, there is some chance for it to take share.
For long-tail, it's harder to challenge eBay....
Regardless, this has to be some kind of a wake-up call for eBay, which has never had a fantastic relationship with car manufacturers.
Amazon has made tons of progress in the Automotive category. Their part finder works pretty well now. It took them a while to get it sorted out.
[References:]
Our Second Story
Supply Chain Shortages Looking Remarkably Similar to 2021
Well, here we are in 2022 and it looks like the new boss is the same as the old boss. China’s Zero Covid policy is again causing supply chain disruption, and it could continue to get worse if they don’t adjust their course. The New York Times recently put out a report that outlines a few points:
1 - China is home to a third of the world’s manufacturing.
2 - Volkswagen and Toyota have already suspended some operations due to imposed lockdowns.
While we are nowhere near the per capita deaths of previous outbreaks, Omicron is still causing chaos in global supply chains.
What’s more, visitors to China for the Winter Olympics could exacerbate the situation in the short-term.
The big question is if China is going to start closing down port cities. This is really the thing most companies are watching and would create a repeat of last year for many companies.
Most Western companies really have no leverage in this situation, though Apple might be an exception. No leverage means no options within the country. The only solution is to continue exploring alternative manufacturing outside of the country.
The short-term effect of this is that companies may accelerate their orders and increase their use of air freightto get around expected challenges this year.
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Our Third Story
Online Grocery Sales of Alcohol to Reach Almost $2 Billion This Year According to New Report
According to a recent report from Rabobank Research, US online grocery sales are set to skyrocket in the future.
A few points to mention here:
First, online sales from grocery stores went from $400 million in 2019 to almost $2 billion this year.
Second, ten states have passed laws making it easier to sell alcohol online, with more expected to follow. These laws that are being reformed are often from the Prohibition Era, designed to reduce consumption of a legal product.
Finally, wine tends to overperform in eCommerce while beer tends to underperform. Boutique wine brands should take note of this.
Beyond grocery, there has been consolidation in the alcohol sector generally. Quick Commerce operator goPuff acquired Bevmo at the end of 2020 to enter the market.
Last year there was additional activity as Uber Eats acquired Drizly, and online marketplace ReserveBar acquired online alcohol delivery app MiniBar.
As a result, wine and beer manufacturers’ eCommerce capabilities are typically not advanced, and because they have to work through retailers, distributors, and state or province-based liquor boards, often do not have a direct consumer relationship.
Even so, transformation is coming to this industry. Every CPG brand, especially those in the alcohol industry, are affected by the direct-to-consumer and constant last-mile logistics innovations.
The reason that this is such a hot segment of overall grocery is the margins. Not necessarily product gross margins, which are slightly less than other beverages, but net margins.
For Quick Commerce in particular, it’s a product people want and when they need it now, they are willing to pay any convenience fee that the app requires.
You can expect to see more innovation here. My advice to companies in the alcohol space is to start with data and technology transformation first. You can have all the strategic plans in the world but unless you have a comprehensive view of your end consumers, all those plans are going nowhere fast.
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And Our Last Story
Kohl’s Investor Macellum Capital Wants to Burn the Company Down
Towards the end of last year, we reported here on the podcast about how Kohl’s was one of the next targets of activist investors looking to split Kohl’s eCommerce business from its retail business.
That is still on the docket, but as they say, things just got more real. Now investors want to set the house on fire.
Macallum Advisors - which owns 5 percent of the company - issued a new brutal memo to the public and fellow shareholders to put pressure on the Company to completely change the composition of the Board. According to Macallum, the plan couldn’t be simpler:Add experienced retail oversight to the Board and fire the weak CEO and management team so that the company can be transformed.
Well, OK. Seems simple, right? But to get anyone to listen to them, Macallum Advisors need a plan that involves a few steps.
First, Macallum wants the company to admit its past mistakes. There is talk of another lost year where Kohl's is not even comping the right peer set and is underperforming the market with no discernable plan.
Second, Macallum wants the company to find a new consumer value proposition (CVP). They don’t exactly say what that is, because I’m sure they want to company to foot the bill for the expensive consultants that would make up one.
Now, you might be wondering, “Rick, what is a consumer value proposition? Well, in this case it’s just a fancy marketing term for ….
"We don't even know what the point of Kohl's is anymore."
The third thing Macallum Advisors wants is more nimble merchandising. Again, they don’t suggest anything specific here, but I’m guessing they think that Kohl’s isn’t ahead of consumer trends. And I’m sure they are right.
Fourth, the memo mentions more efficient sourcing. Apparently, the company’s merchandise sourcing is done through an outside third-party agency.
Imagine if you were supposed to be someone like Gordon Ramsay, a Michelin Star chef, and you couldn’t walk into a market and pick out a ripe avocado or a nice piece of fish on your own. That’s basically what they are alleging Kohl’s of doing here.
Finally, Macallum wants the company to break out its eCommerce performance in Financials.
This is kind of the hidden gem in the report. The eCommerce split that I mentioned earlier, it's just been buried later in the memo.
What I gather from this is that investors are asking if there is anything of value here at all. If there is a response from the company, it will likely be to break out this number.
So first they came for Saks; they are definitely coming for Macy’s; and now they are coming for Kohl’s as well. Oh, and a quick reminder: Activist investors usually get what they want.
Just remember all of those years that Elliott Management pestered eBay, particularly Devin Wenig, about selling off the more complex pieces of the business. All that happened.
To wrap up here, I’ll actually close with a direct quote from the presentation to get across to you how serious these investors are.
QUOTE
"Motion is not action. Flailing from one failed or poorly executed initiative to another is subterfuge. The Company’s shareholders lost another year of what could have been material progress in the underlying business. Not again. More change is needed in the boardroom if Kohl’s is to achieve its full potential."
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It’s That Time, Friends, for our Investor Minute. We have 4 items on the menu today.
First
Gradient No-Code Customer Service Tool
No-code customer service tool Zowie raised $5 million in seed capital from Gradient Ventures.
The company’s tool plugs into your customer service help desk, like Zendesk or Gorgias, or your social channels and tries to save agents from spending hours each day on repetitive responses. One particularly unique thing Zowie does is generate a knowledge base for you, rather than your reps having to do it.
Second
Looks like ShipMonk finally announced that Ruby Has acquisition. Interesting tidbit that this doubles their warehouse square footage. Congrats to CEO Jan Bednar.
https://www.businessinsider.com/shipmonk-acquires-ruby-has-in-e-commerce-arms-race-2022-1
Third
Digital Agency OSF Digital has been on an acquisition spree recently. First, they acquired strategy consulting firm FitForCommerce run by retail luminary Bernadine Wu who I always thought their claim to fame was their directory booth at the Internet Retailer shows. Congrats to Bernadine!
OSF also acquired Salesforce Marketing Cloud partner Datarati.
From reports I have heard, often these agencies get higher valuation multiples by doing nothing omre than clearing a $20 million revenue threshold, so likely that is what this is about.
https://ai-techpark.com/osf-digital-acquires-fitforcommerce-a-strategy-consulting-firm/
And Finally…
Cart.com announced an acquisition of multichannel selling solution SellerActive, continuing a consolidation in this corner of the market.
The thinking seems to be that since Cart.com provides an eCommerce platform and logistics for its merchants, it might as well provide the marketplace plumbing too.
With 800 brands on the SellerActive platform, this one will make waves.
One more thing.
We heard a crazy story last week that FedEx had asked the government to put anti-missile lasers on its planes.4
The first thing that went through my mind? Perhaps FedEx thought this would help to shoot down Amazon’s planes and give the company a leg up in the market.
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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 show is produced by Citizen Racecar. Alex Brower is the producer and also wrote our theme music. The Executive Producer is David Hoffman.
To hear new episodes of the show every Monday morning, subscribe now at rmwcommerce.com/watsonweekly and wherever you get your podcasts.
