June 5th, 2023: Amazon’s Small Business Empowerment Report, Shopify’s upcoming shareholder meeting, McKinsey report on the beauty market, and economists wondering where’s the recession?
Today’s episode of the Watson Weekly podcast is sponsored by Commercetools.
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It’s June 5, 2023 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Amazon’s Small Business Empowerment Report
Shopify’s Upcoming Shareholder Meeting
McKinsey Report on the Beauty Market
Economists Wondering Where’s the Recession?
- and finally, The Investor Minute, which contains 7 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….
Amazon’s Small Business Empowerment Report
Recently, Amazon’s VP of Worldwide Partner Selling Services, Dharmesh Mehta, published a Small Business Empowerment report.
Even though a lot of what Amazon puts out is public relations designed to bolster Amazon’s image with the general public generally and politicians in particular, it’s still useful to review these types of reports because it tells you the narrative the company is trying to push.
Just to give you some idea why Amazon does this…. Imagine if Amazon is viewed as the actual friend of small businesses, then the company isn’t viewed as this abusive employer that makes its delivery drivers pee in cups and peddle counterfeit goods to unsuspecting consumers.
Here are a few statistics from the report that I thought were interesting:
Independent Amazon Sellers in the United States average about $230,000 in sales each year, and created over 1.5 million jobs related to operating their businesses. Of course these jobs will be immediately outsourced to Amazon robots, but who’s counting?
Third-party sales on Amazon account for about 60% of Amazon’s sales today.
Amazon reports that Shipping with FBA costs 30% less per unit than standard shipping options offered by major U.S. carriers and 70% less per unit than their premium options comparable to FBA.
Amazon reports about 260 million products are exported globally by US sellers annually.
Buy With Prime got a small mention, but there was no case study related to it. Likely this is because Buy With Prime is in another organization within Amazon than the selling team. In case you needed another proof of Conway’s Law, here you have it.
I tried to pull out the most interesting tidbits of information so you don’t have to suffer through reading the entire public relations exercise. The 260 million number of products exported globally by US sellers was probably the most interesting piece of information I came across. No mention by Amazon what percentage of its entire catalog that represents.
[References:]
Our Second Story
Shopify’s Upcoming Shareholder Meeting
In case you weren’t aware, Berkshire Hathaway isn’t the only company in the world that has a yearly investor meeting. All public companies are required to have them. Shopify released its latest 6-K which described the changes to the company’s Board of Directors, as well as upcoming shareholder resolutions for approval.
Remember, this is the same Board of Directors that just last year voted to give CEO Tobi Lutke “Founder’s Shares” which essentially means that Tobi is the only Board member that actually matters, similar to the structure that Mark Zuckerberg has with Facebook.
It’s in this vein that I call out one Board of Director nomination that is being made, and it’s Bret Taylor. Bret Taylor is a long-time Silicon Valley executive who has sold several startups to major Silicon Valley players like Facebook and Salesforce. Bret spent 3 years as Chief Technology Officer at Facebook, and 1 year as co-CEO of Salesforce.
There are a few reasons that I think the nomination of Bret Taylor as a director could be interesting, and of course this is all speculation.
First, along with Fidji Simo, Bret is another former Facebook executive on the Board which could indicate that Shopify is looking to ramp up its investments in advertising and wants connections up to the highest levels at Facebook.
Second, as the former co-CEO at Salesforce, Bret could perhaps be helpful as an advisor to Shopify’s Enterprise sales initiatives… Although this is the least likely reason I came up with because Shopify has already been doing quite well convincing former Salesforce customers to join Shopify Plus over the past several years.
Finally, I couldn’t help but notice that in the past 4 months Bret Taylor has co-founded an AI startup which is intended to “use AI to solve some of the biggest problems in business.” Whatever that means! But in other news, didn’t Shopify CEO Tobi Lutke just recently get religion on Artificial intelligence himself, declaring it the top company priority?
The smart money indicates that Tobi is looking to leverage some of Bret’s company’s expertise in AI, and potentially even give his future startup a landing spot if things go well. Stranger things have happened.
[References:]
https://d18rn0p25nwr6d.cloudfront.net/CIK-0001594805/0fdc5826-deba-4008-9832-69ad755686ea.pdf
https://www.linkedin.com/feed/update/urn:li:activity:7029166820972511233/
Our Third Story
McKinsey Report on the Beauty Market
Consulting firm McKinsey recently released a new report on the state of the beauty market in 2023. Since beauty has been one of the most resilient sectors in eCommerce over the past year, I thought it might be interesting to cover here.
Here are my biggest takeaways from the report:
First, the size of the beauty market in 2022 was $430 million worldwide and is expected to reach $580 million by 2027. That’s about a 6% annual growth rate overall across skin care, hair care, makeup and fragrance.
As we unpack this growth rate, McKinsey is predicting the premium tier of beauty to grow slightly faster than mass-market beauty.
With regards to channels, eCommerce is expected to be the fastest-growing channel at about a 12% growth rate, although this doesn’t mean that brands can ignore brick and mortar. Consumers are reporting that their online purchases are being influenced by what they try on and see in stores.
With regards to geography, some of the fastest growing countries are going to be the Middle East and India, which I find interesting. Especially for global brands, having licensees in these regions could be lucrative.
One of the final interesting themes mentioned in the report is the increased role of mergers and acquisitions in the space going forward — in particular, private equity and conglomerates looking for more independent brands as deal sizes shrink in size but not in frequency.
[References:]
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And Our Last Story
Economists Wondering Where’s the Recession?
If you’re looking at all the recent economic news and wondering where the recession is at, so are economists.
Despite some of the continued layoffs in the tech industry by players like Shopify, there are a few positive signs.
* First, the April jobs report was much better than expected meaning that hiring was better than expected and layoffs were less than expected.
* Previously economists were worried that an increase in layoffs in March were the start of a trend, but nope! Economists don’t have any better predictions than you or me.
Regardless of this fact, workers are still cautious about their jobs and rightly so. Most employers are cutting expenses and have slowed down hiring to account for the fact that costs to run a business have gone up.
This is no time to break out the champagne and the checkbook, however. Many brands are still reporting a softer second-half of the year than first-half, but some of these datapoints do vary on a category by category basis.
Until we see a sustained drop in inflation and a return to more normal consumer spending, businesses would still be wise to be more cautious than normal to preserve their cash and avoid risky bets.
[References:]
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Hey, Watsonians, this is Rick. Want to get my take on a burning question and have me answer on this podcast? You can start a topic on the RMW Commerce Community and just ask!
The Community is full of eCommerce diehards just like you talking about important eCommerce issues. Just last week one of the popular topics added by Hendrik included that the eCommerce company Boxed may be preparing for bankruptcy. Ouch!
You can contribute to the conversation at community.rmwcommerce.com.
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It’s That Time, Friends, for our Investor Minute. We have 7 items on the menu today.
First
Media platform AudiencePlus raised a seed round to help small businesses.
AudiencePlus says it’s an owned media platform for marketers, which sounds like a content management system to me, given the software is essentially a repository for hosting various types of content like videos, podcasts, and articles.
Second
Fanatics bought operations of sports betting company PointsBet for $150 million.
If there is a sporting category that Fanatics is not expanding into, I would like to know about it. Anyone who has watched any sporting event in the past few years knows about the rise of sports betting in the United States. The real crown jewel of this deal is that Fanatics gains access to PointsBets licenses in about 15 states and creates a new major competitor to FanDuel and DraftKings.
Link: https://www.cnbc.com/2023/05/14/fanatics-to-buy-pointsbet-us-assets.html
Third
The assets of former direct-to-consumer subscription darling Birchbox were acquired by Retention Brands.
Those who missed it may not even realize that about 2 years ago the assets of BirchBox were acquired by FemTec Health for around $45 million. I can only imagine that the new purchase price was a set of steak knives and a lifetime refill of salad at Olive Garden.
Fourth
Gordon Brothers completed its acquisition of distributor and manufacturer H2 Brands Group.
Gordon Brothers is a well-known liquidator. H2 Brands owned brands such as Comfort Zone, Magnavox and Craig Electronics, and had sales in excess of $250 million. Prior to this transaction, H2 had also divested its paint supply brand Shur-Line to True Value.
Fifth
EBay boosted its fashion authentication capabilities with Certilogo acquisition.
Ebay has been investing in how to scale the authentication of products on its marketplace so that buyers can have a better experience. The company’s services included AI-based software to help rights holders validate the authenticity of products in the wild, which is likely where the greatest benefit will be to eBay. Recall that eBay made another purchase in this sector recently with the acquisition of brand protection firm 3PM Shield. The amount of the transaction was not disclosed.
Sixth
B2B automotive parts marketplace PartsTech raised a $35 million Series C to expand.
The company’s marketplace sits in between the more than 15,000 auto repair shops and over 30,000 parts suppliers. With the continued penetration of digital sales in this category, this only makes sense that auto parts shops are looking to streamline their parts ordering processes.
AND FINALLY …
Fanatics continues its acquisition spree with collectibles auction provider PWCC.
PWCC is the second major acquisition for Fanatics in the past month, and is proof that it’s best to be greedy while others are fearful. Recall that early last year Fanatics acquired Topps trading cards as well, so Fanatics is moving not just to control the supply but also the distribution of the sports collectibles business.
Link: https://frontofficesports.com/fanatics-buys-pwcc-to-compete-in-collectibles-auction-space/
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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 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.