July 4th, 2022: Nike’s Direct-to-Consumer growth, Bed Bath and Beyond looks for a new CEO, Bill Ready joins Pinterest, and is Amazon planning a second Prime Day?
It’s July 4, 2022 and this is the Watson Weekly - your essential eCommerce Digest!
Happy Independence Day! Unfortunately not so happy for the two CEOs who got fired last week.
Today on our show:
Nike Reports Strong Growth in its Direct to Consumer Business In Recent Earnings
Bed Bath and Beyond Looks For a New CEO As the Company Resets Again
Pinterest CEO Steps Aside as Bill Ready Joins as CEO
Is Amazon Planning a Second Prime Day in October, and What Does It Mean?
- 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….
Nike Reports Strong Growth in its Direct to Consumer Business In Recent Earnings
Last week megabrand Nike reported quarterly earnings, and in doing so continued to show progress in its generational shift from wholesale to Direct channels. Here are a few datapoints I pulled out of the call that might be interesting for listeners:
First, let’s talk about Nike’s Direct business. The direct to consumer business unit was up 7% in the recently closed quarter, and up 14% to $18 billion year over year. This puts Nike’s direct business at about 40% share, and the fastest growing segment of the business.
Second, overall revenue for the brand is down 1% y/y for the quarter and 5% up[ the full year, reflecting the changing economic environment.
Third, the company’s gross margins were about 45% in the closing quarter, primarily due to increased freight and logistics costs.
Fourth, and interesting the wholesale channel was severely affected in the last year by closure of Vietnam for up to 12 weeks which indicates the persistence of COVID over 2 years into the pandemic.
To wrap up… I’ve read articles that some financial analysts worry about the costs going into Direct to Consumer. What they are forgetting is that consumers are voting with their feet. History shows us that a DTC-only business is not the largest profit driver, but if all your customers expect to be engaging with you more digitally on their cell phones, if you cut investments in this channel you are literally cutting the potential long-term for your brand.
Brands that are serving their customers however they want to shop will end up being the winners in the long-term.
[References:]
https://s1.q4cdn.com/806093406/files/doc_financials/2022/q4/FY22-Q4-Combined-NIKE-Press-Release-Schedules-FINAL[1].pdf
https://www.fool.com/earnings/call-transcripts/2022/06/27/nike-nke-q4-2022-earnings-call-transcript/
Our Second Story
Bed Bath and Beyond Looks For a New CEO As the Company Resets Again
Well, it looks like Mark Tritton and his team of retail avengers has reached the end of their runway as the company’s Board has ousted its CEO and Chief Merchant.
One likely thing that will happen next is the sale of buybuyBaby. The baby market is huge and the retailer is a big player in that market alongside Target, Walmart, and others. However, is that really the right thing to do? I think there is a serious argument to be made that instead you should keep buybuyBaby and jettison the rest.
But what went wrong here? That’s obviously a more complex story. The short answer is turnarounds are hard for a reason. And turnarounds in a pandemic are near impossible. Mark Tritton had a solid plan and a reasonable idea, but Boards these days are impatient and you only get so much time. It could be said that perhaps it was doomed from the beginning, but the alternative of not trying to transform was worse.
More practically, I think most valuable consumers had already moved on from Bed Bath and Beyond, and so what’s left are price sensitive or promotional shoppers. Trying to go even slightly up-market and reducing the merchandise options and promotional activity scares away even the remaining consumers that are left. This itself can lead to a tailspin.
My only other thought is the idea of partnering with Kroger could be seen as taking your eye off the ball. Your number 1, 2, and 3 issues are to get consumers coming back into your Stores, period. There are no other priorities. I think Bed, Bath and Beyond failed to find that reason to keep consumers coming back regularly in that front door.
What’s next? The Board has already retained Russell Reynolds to help the company look for a new CEO, and Berkeley Research Group to further optimize some of its inventory and costs. Until this happens, a Board member will serve as Interim CEO.
Not that they weren’t there before, but this puts Bed Bath and Beyond firmly in the camp of other retailers like Kohl’s that are still out there searching for their reason to exist. Will they end up finding it?
I shook my magic 8-ball and it just came up: “All signs point to no.”
[References:]
Our Third Story
Pinterest CEO Steps Aside as Bill Ready Joins as CEO
In another CEO change, Pinterest CEO Ben Silbermann has moved on as the Board appoints former Google Commerce lead Bill Ready as CEO of Pinterest. The former CEO now moves into the Executive Chairman role, which indicates the Board still felt there was value in keeping the old CEO around, unlike in other cases like TheRealReal which may have been less amicable.
Clearly, the former Paypal leader Ready signals a clear commerce-oriented direction for Pinterest. However it’s not going to be easy.
Increasingly people are spending all their time on Tiktok, and the rest of the oxygen in the room is taken up by Amazon. After all, if you are going to just shop on Amazon anyway, what is the real reason for Pinterest other than an Amazon or Etsy affiliate program?
What are the other options for the company? They clearly aren’t going to hold inventory. I think equally as likely, they aren’t going to build a marketplace that competes with Amazon.
The obvious answer for Pinterest is ads. There are categories that Pinterest is huge in — home, bridal, and fashion, in particular. If Pinterest can create interesting experiences that allow a brand to target and connect to its users more intimately, then it could be an interesting direction.
I think another thing I would be remiss to speak about with regards to Pinterest. You could almost say that combined with Twitter, Pinterest is one of the most under-monetized social media platforms out there today relative to its peers. The challenge, which I think Twitter also has, is the company has seemingly refused to innovate. Ironically, this could create a big opportunity for Bill Ready to put his stamp on the company in a way that could endear himself to merchants who are looking for optimized customer acquisition channels.
Of course, this is all in theory. But back to the CEO changes itself. Ultimately, we are always left to wonder, how did this happen? But at the end of the day, the answer is always the same — the Board thought the company needed to change if the company is going to thrive.
[References:]
https://www.wsj.com/articles/pinterest-ceo-is-stepping-down-google-commerce-executive-to-take-top-job-11656446701
https://www.theverge.com/2022/6/28/23187084/pinterest-ceo-bill-ready-new
And Our Last Story
Is Amazon Planning a Second Prime Fall Day in October, and What Does It Mean?
Business Insider reported recently that Amazon is planning to hold a second Prime Day event this year, early in the fourth quarter, possibly in October. The internal lingo being used is called “Prime Fall Day”.
A new event is usually difficult for a seller to understand out of the gate because it’s hard to make inventory and promotional decisions with limited information, as the article reports.
Overall, I think you will see more promotional opportunities for Amazon going forward. I can imagine that Amazon is constantly looking at Alibaba in particular for inspiration on their promotional calendar.
In the case of Alibaba, it always seems like another promotional event is just a few months away. Of course too much promotional activity is always a double-edged sword as it has the effect of training consumers to wait for the next promotion to buy, which has the eventual result of depressing prices.
In the past, Amazon has had category-specific promotional events so it makes sense they would want to consolidate their marketing efforts under the Prime banner.
[References:]
https://www.businessinsider.com/amazon-plans-new-prime-day-deal-event-later-this-year-2022-6
https://www.cnbc.com/2022/06/27/amazon-plans-second-prime-shopping-event-in-q4.html
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It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
Chat-based Sales Platform SleekFlow Collects $8 million to Conduct Sales with Customers Over Social Media
The mission of the company is to enable new sales opportunities for companies from messaging and social media channels. The company claims over 5,000 companies globally as customers.
Second
FedEx invests in FourKites to Capture Insights From Its Supply Chain
FourKites has what’s called a supply chain intelligence platform whose goal is to increase the visibility and efficiency of its supply chain customers. While it’s entirely possible this is the prelude to an acquisition, FourKites has already raised a lot of money. It’s entirely possible FedEx traded some investment for roadmap features in this case if they are a key vendor in the future.
Third
Medical Supplies Sourcing and Procurement Marketplace Vamstar Raised a $9.5 million Series A from Alpha Intelligence Capital
The digitization of many different retail categories continues, this time in medical supplies and pharmaceuticals. It seems to me that the company has a marketplace-based model which focuses on matching supply and demand, something that was super-popular during COVID with shortages of PPE and other supplies.
Fourth
Open-Source Headless Content Management System Strapi Raised a $31 Million Series B
The company is focused on developers first and plans to use the money to invest in its open-source community.
With the rise of the cloud, open source is not the selling point it used to be in the application market. It also seems to me like there are so many content management systems getting funding. Is the market big enough for all of them?
Link: https://strapi.io/blog/series-b
AND FINALLY …
Cloud-based marketplace platform provider Nautical raises $30 million in a Series A investment
I met the Nautical team at Shoptalk recently and have followed their story. Given the fact that many businesses want to expand their assortment and still do not hold inventory, I continue to think there is a lot of opportunity left in the space. Congrats to the founding team!
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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.