January 31st, 2022: Amazon’s New ‘Style” Department Store Concept, Gopuff’s First Private Label Line, Walmart’s Plans for GoLocal, and the Latest on Shopify
It’s January 31, 2022, and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Amazon's New "Style" Department Store Concept Kicks Sand In the Face of Investors Who Think Retail Innovation is Dead
Gopuff Launches its First Private Label Line
How Walmart GoLocal Plans to Stand out Among Delivery Businesses
Shopify Fulfillment Seems to be Going Nowhere Fast
- 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….
Amazon's New "Style" Department Store Concept Kicks Sand In the Face of Investors Who Think Retail Innovation is Dead
Following a year when retailinvestors were running away from store valuations, Amazonis still showing what's possible in retail through digital technology.
Remember when I talked about what "noun" Amazon would use to anchor its department store? Well, the name is "Style" and I think by and large it's one of the best choices the company could have made. The name is versatile, aspirational, and merchandise-inclusive.
Amazon released a video that I scanned a few times.
Merchandise appears to be apparel and accessories– shirts, sweaters, coats, hats, shoes, all typical department store stuff.
With a name like Style, I would imagine Amazon could put anything here you might find in a typical Macy's.
Coming later in 2022 in Los Angeles. Test and learn. This is not scaled.
Let's break down the innovations introduced here, relative to the typical retail store.
As far as the in-store experience goes:
- There are no size runs on the floor itself – they’re in the back room. Not totally unique but uncommon.
The negative here is you can't hold up an item to your body if your size isn't the one on the floor.
- You don't have to schlep products to fitting rooms. Just add items to your list, and they will "appear" there by magic Amazon elves.
Scan a QR and send the product to a fitting room or the "Pickup" area. (They don't call it checkout, because ... they already have your credit card).
You can select multiple styles, sizes and colors for the same item.
- The store is virtually watching what you look at for personalization reasons later.
- I don't get the sense that these stores are truly "Just Walk Out" because there are no size runs, and you would otherwise walk out with a product model.
Let’s talk about the fitting rooms for a moment.
- Well, first of all, the fitting rooms are actually open. Many retailers’ fitting rooms are not even open right now.
- You don't wait in line for a fitting room; associates populate one for you and you get a notification from Amazon when your room is ready.
- You unlock your secure fitting room with Amazon's app.
- Inside, the fitting room touchscreen on the wall gives you an "upsell/complete the look/suggestions" option allowing you to browse merchandise personalized suggestions based on what you look at in the store. You can get these additional items sent to your fitting room.
Let me say this again: Amazon is surveilling what you look at in the store. I posted about this a few months ago, knowing that "Just Walk Out" works this way, but Amazon is advancing on this idea.
Moving on to the checkout or pickup area…
- You do have to bring your selected items to the "Pickup" area, where an agent will give you a bag. But you don't have to process payment and you don’t get a receipt because it's all digital and Amazon already has your credit card.
This will likely change when cash is involved.
This is not yet live and, yes, it’s only one store. What many people forget,however, is that typical institutional investors have left retail for dead. They are splitting off eCommerce revenue where they can.
Amazon has a different narrative here and the company’s approach could succeed even if its stores don’t succeed. Essentially, this new store will be Store 1 for Amazon. In retail terms, this is often the store where all innovations and experiments are tested out for the rest of the store fleet.
Of course, beyond Whole Foods and a few others, Amazon doesn’t have a store fleet. But what it does have is a thriving technology business in which it sells new retail innovations to other retailers that desperately need similar technology. Even if Amazon’s stores don’t succeed on their own merits, they could easily succeed as the best sales channel for the technology powering their retail innovations.
[References:]
Our Second Story
Gopuff Launches its First Private Label Line
Dive Brief: Gopuff announced on Tuesday the launch of its first private label line, Basically, which includes bottled water, snacks, batteries, paper products and other household essentials.
1 - In the coming weeks, the company will roll out a line of snacks under the Basically line.So is Basically a clone of Amazon Basics?
2 - Gopuff currently operates in more than 1,000 cities, including New York City, and has launched a fresh meals division, rolled out locally sourced products and built an in-house advertising arm.
3 - Private label lines are beginning to roll out as companies look to build value and customer loyalty.
What does this mean for the industry?
First, the reports I've read indicate the grocers receive 35% margins from private label products versus 25% from national brands. This 10% percent variance can be the difference between life and death for logistics-heavy Gopuff.
How about for companies like Instacart?
I do believe that Gopuff could start getting pushed from cities due to margin pressures in these markets. That would leave lower and middle-market regional chains to be covered by Instacart in Middle America.
[References:]
Our Third Story
How Walmart GoLocal Plans to Stand Out Among Delivery Businesses
Max Garland from Supply Chain Dive recently interviewed the General Manager of Walmart’s GoLocal program, Harsit Patel, and I thought it was interesting to cover here, because some of these principles get to the heart of last-mile delivery and which players have the advantage.
According to Patel, Walmart GoLocal’s primary differentiator is not getting in the way of direct-to-consumer relationships.
Walmart’s approach is what you could term as white-label delivery. White-label means that Walmart doesn’t put its branding on it, instead it is branded for theWalmart customer employing it.
This is very different than the traditional value proposition offered by DoorDash, Instacart, and Shipt, which are marketplaces that ultimately own the customer relationship in the future, and could end up introducing those same customers to new retailers.
That’s not to say that Instacart and DoorDash haven’t also noticed . Instacart’s Connect program and DoorDash’s Drive program accomplish much the same thing. Despite the earlier start of Instacart and Doordash, one would think that with persistence Walmart could gain the long-term advantage here.
My take?
If there is one player outside of Amazon that the wider logistics industry does not want to get momentum, it’s Walmart - a company always known for its logistics strength.
Walmart has announced a limited pilot with Home Depot as well as a partnership with Chico’s. It’s still a new program, and while Walmart is still finding its legs, these are encouraging early signs.
While it’s still unproven, these customer types could be the start of larger partnerships in the industry as there are very few scaled national players with Walmart’s resources.
[References:]
And Our Last Story
Shopify Fulfillment Seems To Be Going Nowhere Fast
There are a lot of rumors and reports recently about what is going on with Shopify's Fulfillment Network. Cancelling contracts, not cancelling contracts. What's going on?
Let me save you the trouble. It's not going to work at scale, and this isn't even a very hard call. Best not to pay attention to the market smokescreens.
First, in the last 10 years, great logistics talent go to three places: Target, Walmart and Amazon. For Shopify to become great at fulfillment, it would have to become exactly like the evil empire it so loathes. "I don't get my Amazon parcels on time," and "I think the Target curbside experience needs improvement," said no one ever.
Second, Shopify has no Chief Supply Chain Officer. I could end the post right here. There isn’t even a category for supply chain on Shopify’s jobs site. Go check yourself! I'll wait.
The notion of having 3PL contracts or not having 3PL contracts moving the Shopify stockis so puzzling to me.
Third, Shopify’s strategy has changed more than once from reports telling me for years the company has been essentially white-labeling a third-party solution (without publicizing this widely), to building out a fulfillment center outside of Atlanta of all places. I have a pretty good idea what I would find if I walked through that facility - and it’s not “best in class.”
Fourth, no one at Shopify is talking about what modern brands need from a fulfillment solution. They are:
- Amazon FBA Prep and FBM support. Think Shopify will do this? Me neither.
- Ability to ship pallets and case-packs to wholesale partners.
- Ability to ship parcels to consumers.
- Last-mile options. (Where are the gig worker partnerships?) Amazon added store pickup to their marketplace even. Where is Shopify on this?
Fifth, we have seen enough to know it's not working. For those of you lucky enough to have watched the launch of FBA, it was simply brilliant. A watershed event in the fulfillment landscape. There weren’t two years of test and learn. Like AWS, the first launch "just worked" and it kept getting better.
Finally, Shopify did not even follow the relatively easy example of Walmart in this space. Partner with a third-party first, advertise it. I'm sure a company like Deliverr would have been more than happy to take the business.
Or perhaps VC-backed supply chain valuations are too high that Shopify can't run the "Global-E/Affirm playbook" it has become accustomed to.
Supply chain doesn't work without scale. Shopify is about entrepreneurs. The vast majority of entrepreneurs have low volume because they are just starting out. Don't be so hard on them; FBA wouldn't work either without riding on the rails of "Customer 1."
Tobi is having too much fun playing with his tape gun to notice, I guess.
[References:]
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It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
E-Commerce Tracking Firm Route Hits $1.25 Billion Valuation
Route is a free for merchants shipping insurance app with built-in visual package tracking, kind of like Uber, for packages. I do question the business model because it is an opt-out nonsense insurance fee. Feels like this might explode in the future.
Is that why the key investor is secretly protected by a strict NDA? Very unusual.
Second
Accrue Savings, a Save Now, Buy Later Startup, Raises $25 Million
Now follow me here, because this might take a moment to wrap your head around. Imagine if a retailer started acting like a kind of bank that forced you to save enough money to buy that expensive item you wanted. You know, kind of like the old layaway model.
Accrue provides a payment tool by which consumers can save money toward the purchase of goods from about a dozen retail brands and receive rewards along the way. I think the rewards and loyalty component of this is interesting because anyone who starts banking with a retailer must be a pretty big fan.
https://www.retaildive.com/news/save-now-buy-later-startup-raises-25m/617367/
Third
Soona, a Virtual Photo Shoot Platform for eCommerce, Raises a $35 Million Series B
The company primarily focuses on photos and video clips. Almost every brand could use more creative services help, so this is a good idea.
Fourth
Cross-Border Shipping Provider Passport Raises a $39 Million Series B to Help eCommerce Brands and Marketplaces Level Up
https://www.linkedin.com/pulse/passport-raises-39m-series-b-help-e-commerce-brands-level-yancher
This is a competitive market so hard to break into with services like eShopWorld, Global-E and Avalara dominating.
AND FINALLY …
Walmart Makes an Investment in Vertical Farming Start-up Plenty
So in this one, Walmart is getting a two-fer - a potential investment outcome in a startup, and a new supplier. Sounds like what Shopify is doing with its own ecosystem, doesn’t it? In any event, I think it’s unlikely that Walmart invested much money in this one.
https://www.cnbc.com/2022/01/25/walmart-makes-an-investment-in-vertical-farming-start-up-plenty.html
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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.
