June 20th, 2022: Amazon’s Consumer CEO departs, Jokr is leaving the US market, The RealReal Founder is out, and Amazon announces Prime Day

June 20, 2022 Rick Watson

It’s June 20, 2022 and this is the Watson Weekly - your essential eCommerce Digest!

I’m back, did you miss me?

Today on our show:

The Great Resignation Moves to Amazon as Amazon Consumer CEO Dave Clark Departs
Instant Delivery Firm Jokr Announces Its Leaving the US Market
TheRealRealFounder Out As We Hold Our Breath for The Secondhand Shoe to Drop
Amazon Announces Prime Day on July 12th and 13th To Help America Get Rid of Excess Inventory

- and finally, The Investor Minute which contains 5 items this week from the world of venture capital, acquisitions, and IPOs.

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….

Great Resignation Moves to Amazon as Amazon Consumer CEO Dave Clark Departs

In January 2021, Jeff Wilke departs Amazon.

Now in June 2022, Dave Clark departs Amazon. Ostensibly, the CEO of Worldwide Consumer at one of the earth’s largest online retailer seems like a highly desirable role.

Why does no one seem to want it?

In short, the last few years have been tremendously difficult. Particularly for executives that have been at companies for 20 years. Consider it Amazon’s own mini-great-resignation.

If you’ve spent the past 10+ years building one of the best logistics operations on the planet, and doubled those operations in the past 18 months entering into a slowing period, the next few years ahead of you suddenly don’t seem as interesting.

In other words, having built such an empire the next few years start to look a lot more like shuffling deck chairs around and optimizing costs. This is a much more financially-oriented.

Which allows me to speculate about the successor to Dave Clark. What will the shape of Amazon’s next leader look like?

Andy Jassy is in many ways was the most Jeff-like of the remaining Amazon execs and chosen as overall CEO of Amazon. His first major job was to appoint his successor at AWS, where he poached a former Amazon executive from Salesforce.

Will we see an eCommerce and consumer visionary in thisfollowup role, or a more financially-oriented operator?

Ultimately, most of the assets and formulas are in place, they need optimization. But not optimization in the spreadsheet point of view. I predict one of two options. First, an AI and data-oriented leader being chosen to lead Amazon’s consumer business.

You can’t manage and optimize business Amazon’s side using spreadsheets. Its optimized using algorithms.

Second, the job is split into 3 different parts: one for US consumer, one for Interantional consumer, and one for Logistics. The company already has leaders for these areas and it seems like Andy Jassy wants to manage this himself anyway.

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Our Second Story

TheRealReal Founder Out As We Hold Our Breath for The Secondhand Shoe to Drop

Designer resale site TheRealReal shocked the market last week when the long-time founder and CEO Julie Wainwright stepped down as CEO as well as from the Board.

Here is a summary of the company.

* The Real Real was founded in 2011. Went public in 2019.

* 2021 Revenue increased 56% year over year to $468 million

* 2021 Net losses grew 34% year over year to $236 million

* The Board has appointed COO and CFO to shepherd the company while an Interim CEO search is done.

Now the company did not announce why this is happening, which leaves us to do a bit of detective work to guess what’s going on here.

* It’s not clear the company had any kind of clear succession plan in place, as there is no mention of it from the company.

* Sometimes in surprise resignations another shoe is waiting to drop. A clear example of this happening is when Devin Wenig departed eBay over the scandals that happened under his watch.

It does not seem like this is the case here. I started my investigation by looking at the profiles of the two people who are Interim CEOs. The current President has been Chief Merchant since 2011 and President since March 2021.

Doesn’t it seem odd to anyone that this person wouldn’t just be named the full Interim CEO?

So let’s try to determine why this is. When you look at the current CFO, Robert Julian’s background, you see that the first red flag is that this person joined the company only 9 months ago.

Then you look at the last 4 stops from Mr. Julian, he has been nowhere for more than 3 years. And if you look at the last couple of stops, he was the CFO when Sportsmans Warehouse attempted to sell itself to Bass Pro Shops in 2021. This acquisition was later canceled by the FTC which led to Julian’s departure, and later joining the Real Real.

He was also the CFO of Callaway Golf when they acquired Ogio in 2018.

On the other side of the coin, let’s look at the facts from TheRealReal. The stock has been in the tank, but so have a lot of stocks.

The thing that stands out to me the most is that the company issued about $143M in notes in 2020 and $244M in notes in 2021. While the company says it has enough cash to last through the end of 2022, I really expect they have no more than 18 months of cash. For any public company Board of Directors, this is a huge issue.

As a result, my feeling is that this was a virtually unanimous decision from the Board — the big question is did Julie Wainwright want to stay or not. But the fact that she is no longer on the Board hints at the fact there was a major disagreement there.

Now you have a new CFO who is experienced at putting together deals and financial analytics, and the company needs to reduce its losses as it cannot continue to issue notes in this rising interest rate environment.

Expect major restructuring and layoffs leading through this CEO search. In fact, you might even expect this CEO search never to complete and the company instead to be sold to new owners.

[References:]

Our Third Story

Instant Delivery Firm Jokr Announces Its Leaving the US Market

A few years back, Jokr said it was "unit profitable" in all of its major markets, including the US. So why then are they exiting the US market?

Well Warren Buffet is famous for saying that EBITDA is a terrible metric to live by when looking at investing in businesses.

He calls it "BS Earnings." Why?

It does not consider the cost of capital. Major infrastructure investments. So just because a company pushes lots of OpEx into CapEx, does not mean it is any more profitable.

Because that (razor thin, almost non-existent) unit profitability needs to subsidize those capital investments in the long-term. If the payback period is too long, then that unit profitability is not worth very much to anyone.

All it means is you have a different kind of unprofitable business.

I think a lot more businesses will find that they are in this situation. With people, buildings, etc.

Amazon is there too, and they are reportedly delaying construction projects and subleasing some of them, depending on what phase they are in.

Just a simple note as the cost of capital goes up to pay attention to the overall business, not just what the business looks like above the contribution margin.

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And Our Last Story

Amazon Announces Prime Day on July 12th and 13th To Help America Get Rid of Excess Inventory

Last week Amazon announced its Prime Day will be on Tuesday July 12th and Wednesday July 13th this year.

Remember when Amazon Prime Day was new and exciting? That was a long time ago. Now in popular culture it seems like a way for everyone to stock up on new electronics cables and Amazon-branded products.

In reality though, this is a big day for the third-party seller community.

What am I watching for this Prime Day? A few things.

One, is how heavy the discounts are. This will give you some idea how much extra inventory Amazon has.

Two, how much influencer involvement will there be in Prime Day? Amazon’s announcement made a note about live streaming being an even bigger deal this year than previous years. While their traction has been limited so far, I truly believe Amazon is playing the long game in livestreaming eCommerce and traditional players in the online shopping market should be terrified that Amazon is coming for them long-term.

Three, how much promotional activity are they giving third-party sellers and what impact will this have on their business this year?

I learned from Amazon’s announcement that Amazon is introducing a new small business badge this year. While this isn’t going to have a huge impact on Amazon’s business overall, it will influence some shopper behavior at the margins and serve as a good PR story for Amazon.

Four, what does Prime Day internationally say about their progress in those markets?

[References:]

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It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.

First

Cereal brand Magic Spoon Closes $85M Series B Round Led by HighPost Capital

That’s a lot of cereal folks. This is on the heels of its launch into Target stores nationwide. The basic idea is simple. All the bowls of sugar we grew up on recreated in keto-friendly formulas. Sign me up.

https://www.businesswire.com/news/home/20220613005115/en/Magic-Spoon-Closes-85M-Series-B-Round-Led-by-HighPost-Capital-and-Announces-First-Nationwide-Retail-Launch

Second

B2B eCommerce medical supplies marketplace bttn just received $20 million from Tiger Global

One of the biggest under the radar stories in eCommerce right now in my opinion is the growing share of eCommerce revenue in traditional product categories that until now have been almost exclusively the domain of business to business purchases. Medical supplies is just one of thousands of categories in this bucket.

https://techcrunch.com/2022/06/13/tiger-global-bttn-series-a-e-commerce-medical-supplies/

Third

Jeweler Blue Nile Set to Return to Public Market Via SPAC Deal

This will be Blue Nile’s second turn in the public markets. Interesting decision to return there now, we will see how it fares.

Link: https://www.bloomberg.com/news/articles/2022-06-10/jeweler-blue-nile-set-to-return-to-public-market-via-spac-deal

Fourth

Private Equity firm Apollo to acquire Hispanic retail chain Cardenas Markets

The chain operates 59 stores in markets across the West and Southwest. It will be interesting to see if this develops a serious online component.

Link: https://www.grocerydive.com/news/apollo-to-acquire-cardenas-markets/625411/

AND FINALLY …

Postscript takes in $65M so merchants can send more personalized texts to customers

Link: https://techcrunch.com/2022/06/15/postscript-65m-shopify-merchants-personalized-texts/

SMS is one of those newer marketing channels for brands that has not yet been completely overrun by spam, but that day is coming soon. Given that internationally SMS is not a very used channel internationally — that honor goes to WhatsApp — it will be interesting to see how they pivot into other marketing channels going forward.

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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. Garrett Tiedemann is the producer; Alex Brower 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.