March 21st, 2022: Marc Andreessen thoughts on retail stores, Walmart’s linchpin, Macy’s staying ahead of “The Reaper”, and Amazon’s gain in eCommerce
It’s March 21, 2022 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Retail Stores Will Completely Die, Says Tech Investor Marc Andreessen
Walmart Sees Stores as Linchpin of Last-Mile Strategy
Macy’s Trying Very Hard to Stay Ahead of the Reaper
New Data Suggests Amazon is Gaining Share in eCommerce
- 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.
==
[PAUSE]
BUT FIRST in our shopping cart full of news….
Retail Stores Will Completely Die, Says Tech Investor Marc Andreessen
The creator of Netscape and founder of venture capital firm Andreesseen Horowitz recently made the unreal production that retail stores will completely die.
Here are a few points from the article I found interesting:
It starts out by saying that retail chains are a fundamentally implausible economic structure if there is a viable alternative. When you combine real estate and inventory, then it becomes a big problem.
From there he believes that, like malls, retail chains are going away.
What do I think about this?
I would like to start out by asking if Marc Andreessen has traveled outside of Palo Alto in the last 10 years.
The suburbs are filled with what?
Strip malls.
Every strip mall in America will go away?
Second, while I believe that eCommerce will continue to grow, it doesn’t mean retail will die. The biggest online retailer Amazon is not profitable at all. A great retailer like Target has about an 8 percent net margin, with Walmart at about 5 percent.
Third, this theory works as long as you don’t consider things like supply chain costs. People want things quickly.
If you want to say that bad retail is dying, I definitely agree. Bad retail is dying every day and there are huge swaths of retailers that I’ve talked about on this program that I am skeptical about.
My take on this whole matter?
The only way that retail stores will completely die is if we develop the StarTrek replicator technology. Computer, Earl Grey tea, hot. I always wanted to know, who did Captain Picard’s dishes after he finished that cup of tea? Did the computer then vaporize the cup?
[References:]
Our Second Story
Walmart Sees Stores as Linchpin of Last-Mile Strategy
A recent article in Supermarket News highlighted Walmart’s gains in grocery as well as its developing fulfillment strategy.
The article highlighted a concept called MFCs, or market fulfillment centers, that are being developed as local automated fulfillment centers attached to its stores. These automated fulfillment centers will be able to fulfill orders that are placed online for a local area without shipping the products across the country.
How that happens is robots pick items from the fulfillment center itself rather than having gig workers or store employees walk the aisles of a store to find an item.
The company is testing an array of micro-fulfillment providers like Alert Innovation, Fabric and Dematic, likely for different specialized use cases. This is a good use of Walmart’s resources.
My take on this is that Walmart is studying Target’s stores as a fulfillment hub playbook, and then building its own path forward.
To the extent that this is successful, I think more and more stores will start to have mini automated fulfillment centers included as part of them going forward.
Can we talk about Walmart for a moment? Just three years ago it seemed more lost in my opinion.
Is it just me or is Walmart executing much better since Marc Lore exited his operational role and wound down all of his crazy experiments?
[References:]
Our Third Story
Macy’s Trying Very Hard to Stay Ahead of the Reaper
Recent articles in both CNBC and RetailDive illustrate the kind of transformation that Macy’s is trying to pull off.
A few points I pulled out of the article.
First, there is a new tagline, Own Your Style. OK! Taglines solve everything, right?
Second, Macy’s will train its employees to help with one-on-one style choices.
Actually, helpful retail employees are always a good idea, so let’s keep moving.
Third, Macy’s will change its employees dress code allowing them to express their own styles in their work.
What? Now things are getting strange.
Fourth, Macy’s will add digital screens to stores to provide style tips.
Alright, I’ve heard enough. You know where the younger generation gets style tips?
Do you want to know?
It’s Tiktok, people.
To be honest, I am really shaking my head at this news.
Macy’s wants to attract a younger generation. Yet suddenly that younger generation is going to want style advice from the department store that their parents go to, and who is also in those old black and white movies about Santa Claus?
Try harder, Macy’s.
[References:]
And Our Last Story
New Data Suggests Amazon is Still Gaining Share in eCommerce
There was a recent article in the publication PYMNTS which provided some new data on Amazon’s share of the US eCommerce business.
While the news that Amazon is a big deal in eCommerce is never really news, I did learn a few things from the article:
First, 60% of eCommerce sales in the US were done on Amazon last year. Which, if you look back historically, is about double the share Amazon had in 2014.
Now there are probably those of you in the audience kind of wondering — what changed on Amazon since 2014? The simple answer is a major expansion of Amazon same-day logistics, as well as a massive increase in Prime benefits including things like Amazon Video.
In short, Amazon has thrown the kitchen sink at Prime, and it's working.
Second, the article indicates that the biggest advantage for Amazon is in electronics and appliances, where Amazon has approximately 25% of the market and Walmart has only 5%.
Finally....
If Amazon, Walmart and Target are all growing, what does that mean for the rest of eCommerce and retail?
The simple fact is that the middle of the market has completely fallen out and is either treading water or losing share. SMB or small and medium business is the growth segment.
Above the SMB level, the middle of the market is experiencing distress. Activist investors are busy restructuring the middle of the market. This activity will generate some short-term unlocks, but long-term it's unclear that there is any sustained value creation happening.
Which brings me to a few additional thoughts on the state of the Amazon universe.
I still talk to so many investors and brands that are having a binary conversation about Amazon. "If I have a D2C site, I can't be on Amazon."
Ask yourself this, why are there 6 million sellers globally on Amazon.
Can all of them be unprofitable? Can it be destroying the businesses of all these brands? If you haven’t found a way to make money on Amazon, the problem is likely not the marketplace itself, but probably your approach.
Let’s start with your net margins. Because of the complexity of doing business online, I still see so many brands that have no clue what their SKU-level net margins are. They almost always know their category-level gross margins. Often they know their product-level gross margins (also straightforward).
What they most certainly do not know is their SKU-level net margins.
In any event, Amazon isn’t going anywhere for a while and according to this new data is still pulling away from its biggest competitor, Walmart. This new data likely doesn’t give online retailers a lot of comfort.
[References:]
[PAUSE]
It’s That Time, Friends, for our Investor Minute. We have 5 items on the menu today.
First
Disco (formerly known as Co-Op Commerce), a San Francisco-based network of brands that work together to learn more about their customers, increase merchandising distribution and lower customer acquisition costs, raised $20 million in Series A funding.
It's an interesting idea to cross-sell with other brands to increase conversion rate and average order value.
https://www.finsmes.com/2022/03/disco-raises-20m-in-series-a-funding.h`tml
Second
Oddly enough, another competitive company called Canal, with a similar idea, just raised $22.5 million from Andreeeseen Horowitz, among others.
https://twitter.com/btcarroccio/status/1501241262321520641
Third
Calico, a software platform to help brands connect with manufacturers and manage their upstream supply chains, just raised $2.1 million.
The founder’s story is interesting because not only did she attract funding from tennis superstar Serena Williams, she also tried to work with previous ERP companies and ended up creating her own solution to the challenges she faced with more modern software.
Fourth
Channel Engine, a platform that helps brands manage their products across various online marketplaces raised $50 Million dollars in new capital, not a small raise.
While other players in this space are looking for the exits, Channel Engine is reloading, I think this is an interesting datapoint.
https://venturebeat.com/2022/03/15/channelengine-an-ecommerce-marketplace-integrator-raises-50m/
AND FINALLY …
Sneaker eCommerce platform Kicks Crew raises a $6 million Series A, proving that there is no end to the passion of sneakerheads.
The global thirst for an up-charged pair of Yeezy’s or limited edition Jordan’s, combined with a growth in a digital ecosystem, is creating new opportunities, particularly in the sneaker resale market.
https://techcrunch.com/2022/03/09/kicks-crew-a-sneaker-e-commerce-platform-raises-6m-series-a/
[PAUSE]
That’s all for this week! Till next time, Watsonians.....
[PAUSE]
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.
