July 11th, 2022: FedEx’s new strategy, Instacart and Walmart Canada’s new launch, TikTok cancels eCommerce plans, Shopify invests in content management system
It’s July 11, 2022 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
FedEx Announces New Strategy Based on Revenue Quality, Mirroring UPS’s Approach
Instacart and Walmart Canada Launch Virtual Convenience Store
TikTok Cancels eCommerce Plans in the US After Terrible Results in a UK Test
Shopify Launches Editions and Invests in Content Management System Sanity
- 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….
FedEx Announces New Strategy Based on Revenue Quality, Mirroring UPS’s Approach
Last week, FedEx’s earnings release was highlighted by new CEO Raj Subramaniam indicating that revenue quality would be the number one focus of the firm.
This comes after the last few years of decline in FedEx’s competitive position relative to its peers, especially UPS and Amazon. In particular, the company reported that Express, Ground and Freight are all off last year’s marks.
While I applaud the CEO highlighting a top priority, it’s not 100% clear where the company will be investing most of its resources. What I hear from this release is that FedEx will stop wasting quite as much money, particularly on areas like the synergies between the Ground and the Express networks which have always been separate. Separate operating infrastructures means there is virtually no advantage in these divisions being part of the same company. On the other hand, if these entities are able to hand off to each other, segment volumes could increase and optimize across both networks as each specialize in what they are good at.
As a result, color me skeptical at the moment until a more massive shakeup happens at FedEx.
[References:]
Our Second Story
Instacart and Walmart Canada Launch Virtual Convenience Store
Last week Instacart announced that it has signed a partnership with Walmart Canada to open a virtual convenience store in the Toronto area powered by Instacart.
Up to 4,000 items will be offered and the timeframe is reported to be 30 minutes.
I think long-term, Instacart has a problem here. It has a high concentration of revenue from a few big retailers, and is teaching those same retail partners about the business model over time. It seems more likely to me that these big retail partners will figure out their last-mile supply chain solutions and not give such a big percentage to someone who wants to ultimately own their customer relationships.
The technology is powered by the old Instacart Unata acquisition, which appears to have been rebranded as Carrot Storefront.
I thought the same thing when I heard the term Carrot Storefront. It really takes guts to name a product Carrot Storefront. Can’t you just imagine a little virtual Bugs Bunny moving in there?
Perhaps this is meant to draw attention away from the fact that Instacart is supposed to be in a quiet period after the company filed its confidential IPO. It remains to be seen if the company will come out the other end of this process — it is definitely not a great time in history to be going to the public markets if you aren’t both growing and profitable – and it is not clear if either apply to Instacart at the moment.
Ironically, this doesn’t give me a lot of confidence in the agility of Walmart Canada either. Can you imagine Amazon Canada ever partnering with someone like Instacart to deliver technology solutions?
Me neither.
[References:]
Our Third Story
TikTok Cancels eCommerce Plans in the US After Terrible Results in a UK Test
Social media platform TikTok, which has the most engagement out of all social media platforms out there right now and is running rings around Facebook, has been trying to determine if it could introduce this to the US.
According to the published reports, in order to determine whether or not to scale the concept in the West, its parent company ByteDance tasked a UK-based team to build a livestream eCommerce offering into the app.
Well, the project was plagued with problems and the consumer results were not interesting enough to continue investing in.
Let me explain why this is happening.
First, what is the average engagement time on TikTok for a user on a single video? About 3 seconds. Sometimes less! Have you seen the average teenager thumbscrolling Tiktok? Livestream eCommerce doesn’t even have a chance.
Second, what is the purpose of TikTok? Entertainment and inspiration. As a rule, you don’t go to the site with commerce intent. Anyone who has tried to run an eCommerce brand knows that, in most cases, the source of the traffic to your website matters more than the landing page. If the people who find your site are not looking for what you’re selling, then they will simply bounce.
Third, news has leaked that the team in the UK tasked with this initiative was apparently not treated very well. I don’t have any special information here, but it’s hard to imagine how an unmotivated team can produce a great result, so I’m sure this didn’t help. However, in the words of Marc Andreessen, if there is a market for what you’re doing, it will pull a product out of even a mediocre team if they are persistent. Right now I can only assume even a great team would not have been able to produce much better results.
While this may not put the nail in the coffin of all of what people called Social Commerce, it does pretty much put an end to the idea that a social media platform ever has the potential to disrupt a major eCommerce player in the aggregate. Brands and creators that have an insane following with extremely limited time offers can make social commerce work. Everyone else?
Better to spend your time elsewhere.
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And Our Last Story
Shopify Launches Editions and Invests in Content Management System Sanity
Shopify has released its Summer ’22 Edition, adding more than 100 new features – including NFTs, Twitter shopping, and tap-to-pay on iPhone.
In a company that already tends to be pretty good at PR, it just started a new semi-annual Editions series to highlight all its recent features developments.
The biggest changes for merchants to take note of are as follows:
Shopify is prioritizing B2B.
Twitter is now a sales channel.
NFT-gated eCommerce is mentioned here
Merchants can now add build and host back-end code on Shopify’s infrastructure, what the company calls Functions.
My take on these changes?
I almost ignored them because I had heard many of them announced in the past, but there is definitely new information here.
Twitter and NFTs I couldn’t be more down on as real commerce opportunities at the moment. Twitter is full of bots, TikTok just shut down its eCommerce experiment, and NFTs are only for the true pioneers at the moment.
Overall, if I had to pick a theme, there are many merchants including B2B merchants that could benefit from Shopify opening up the kimono in its checkout and payment processes. Shopify Functions is kind of a serverless way to enable this without introducing another infrastructure dependency.
Another bit of Shopify news I uncovered was its investment in developer-focused headless eCommerce management system Sanity. This deal is noteworthy for a few reasons.
First, Shopify continues to invest in its ecosystem providers. My network is completely divided on whether this is a good idea or not. I tend to think that the result is net positive enough that Shopify should keep doing it, but others think that picking winners in what is supposed to be an open ecosystem is more harmful than not. In any event, both sides agree that this behavior hasn’t hurt Shopify to date.
Second, are you kidding me — another headless content management system? How many of these players can the market actually support?
Third, Sanity’s technology approach is interesting because it’s implemented on top of Shopify’s headless Hydrogen and Oxygen stack. It will be interesting to see how merchants feel about this approach. On one hand, if you are already investing in Shopify, you are not adding new points of failure to your eCommerce stack. On the other hand, if you ever want to switch platforms in the future this definitely creates some additional Shopify lock-in, which I guess is kind of what Shopify is hoping for.
[References:]
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It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
Walmart is acquiring Memomi, an AR startup powering virtual try-on for eyewear.
No acquisition price was announced but this optical services are a huge need in Walmart’s Pharmacy plans.
Second
Trucking Company Schneider invests in chemicals supply marketplace ChemDirect.
Schneider National Inc. provides transportation and logistics services. Its minority stake in ChemDirect includes an agreement that will make Schneider a transportation and logistics provider for the startup, in addition to what is estimated to be about a $5 million to $10 million stake in the company as part of its Series A.
Third
Profasee raised a $2.3 million seed round and launched an Amazon price optimization platform.
Despite the fact that repricing products on Amazon is not a new phenomenon, there are so many sellers mispricing their products on Amazon on a daily basis that I see this as having a big market potential.
Congrats to my friend Chad Rubin on this news!
Fourth
Klarna is set to raise fresh cash at a slashed $6.5 billion valuation.
This would be over an 80% discount to its previous $45 billion valuation. It’s tough times in the Buy Now Pay Later space, folks.
Link: https://www.wsj.com/articles/klarna-to-raise-fresh-cash-at-slashed-6-5-billion-valuation-11656692324
AND FINALLY …
Klarna rival Zilch extended its Series C to support growth in the US.
The company has raised an additional $50 million, but first of all, who came up with the name Zilch?
Second, it’s not 100% clear how much of this extension is debt vs. equity. In this environment, taking on a lot of new debt could get expensive very quickly.
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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.
