March 13th, 2023: Amazon closing more retail, Dick’s Sporting Goods success story, Target and the next-generation mall, Cloud software spend holding up
It’s March 13, 2023, and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Amazon Closing More Retail
Dick’s Sporting Goods Offers a Retail Success Story
Is Target Building the Next-Generation Mall?
Cloud Software Spend Holding Up Surprisingly Well
- 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….
Amazon Closing More Retail Stores
Some of the top news recently is about Amazon continuing to try and figure out retail. News from Retail Dive says that Amazon is closing 8 of its 31 Amazon Go stores. That’s a significant number for a company that usually looks to expand. As a reminder, Amazon introduced the first Amazon Go store in its Day One Building in 2016 in Seattle.
I went through the list of Amazon Go Stores in New York City just to try and discern any pattern. To give you some idea, Amazon has about 10 Amazon Go stores in Manhattan alone. To close only 2 of them means that perhaps it’s more of a question of bad real estate than bad business. It’s hard to imagine that New York City would not have enough density to support an Amazon Go store.
In other news, Amazon is also delaying the construction of its new headquarters in the Washington, D.C. area. Isn’t it crazy how much can change in 5 years? Amazon needing more office space to expand feels like we are in a different era. During its crazy nationwide search, it planned to place as many as 25,000 workers in D.C. by the year 2030.
Of course the entire project isn’t being scrapped. The company will have approximately 8,000 people there by June of this year. The biggest change in Amazon’s plans is the delay of its iconic helix building in D.C., which always looked to me like a giant poop emoji.
That poop emoji might even resemble Amazon’s overall retail footprint at the moment if it doesn’t get its act together in grocery and convenience stores.
[References:]
https://www.retaildive.com/news/amazon-go-stores-closing/644212/
https://www.businessinsider.com/amazon-go-stores-closing-nyc-san-francisco-seattle-2023-3
https://www.geekwire.com/2023/amazon-pausing-construction-on-hq2-in-washington-d-c-area/
Our Second Story
Dick’s Sporting Goods Offers a Retail Success Story
It’s no accident that in this economy, retailers that are managing their inventory stock well are the ones performing well. Let’s review this fact in relation to Dick’s Sporting Goods.
Dick’s Sporting Goods beat revenue expectations in its holiday season with same store sales increasing 5.3% during the fourth quarter, more than double analyst expectations.
Dick’s experiential House of Sport will be its growth concept going forward from a square footage point of view, with up to 100 locations opening over the next 5 years. This is where most of its capital expenditures are going. If you’re not familiar with House of Sport, it provides more active spaces inside retail footprints for shoppers to interact and play with equipment. Think of a batting cage inside a retail store and you get the idea.
The company’s inventory position was improved and it’s expected to have solved its previous inventory overages.
You’ve also seen Dick’s Sporting Goods play offense recently with its acquisition of Moosejaw, which was previously owned by Walmart.
Why is this happening? Well, the answer to that question is even better news for Dick’s Sporting Goods than you might think. After the pandemic and even into inflation, consumers are classifying fitness and sports as closer to essentials, rather than luxuries, thus reprioritizing spending in this area. This makes sense to me because if your kids play any kind of sport, it’s very hard to not buy them the equipment they need.
In other categories that are perhaps not exactly essentials, but not discretionary either, this fact should provide clues to other brands and retailers. My advice? Remind your customers why your products matter!
[References:]
https://www.cnbc.com/2023/03/07/dicks-sporting-goods-dks-q4-2022-earnings.html
https://www.yahoo.com/lifestyle/dick-sporting-goods-beats-revenue-150419922.html
Our Third Story
Is Target Building the Next-Generation Mall?
Recent news reports that Target will add drive-up returns to its set of same-day services. My initial reaction is, "what?" How does this help Target in the short-term?
Reality is, it doesn’t.
Upon further consideration, Target is running a constant stream of experiments to become the modern mall, powered by a set of digital and omnichannel capabilities.
And in this mission, Target is unwavering in its ultimate mission to become the best platform for its brand partners. You might even call it a drive-up marketplace.
While the class "A" mall isn't going anywhere soon, what's happened in the past 5 years is that the brands that used to fill the center of "B" and "C" mall properties have instead partnered directly with Walmart, Target and other retail. There are at least a half-dozen brands/retailers you could name starting with Disney, Apple, Ulta.
The cynic in me says that Target's problems in the short-term are unsolvable (i.e. Target isn't going to become a value brand), and these types of experiments could be distracting....
On the other hand, the fact that Target is willing to be misunderstood in this domain also says something positive about its management team - they are thinking about the long-term.
Drive-up returns on its own? Not transformational. However, as one of several ways to drive the frequency of shoppers into the parking lot? Helpful. Sure, you want them to walk into the store, but the first step is the parking lot.
It's like a funnel. What if you could sell shoppers other products and digital services as part of that drive-up transaction? Starbucks is already part of this equation.
If you think of Target like a mall instead ofa retailer, it can help clarify their vision. Target is trying build the best platform of services to offer its tenants so that it can power the best guest experience on the planet. Target is persistent in targeting savvy, convenience-oriented shoppers. Surround that with a best-in-class set of digital and physical capabilities, and you have the foundation of great modern retail.
I'll repeat it -- Target is building what the mall should have been 10 years ago. It may not be evident from the outside, but on the inside, I'm sure that Target views drive-up returns as another brick in the wall of its customer-focused future.
While each individual capability is essential, Target's real advantage is the culture and management patience required to build them.
Of course, the economy is likely to get worse not better. And if that’s the case, we will probably see a lower margin Target than we are used to seeing.
[References:]
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And Our Last Story
Cloud Software Spending Holding Up Surprising Well
VC technology investor Battery Ventures published some new data which could be useful for software technology startups out there, as the venture capitalist surveyed Chief Technology Officers and other software buyers in the industry, where 85% of the respondents worked for companies with over 1,000 employees. So these are sizable budgets we are talking about.
The results of the survey were heartwarming for vendors, for the most part.
46% of corporate respondents reported that their tech budgets for 2023 are heading up this year. Another 27% are flat. This leaves only 27% declining slightly. These stats proved true even for the largest companies.
Asked to rate their cloud spending priorities, infrastructure and data were tops. This was followed closely by enterprise applications.
It wasn’t all roses, however. The top areas that buyers were looking to cut are related to consolidating vendors and optimizing existing SaaS licenses. This is good news for a software company with a broad portfolio and not the best news for startups. It also points to at least some pressure on existing customer revenue, which is not entirely unexpected.
Regardless of the couple of warnings here, this is good news for software-asa-service companies and it’s one reason that this sector continues to be a long-term winner for technology investors: it’s definitely hard to cancel a contract for software that your employees actively use unless you have an obvious replacement.
[References:]
https://www.battery.com/blog/battery-ventures-tech-spending-survey_2022/
https://techcrunch.com/2023/03/08/the-sky-isnt-falling-for-cloud-software-spend/
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Hey, Watsonians, this is Rick. If you’re looking to discuss eCommerce topics with other listeners, you can find it all at the RMW Commerce Community. There, you’ll find a trusted group of fans just like you who are passionate learners of eCommerce. So don’t delay, just visit community.rmwcommerce.com to sign up for free.
It’s That Time, Friends, for our Investor Minute. We have 5 items on the menu today.
First
Electronics trade-in company Apkudo raised $37 million in Series C funding.
The company is based in Maryland and is focused on building a platform to allow companies to repair, trade-in and recycle electronics for its manufacturing and supply chain customers.
The company provides inspection, disposition, and a marketplace offering to give its customers a view into the global demand for devices of a particular quality.
Link: https://resource-recycling.com/e-scrap/2023/02/15/supply-chain-tech-company-nets-37-5m-in-funding/
Second
Indian online grocer FreshToHome’s latest funding includes Amazon.
Even if Amazon’s investments in US grocery haven’t always worked out as planned, the company has not given up and is keeping its finger on the pulse of the Indian market. Founded in 2015, FreshToHome claims to be operationally profitable (which is usually code for not profitable) and is one of the bigger players in the fresh fish and meat market in India and also the UAE.
Third
Dick’s Sporting Goods is buying Moosejaw from Walmart.
If you’re wondering why Walmart ever owned another retailer like Moosejaw, it was part of the ill-fated Marc Lore era of eCommerce at Walmart. Personally I am no fan of Marc Lore, who is better at spotting a mark than building a sustainable business. Walmart eCommerce under his watch was characterized by throwing a lot of spaghetti on the wall and focusing attention on the importance of eCommerce, but very bad at getting any of that spaghetti to stick.
Which, I’ve always wondered about this analogy — isn’t it more efficient to just eat the spaghetti?
Fourth
Customer experience technology solution Nosto raised $16 million.
Nosto grew up in the personalization space and has expanded into several adjacent software categories like A/B Testing and Search. The company has been quite acquisitive in its history but has put a lot of recent focus on its Search solutions while it has integrated and unified its Findify and SearchNode acquisitions.
Congrats to my good friend Jim Lofgren, the CEO of Nosto, on this important milestone.
AND FINALLY …
Logistics startup Slync raised $24 million to reboot the business.
Look, a startup is tough to build in any economy. But when your CEO uses over $16 million in VC funds to buy a Gulfstream jet and then is later convicted of Securities Fraud by the SEC, it’s a lot worse. Despite these “setbacks”, the company has raised new capital – though I’m sure the valuation is far down from the $240 million it was previously valued at.
I feel like I should tell you more about what the company does, but after that intro, does it really matter?
If you ever think it can’t get any worse at your startup, trust me, it can!
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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.