June 17th, 2024: Could Amazon deliver the mail? Costco expanding its ad network, McKinsey state of the consumer 2024 report, and Loop and Happy Returns partner up
Today’s episode of the Watson Weekly podcast is sponsored by Commercetools.
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It’s June 17, 2024 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Could Amazon Deliver the Mail?
Costco Expanding Its Ad Network
McKinsey State of the Consumer 2024 Report
Loop and Happy Returns Partner Up
- and finally, The Investor Minute which contains 3 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….
Could Amazon Deliver the Mail?
Or asked another way, "Should USPS Expand Workshare Rather than Shrink It?"
I did a post on this on LinkedIN last week and it got what you might call the opposite of fan mail. It generated an entire flame war against me, which I was happy to be on the receiving end of! After all, if you are having a discussion there is passion about a topic right? If you’ve ever wondered wow I wish I had more engagement on my LinkedIn content, be careful what you wish for! But it’s better than being ignored I guess. (laugh)
What am I talking about?
There was an WSJ article recently about how some of the changes to the USPS have been off to a slow and struggling start. It's not this I'm worried about. Change always brings struggle. Operational issues can be fixed. Regional processing plants - like the one mentioned in Atlanta - are a good idea objectively, even if some are struggling out of the gate. Staffing is a problem for everyone.
It matches my own experience with the mail. Sometimes great, sometimes maddeningly delayed. Staffing has been one of the biggest blockers.
But I have trouble with the WSJ article too. It mentions USPS is hemorrhaging cash for years due to declining mail volume. Well, parcel volume has been increasing. Really the cash hole is due to the Retirement Benefits obligation changes pre-funding retiree health benefits. Isn't it curious since that day, USPS has never turned a profit since?
It's not a coincidence.
I wanted to ask a simple question though: why shouldn't we change how last-mile is done?
It seems to me that we have long past the time where exactly one last-mile carrier can deliver the volume of mail nationwide to all places. The universal mandate is a fine idea, but it does not necessarily mean the implementation need be the same everywhere. If you were to reimagine this from scratch, you would likely not setup the same structure.
Having private companies bid for zones and routes would setup competition and encourage entrepreneurship. Quality could be an issue (as if it isn't already for the mail!), but Amazon's Delivery Service Partner program is a model. It's not technically Amazon employees delivering the parcels to most of us.
Workshare has historically been done primarily in mail pre-sort with massive facilities to get mail across the countries, dominated by Pitney Bowes historically. Could the same be done in last-mile?
Could some kind of public / private partnership work there? And if so, why not Amazon?
Amazon already dominates most every package room in America, why not your mailbox?
[References:]
Our Second Story
Costco Expanding Its Ad Network
And you thought the hot dog was enough at Costco, it looks like instead of just mustard you will also get a side of ads. Wait, you don’t put ketchup on your hotdog do you?
Costco is the third-largest retailer - a fact that I constantly forget - and has a subscriber database of over 74 million consumers. That is a lot of valuable data which brands would love to leverage.
One thing that will make Costco’s retail media network more valuable than others? Everyone who walks into the store you know their address due to their membership. This is very different than the average retailer and will likely lead to a premium on this ad inventory relative to others.
Of course relatively speaking, Costco is late to this party, but since everyone loves their hotdogs people will be happy they have finally shown up. Most of all brands who are looking for alternatives to Amazon, Instacart, and Walmart in the retail media space.
It’s not lost on the management team there is a big profit opportunity here. Last year it is estimated that Costco brought in $225M in media revenue, but its competitors like Kroger brought in almost a billion dollars.
Can you say upside? Extra ketchup on mine please.
[References:]
Our Third Story
McKinsey State of the Consumer 2024 Report
The often ridiculed but seldom duplicated consulting firm Mckinsey has released a 2024 state of the consumer report and I thought it would be interesting to pass along a few key findings from it. Or pass along my thoughts on what in general I consider to be ridiculous findings.
Now that you have been warned, let’s get into it.
First, particularly in the Middle East and Asia, younger consumers are about to become much bigger spenders and their eyes are on more premium products compared to the trading down happing in the West right now.
My take on this trend is that is it may not apply to China given their upcoming demographic challenges.
Second, middle-income consumers are resilient, there’s that silly word again, and are willing to spend on discretionary items like travel and home improvement.
Two trends, two misses from my point of view. I have a feeling the idea of the resilient consumer will be laughed at in about 6 months from now. Whose pocketbook is not being squeezed in an advanced economy right now?
Third, brand loyalty is diminished and some consumers have switched brand loyalty in the face of pandemic-era supply chain disruptions. This has caused increased purchase of private-label products which are often just as good but cheaper.
My take? It seems like this is taking one trend and conflating it with another. Supply chain disruptions changing brand loyalty? How about this trend they skipped over in the last one? In other words, squeezed consumer pocketbooks causing consumers to trade down.
Finally, McKinsey mentions that the health and wellness market is expanding significantly. Seriously, this passes for insights? Why no mention of the aging demographic of US consumers which is the real motivation behind all this? Also, hello Ozempic. I see you sitting there.
Look part of our role here at the Watson Weekly is to shine a light on bullshit, and there was more than a little bit in this McKinsey report, but at least we are here to help each other out on this journey..
And hey you got some free McKinsey consulting to boot. That and $2.90 will get you on the subway in New york City.
[References:]
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And Our Last Story
Happy Returns and Loop Partner Up
Loop Partners With Happy Returns A Win For Both Sides
It sure looks to me like Loop has consolidated the Shopify returns market over the past few years. The whole business started when Affirm acquired Returnly in 2021, and then shuttered it in 2023 — telling all its customers to move over to Loop which greatly accelerated the company’s growth.
This looks like another deal where the dominant player on one side, Loop makes a smart partnership with the dominant player on the other side, Happy Returns, and both sides can benefit and the two avoid competition.
Digital meets physical.
Here are the details on the partnership between Happy Returns and Loop:
* Loop customers have the option to access Happy Returns 10,000 dropoff locations where a box is not required, which is frankly how most shoppers want to do returns. It's much better to inspect and understand what to do with a return at the point the consumer hands it to you, rather than have them ship it back.
* Happy Returns customers now a preferred path to integrate with Shopify and serve buyers who are a part of that ecosystem.
Even those who work for other platforms will acknowledge Shopify the fastest growing platform, so Happy Returns teaming up with the largest returns provider on that platform is good for them as well -- particularly as Shopify starts to have more conversations up-market.
Knockout Blow for the Returns Market?
While there are several smaller players, it sure looks to me like in the Shopify integration side, Loop has outlasted not only Returnly but now Happy Returns as the primary returns integrator for Shopify. There is competition, but they are much smaller. And now the focus seems to be up-market since Happy Returns is about Enterprise customers, as part of UPS.
What Next?
At its core, Loop has always been about returns and also not about returns. There is an entire class of supply chain-related companies that never touch a box. So what then?
At its core, Loop has been about something very different - driving cash efficiency in a merchant's business by turning an opportunity where cash could have exited the building, and exchanging that for inventory.
Loop helps merchants be more efficient with their precious cash and inventory turns. Making a customer happier during their purchase experience - making it more likely they will purchase again, also cash-benefiting - while at the same time improving a merchant's efficiency.
My partner and colleague Nick Kaplan has discussed on the Watson Weekend about the world having entered entering the Age of Efficiency -- in particular with regards to cash.
In other words, the CFO has slid into your DMs.
Going forward, there are other customer experiences Loop could transform to help improve a merchant's cashflow, and this is the direction I expect Loop and other growth-oriented SaaS companies to head in.
Congrats to Jonathan Poma and the entire Loop, as well as the Happy Returns team on this.
[References:]
https://www.loopreturns.com/blog/loop-happy-returns-partnership
https://www.linkedin.com/feed/update/urn:li:activity:7206991156205731840/
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It’s That Time Friends, for our Investor Minute. We have 3 items on the menu today.
First
Shopify Acquires Slack Alternative Threads
Shopify has acquired Slack replacement Threads for an undisclosed amount. Is this another acqui-hire or a potential opportunity for Shopify to offer a team communication platform for its customers? If that’s the case, is a Tableau-like acquisition next to complete their transformation into a Salesforce-look-alike?
Second
Authentic Brands Group to Acquire Champion From HanesBrands
Authentic Brands Group has acquired athletic wear brand Champion from HanesBrands for $1.2B, potentially adding $300M for a $1.5B exit based on performance thresholds. Authentic continues to find and acquire iconic brands. It has interested to see the rise of Champions in the last several years from forgotten to remembered.
Link: https://authenticnewsroom.com/press-releases/authentic-to-acquire-champion
Third
New Era to Acquire Lifestyle Brand '47
New Era has announced it will acquire fellow lifestyle brands '47 for an undisclosed amount. The combined companies generate approximately $2 billion in annual revenues. What are the chances we see an IPO for New Era in the next two years?
Today’s final word for the week of June 17, 2024 is CFO: As in, the CFO has entered the chat. My partner Nick Kaplan and I spent some time at CommerceNext last week and I’ll be damned if how to sell to a CFO was not a part of every conversation. If you’re within a brand, the game is now how to convince your CFO that everything your digital team does is not actually just another cost center but can help the company’s cashflow. On the other side of the table, if you are an agency or ISV, how to turn that CFO frown upside down by showing concrete proof and delivery of results to both the top and bottom line.
Good luck out there!
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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.