March 14th, 2022: Kohl’s Transformation, Nordstrom’s Ad Expansion, Shopify’s Shipping Platform, and Amazon’s Investment in eCommerce Software
It’s March 14, 2022 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Kohl’s Looks to Stave Off Activist Investors by Transforming Itself
Nordstrom Plots Ad Expansion as its New Retail Media Network Generates $40 million
Shopify Launches a Shipping Platform in Europe with Shippo as its Partner
Amazon Continues to Invest in the eCommerce Software Market - Is a New Platform Coming Soon?
- 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….
Kohl’s Looks to Stave Off Activist Investors By Transforming Itself
Looks like Kohl’s is looking to transform and I think the question on the minds of investors is simple: "Is it too little too late?"
Previously I had posed the question, why does Kohl's – or any department store – need to exist. There's only so much consumer appetite for the same merchandise in yet another department store.
The best department stores prove they understand their guests, merchandise well, and develop their own private label businesses. The worst are struggling to find ways to get customers in the door.
Let's look at Kohl's solutions, as reported by RetailDive:
- They are looking to switch from a department store model to a "focused lifestyle" concept. Unclear precisely what this difference means. Would a consumer notice it?
- Sephora to the rescue! Sephora’s coverage is going from 200 to 850 stores. I'm guessing both sides had good results here so far? This is at least a way better idea than an Amazon Returns bar.
Apparently Kohl’s is in competition with Target’s strategy to launch 800 Ulta Shop-in-Shops. Which store would you rather walk into and use? Target or Kohl’s? I know which one I would pick.
- Kohl’s is also looking at opening 100 smaller stores or stores in smaller markets.
Macellum Capital, one of the activist investors, was not impressed with the plan as it gives the retailer no margin for error if it misses its top-line revenue.
My initial take is to agree with Macellum. It sounds like a risky plan that is both very investment-heavy (new stores and remodels) and not transformational enough to get consumers to look at Kohl's in a new way in order to make a big difference.
I took a look at the board and it's a hodge-podge random collection - something else investors think needs to be completely realigned. I tend to agree. The company cannot count on the same people who got it into this mess to get it out.Why should we believe them now?
This won’t be the last of the Kohl's etail story, and I don't expect activists to go away anytime soon.
[References:]
https://www.retaildive.com/news/kohls-wants-to-transform-from-a-department-store-into-a-focused-lifestyle/619987/
Our Second Story
Nordstrom Plots Ad Expansion as its New Retail Media Network Generates $40 Million
It looks like Nordstrom is the latest player to formally join the retail media network revolution with the expansion of what it’s calling the Nordstrom Media Network.
A few tidbits from the release:
Nordstrom’s has over 32 million customers and 2 billion unique annual visits that can be targeted by the program, not to mention off-site display advertising opportunities.
The program started in 2019 with an initial focus on off-site programs through Google and Meta.
I’m sure those initial test cases were useful for learning, but this type of advertising does not provide a brand partner with access to Nordstrom’s valuable first-party data assets.
Offline, brands used to pay co-op dollars to get placement and promotions in stores. Retail media is the new co-op dollars, it’s just all moved digital into both display and keyword-based advertising programs along with other promotional opportunities and analytics solutions for brands to understand the types of customers interacting with the merchandise online.
For the average retailer to take advantage of these retail media opportunities, they need two things: one is an advertising software platform, and the other is internal digital talent with the skills to operate the platform. Either that, or a digital agency to run it for them.
And that is the dirty secret of the technology industry today. The tools and platforms are getting better much more quickly than the people who are able to operate these platforms. It’s a situation the industry has yet to deal with.
[References:]
https://www.nordstrom.com/browse/about/nordstrom-media-network
https://www.adweek.com/commerce/nordstrom-media-network-target-32-million-luxury-shoppers/
Our Third Story
Shopify Launches a Shipping Platform in Europe with Shippo as its Partner
Shippo scored a major win in the shipping label wars with Stamps.com this week with the launch of its Shippo for Platforms product, announcing Shopify Europe as its first customer.
Shopify plans to use the service to power the back-end technology of its label printing and tracking solution in Europe, in particular the United Kingdom, France, Spain, and Germany.
In case you’re curious what Shopify Shipping is, it’s a built-in solution for Shopify to get shipping rates, print labels, and track shipments.
The crown jewel of this is the label, because this is the primary source of revenue for companies like Stamps.com, Pitney Bowes, and Shippo.
These players have created certified images of popular label types which are then upcharged to various applications and platforms that wish to purchase postage and generate compliant labels with the major carriers. It sounds simpler than it actually is, having been at Pitney Bowes and seen what goes into actually generating a compliant shipping label, and supporting all the various features and functions available by the carriers. It’s definitely harder than it sounds.
Anyway, back to our story. This partnership is a win for both parties. Shippo gets exclusivity on a major market with a leading platform. Shopify gets a shipping solution that allows its smaller merchants to print labels easily. This same technology will also likely power the tracking behind the scenes of the Shopify Shop App in the future, although I wasn’t able to confirm this. Shopify is investing significantly in expanding its European business and this is a missing component there.
The bigger question in my mind — does this mean that Shippo will be used in North America in the future to expand the set of carriers available and tracked in Shopify? I’m sure this was part of the consideration in doing this partnership.
[References:]
And Our Last Story
Amazon Continues to Invest in the eCommerce Software Market - Is a New Platform Coming Soon?
Big news yesterday is another Amazon acquisition in the eCommerce software market.
That's right, Amazon is acquiring Veeqo, a multichannel inventory and fulfillment solution. My strong suspicion is that this solution will become the basis for Amazon's multichannel App Store, which it currently does not have .
So let's review.
Amazon acquired Indian cloud-based POS Perpule - which focused on offline stores that had not yet digitized.
Amazon acquired Australian-based eCommerce player Selz - which focused on entrepreneurs starting eCommerce stores.
So now it has the trifecta – eCommerce, POS, and App Store.
Combine this with existing assets like an advertising and fulfillment solution, a connection to one of the most liquid eCommerce marketplaces on the planet, and the fact that Amazon tends to think in 10-year time horizons, what do you think Amazon is planning next?
Sure looks like a different approach than previously taken to the Stores market.
I would not be surprised at all if Amazon introduces a kind of global "off-Amazon Prime" to buyers designed to reinforce its existing flywheel.
Let’s ask a few important questions about what could be a new offering.
Who is the target customer?
I expect the first customer would be the millions of sellers who grew up on Amazon and haven’t bothered to create their own websites. Amazon has approximately 9 million sellers globally, and Shopify has about 3 million websites globally. So even at an order of magnitude level, there is a big opportunity for Amazon in multichannel commerce.
What would be the offering?
I think Amazon’s offering would have a number of properties. What is Amazon trying to do here? Create the same walled garden around its merchants in the wider Internet that it created for its merchants in its own marketplace.
Please note this is all speculation on my part, but it’s interesting to think about, right?
First, advertising exposure and multi-channel fulfillment (what Amazon calls MCF, which is a kind of white-label version of Fulfillment by Amazon) would be core to the offering. These would be immediate differentiators compared to competing eCommerce platforms.
Second, the store would be global by default. You could launch your store inventory into any Amazon marketplace globally, or launch a global website easily.
Did I mention that you could transfer inventory worldwide wherever it needs to be using Amazon Logistics?
Third, it would have a simple onramp for existing Amazon sellers who want to use Amazon to take them into the broader multichannel world.
Finally, there is also an outside possibility this could replace both Vendor Central and Seller Central as the “home base” for brands selling on and off Amazon.
Given the number of sellers on both platforms, I expect this could be quite difficult to pull off, but it also gives some idea of why it’s taken so long for Amazon to release this solution. I give this less likelihood, but it would be an ambitious long-term goal for Amazon and I can’t imagine Amazon wants to maintain three separate brand portals long-term.
The big question on everyone’s minds is pretty simple — who is going to trust Amazon to do this? I think most people who are considering this question are not thinking about the various segments of eCommerce merchants properly. Mainstream brands aren’t going to make it their home, and they don’t need to.
However, that doesn’t mean it couldn’t get adoption from mainstream brands. Amazon understands that it’s only true long-term competition is Alibaba, which has much better tools for its brands that also unite its advertising and fulfillment offerings. If every Amazon seller suddenly needs a robust brand store on Amazon, then you have immediate adoption due to the natural competitive forces on the channel.
[References:]
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It’s That Time, Friends, for our Investor Minute. We have 5 items on the menu today.
First
Fanatics Raises $1.5 Billion at $27 Billion Valuation
Fanatics now has exclusive licensing deals with the NFL, NHL, NBA, MLBMajor League Baseball, and scores of colleges and universities to make and sell jerseys, caps, and tons of other official team merchandise.
It also has a digital media arm and new marketplace called Candy Digital which allows fractional or full ownership of digital collectibles.
Unbelievable valuation, right?
Second
Buy Now Pay Later Pprovider Zip Aacquires Sezzle in a Ccontinuation of the Sspace’s Cconsolidation Ttrend
Still a very hot space, but at this point it’s not easy for a new player to enter. AfterPay has exited to Square, Klarna could be worth about $60 Billion dollars, and Affirm started trading on Nasdaq last year.
Buy Nnow Pay Llater allows consumers to pay in installments tied to specific products they purchase, often with lower fees than credit card companies, but not always.
Third
DoorDash Aacquires Rrestaurant Oordering Pplatform Bbot
It looks to me like BbBot is in some of the territory that Square could be in, with POS and ordering for customers in restaurants.
Is it just me, or is DoorDdash doing all the things that I think Instacart should actually be doing? It will be interesting to see how this space continues to play out.
https://www.fastcompany.com/90726389/doordash-aquires-restaurant-ordering-platform-bbot
Fourth
Beauty Ttech Ffirm Perfect to Ggo Ppublic in U.S. via $1 Billionbln SPAC Ddeal
The beauty and fashion tech space has gotten extremely competitive in the last several years. Augmented reality is extremely valuable in a number of different circumstances to help customers make beauty and fashion purchase decisions in this category, and there is not that much technology out there to assist retailers and brands thatwho would like to create these experiences.
AND FINALLY …
E-Commerce Group ESW EShopWorld Weighs IPO at $4 Billion Valuation
Swiss-post backed and crossborder leader ESW is apparently considering an IPO. This is on top of a torrent of activity in the cross-border space in the past year with Flow Commerce being acquired by Global-E, and Global-E itself going public at a very high $4 bBillion dollar valuation.
According to the rReports I’ve seen, are that ESW has even higher revenue than Global-E, and so the $4 bBillion dollar valuation could even be on the low side. Or will that mean that Global-E’s valuation will come back to earth a little bit when people see ESW’s numbers? Hard to say.
ESW is owned by Asendia, which who paid $1.4 bBillion for 49% of the business in 2021, so this would be a big payoff for them.
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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.
