July 29th, 2024: UPS reports Q2 earnings, Google not ending cookies after all, Amazon Prime Day roundup, and new marketplace whitepaper released
It’s July 29, 2024 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
UPS Reports Q2 Earnings
Google Not Ending Cookies After All
Amazon Prime Day Roundup
New Marketplace Whitepaper Released
- 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….
UPS Reports Q2 Earnings
5 Key Takeaways from UPS Latest Earnings Report Q2 2024
I listened in on UPS' latest earnings report and came away with a few big impressions.
1 - Temu, Tiktok Shop and Shein Growth "Exploded"
Previously the euphemism of note was "our largest customer" which was UPS codeword for Amazon. "New eCommerce entrants" is the new UPS euphemism. And the growth is exceptional!
* UPS CEO used the words "growth has exploded" and noted that these new entrants are running an entirely different model than its traditional shippers, and greatly relying on SurePost.
* In response, UPS has invested a lot in redirecting SurePost volume back into its Ground network -- to the tune of 40% success with redirect so far, and expect this number to rise.
2 - Businesses Trading Down, Not Just Consumers
One of the first mentions on a carrier call I have seen about shippers trading down in service level. For the same parcel that used to ship Air, those are now going Ground. Ground parcels are now trading down to SurePost.
UPS is claiming they are trying to maintain Ground network volume by matching loads, but all that does is reduce per parcel asset utilization of their Ground network -- somewhat a good news / bad news story. It does not fundamentally solve the trade-down problem.
Expect "TTS" - Temu, TikTok Shop, and Shein to continue to spread in the lexicon.
3 - Teamsters agreement good for robots, bad for humans
Combined with pressure on UPS average daily volume, the rise in costs of the Teamsters agreement is bad news for humans. UPS would have continued its RFID initiatives anyway, but the combination of UPS volume challenges has promoted UPS to eliminate 11,500 positions which has delivered $350M in savings. They expect to triple that savings number by end of year.
As I said, good for robots, bad for humans.
4 - Holiday Peak Will Be Condensed
If you haven't studied the holiday calendar this year, now may be time to do so. There are only 17 days between Thanksgiving and Christmas. UPS is calling this the most condensed peak since 2019. Dec 18th they expect to be the peak.
* Given the volume declines, I still don't expect many supply chain issues but those not prepared for the condensed peak may be caught flat-footed.
5 - Amazon Revenue Stable At 11.5% of Revenue
* The fact that this is flat to a year ago is somewhat surprising, but also indicative of the growth of Amazon relative to other shippers.
* When Amazon tells you for years that they are going to be reducing reliance on UPS but their share of your revenue stays consistently flat -- I take this as a clear indication that Amazon is still taking marketshare.
[References:]
Our Second Story
Google Not Ending Cookies After All
And you thought we were living in a post-cookie world? Clearly we are not. After pushing back the cookie deprecation date in Chrome several times in the last few years, Google has decided the cookie either cannot or will not be killed.
The company has given an alternative in its Privacy Sandbox APIs, but ultimately this decision may not end up meaning as much as we might think. With regards to cookies, users will at some point be given a choice whether or not they want to use them.
In new and growing mediums like mobile and ConnectedTV, the cookie is simply less relevant. As a result, we already are living in a cookieless world because we are trying to triangulate user identity and information in a much more privacy-safe way with data clean rooms and retail media networks
Still … back on the desktop Internet, it strikes me like the cockroach and Twinkies, the HTTP cookie may always be with us.
[References:]
https://www.marketingdive.com/news/google-wont-deprecate-kill-cookies-chrome-advertising/722053/
https://privacysandbox.com/news/privacy-sandbox-update/
Our Third Story
Amazon Prime Day Roundup
Well we have another Prime Day in the books. While I am Prime Day is now in the rear view mirror I thought I would encapsulate a few of the roundups from notable sources like Amazon, Adobe, JungleScout, Numerator and Acadia an Amazon marketing agency.
What follows is a synopsis of some of my key takeaways from these sources:
Prime was a record-breaking event for Amazon but otherwise they don’t report too many metrics that allow you to see what’s going on. Consumers shopped deals across 35 categories.
Adobe reports Prime Day being up 11% year over year, which is slightly above the eCommerce growth rate of 8-10% being widely reported at the moment. Shoppers are reported to have spent $11.4 billion in two days. By one thought, that would seem like a slight disappointment given the amount of promotion involved, but this is partially explainable if you keep listening.
Of the agencies reporting about their clients, Acadia reported that 80% of their clients ran deals.
Consistent with consumers trading down, the number of orders was higher than average order value. Numerator reported the AOV at around $58 and the average price per item was about $28. Acadia reported a 15% drop in average selling price compared to last Prime Day.
Acadia reports that ad sales on Amazon were up 63% year over year. On 11% growth rate in gross merchandise volume. This is going to be great for Amazon’s Q2 margins, but is this a sustainable trend? Paging Lina Khan. Please pick up the orange phone. Paging Lina Khan, please pick up the orange phone.
Prime Day continues to be an electronics-focused event with televisions, fitness trackers, computers, smartphones and cameras benefiting most.
What’s next? Get ready for Amazon’s Fall Prime Day event which if the past is any guide will begin in October!
[References:]
https://www.aboutamazon.com/news/retail/prime-day-2024-recap
https://www.digitalcommerce360.com/article/amazon-prime-day-sales/
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And Our Last Story
New Marketplace Whitepaper Released
This last week, at RMW Commerce we released an interesting new whitepaper called “Your Customer Is Hiding in Plain Sight” - to draw attention to the fact that marketplaces are still a great way to win new customers, and in fact your brand’s customers are definitely there!
This report builds on other research we’ve done here at RMW Commerce on Delivering the Modern Brand Promise which indicated that customers use an average of 6 digital touchpoints before they purchase something.
The challenge is, you can’t just show up on any random channel and expect to win. If you’re looking to succeed on marketplaces, you must solve a number of challenges:
Identify which channels are a fit for their customers.
Connect to those channels
Understand what the best assortment is for that particular channel, compared to your own website
How to Optimize your feed and business on that channel
And last but definitely not least, how to be profitable.
A big thank you to Sharon Gee and the entire Feedonomics team for commissioning this report, and Vinny O’Brien who helped author it. Check out the Resources section of the RMW Commerce website for our latest Whitepapers and to download it.
[References:]
It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
UPS to Acquire Mexican Delivery Company Estafeta
UPS acquires Mexican express parcel delivery company Estafeta for an undisclosed amount, aligning with its 'Better and Bolder' strategy to become a global leader in premium international small package and logistics services. With Section 321 and other nearshoring happening, Mexico is a key staging ground for the North American market for brands now.
Second
L Catterton Buys Outlet Malls Stake in $1.9B Deal
L Catterton has agreed to buy Hammerson's stake in outlet mall landlord Value Retail in a deal representing an enterprise value of $1.9b. Who said luxury is not interested in real estate?
Third
Shopify to Acquire ChannelApe
Shopify has acquired the inventory management platform ChannelApe for an undisclosed amount. Is this Shopify atoning for its logistics fiasco and enhancing its inventory management software? With apologies to ChannelApe, any software with an ape is not Enterprise software. From looking at their website, this could add better EDI, purchase order, and inventory management and analytics to Shopify.
Link: https://www.channelape.com/blog/channelape-is-being-acquired-by-shopify
Fourth
The Bouqs Company Raises Over $23M in Funding
The Bouqs Company, a DTC floral retailer, has raised over $23M in a mix of debt and equity that will be used to fund retail growth and new initiatives. I am seriously curious how a 12-year-old florist raises funding?
Link: https://www.finsmes.com/2024/07/the-bouqs-company-secures-over-23m-in-funding.html
AND FINALLY …
Cart.com Secures $105M in Debt Refinancing
Cart.com has secured a $105M term loan facility from BlackRock to refinance its previous loans. Debt and startups often doesn’t work well together - and the current interest rate environment is not fantastic.
Link: https://www.finsmes.com/2024/07/cart-com-secures-105m-in-debt-refinancing-from-blackrock.html
Today’s final word for the week of July 29, 2024 is Simplicity: I bring this up because many businesses grew up in an era where technology was an asset, it could help your valuation, and you thought you could get a competitive advantage by building your own technology. For most brands and retailers in the audience, that era is long past. There is so much software on the market, but I find there is not enough good people to understand how and when to use it. In any event, don’t overcomplicate your technology. Get the right people, and help them learn each day about the customer, then add technology which helps you on this journey. But notice, it’s the people you should worry about first.
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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.....
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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.