May 15th, 2023: BigCommerce reports earnings, eBay prepares launch of international shipping program, Flexport is missing the infrastructure to compete with large players & Amazon gives incentives
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It’s May 15, 2023, and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
BigCommerce Reports Earnings
eBay Prepares Launch of International Shipping Program
Flexport is Missing the Infrastructure to Compete with Large Players
Amazon Gives Shoppers Incentives to Pick Up Their Orders
- and finally, The Investor Minute, which contains 7 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….
BigCommerce Reports Earnings
Last week BigCommerce reported its earnings and it looked to me like a steady improvement over the past year.
Look, in some ways, BigCommerce is a bit like the Maytag Repairman of eCommerce. Not exciting on the outside, but a dependable software-as-a-service business on the inside. In other ways, BigCommerce is like the Rodney Dangerfield of eCommerce — it “Gets No Respect”. It is a solid platform that did not capture the eCommerce zeitgeist like Shopify.
In its history, BigCommerce has had two primary issues.
One, the company is not widely known. It still is not even included in many RFPs except in certain segments. Of course, this is a problem and an opportunity the company seems to recognize. It’s encouraging to hear Brent talking about turning off SMB marketing and activating field marketing and events for Enterprise customers.
Two, BigCommerce is under-monetized. In the land of exciting business models and attach rates of the competition, BigCommerce is primarily a simple SaaS Enterprise play. So 2000s right?
In the end, the best play for BigCommerce is probably a new acquirer, which I will not speculate on here. Still, private equity is the easiest bet to make, given the large number of growing, slightly unprofitable, high gross margin, SaaS Enterprise players who have been acquired in the last two years: Avalara and Zendesk to name only two, and there are more.
It’s not required, mind you, but it would accelerate their trajectory.
From a results point of view, there is a lot to like in BigCommerce’s earnings.
For 2023 Q1 earnings,
* The company remains focused on raising its Average Revenue Per Account, up 11% year over year to $39K. This is a healthy raise from its previous $30K-$33K in the past, and indicates that management seems to understand the levers it has to improve this.
* Total revenue was $71.8 million, up 9% compared to the first quarter of 2022. Pretty steady.
* Increasing gross margins were reported. GAAP gross margin was 76%, compared to 74% in the first quarter of 2022. Non-GAAP gross margin was 77%, compared to 75% in the first quarter of 2022.
* Feedonomics is also a good play for BigCommerce. It’s needed functionality if you are going to be merchant-centric, and it’s not easy to find reliable Enterprise partners (outside of ChannelAdvisor). There is one area BigCommerce outshines Shopify here: a connection to Amazon. How many Enterprise brands are on Amazon? “Many” is the answer, and a significant number are first-party merchants still. After all, if you are in big-box retail, Amazon wants you in first-party more often than not.
Having spent a career at ChannelAdvisor, it’s not an easy business to connect to marketplaces. But this functionality is essential with the near-constant updates to marketplaces. Shopify will need this same kind of connection to Amazon if it continues to move up-market.
As part of a larger entity with more resources, the company could accelerate. It has a narrow focus which seems to be narrowing even further. With some marketing help and additional resources and talent, the company could be even better.
[References:]
Our Second Story
eBay Prepares Launch of International Shipping Program
It looks like eBay is finally taking the wraps off its International Shipping (EIS) program in July of this year, with eBay migrating sellers to the program over the next few months.
On a personal note, over 4 years ago now, I spent about 3 years at Pitney Bowes working with its cross-border software. What used to be called eBay Global Shipping Program, or GSP, used to be almost exclusively provided by Pitney Bowes. This has changed going forward to a set of partners.
The big challenge with cross-border on a global marketplace like eBay is data. And by that I mean, the data provided by sellers is completely terrible. Which means all providers must work extra hard to estimate, guess, and learn, and all other manner of techniques – including manual work – to help make global eCommerce possible in such a scenario.
eBay International Shipping is for the small sellers of the world – the job is to make it easy. Ebay sellers don't do much more than enable it on their listings, and ship normally. eBay takes care of the rest, including compliance, payments, duties and taxes, and delivery – all through an integrated network of partners.
Cross-border shipping to 200+ countries for eBay sellers is the goal; existing sellers will be transitioned over the next few months with a hard cut-over on July 1.
As far as providers for the program:
* Avalara is providing compliance, classification, and landed cost pricing – it's not exactly a surprise as Avalara has quite a number of ex-Borderfree and Pitney Bowes employees there for the past several years. So a big chunk of that heavy lifting Pitney Bowes used to do is now taken on by Avalara.
It's hard to find a company with the global scope in these kinds of complex situations like Avalara. Alternatives are generally cobbling together multiple providers.
* It also looks to me like eBay is supporting not just cross-dock freight forwarding through the US, but also direct international cross-border shipments from the seller's location with providers like EasyShip, which also announced support for the initiative.
* It appears to me that (based on its press release), Pitney Bowes retained its contract as provider of eBay's Global Shipping Program in the United Kingdom.
* I read that eBay is partnering up with a solution called ShipRocket in India.
Here's to the next 10 years of eBay International Shipping supporting small and medium sellers across the globe. It really is one of the better programs in the industry supporting cross-border sellers.
[References:]
Our Third Story
Flexport is Missing the Infrastructure to Compete with Large Players
Well, the dust has settled on the sale of Deliverr to Flexport, and I’m not so certain that this sale looks so great in the light of day for the acquirer.
Yes, this extends Flexport's addressable market, but is it healthy? How is this anything but shuffling a few deck chairs around? A few days after the deal is done, a few questions remain.
First, where is the infrastructure?
The simple reality is that Deliverr does not operate its own facilities and does not control its own volume, so where will the volume come from? The biggest logistics players are investing in fixed assets.
Dave Clark's assertion that shipping will happen for your eCommerce site, and your stores – I can't think of any math here that makes this equation work. Do you think eCommerce is a tough market to crack? Try store distribution. It's a 50+ year entrenched business with even slimmer margins.
What is the size of the margin prize here? Forget the technology – if you pitched a VC on disrupting how people ship to a store, you would get laughed out of the room (if you could even get through the door).
The only people who have innovated in shipping to stores in the past 10 years is Target, and it's because Target controls all sides of the network: the distribution center, the store, and the downstream sort facility.
Long term, the only way this works is if Flexport can aggregate enough volume to afford to vertically integrate logistics, rather than push work to partners. Otherwise you are simply just another middleman: what are you operating?
At some point, I expect an asset merger to pair with Flexport's technology. Perhaps private equity could make the tie-up. More must be coming.
There is really only one path forward: Flexport needs to find a source of virtually guaranteed volume like signing all the global marketplaces as customers. The only challenge is many of them are logistics companies themselves. Again, more must be coming.
Second, I’m left wondering what the terms of the deal between Shopify and Flexport are.
I am expecting that other third-party logistics providers can still connect to Shopify, so this doesn't limit existing players.
Re-reading Tobi's note about the sale of Deliverr to Flexport, he referred to Flexport as the preferred provider of logistics for Shopify. Preferred does not mean exclusive.
Wouldn't it be in Shopify's best interest to shop this capability around to the best fulfillment provider for consumers, rather than simply the company that took Deliverr off its hands?
Maybe Shopify still has this flexibility. It's also possible that Shopify now views Flexport in a similar way for logistics that it views Stripe for payments.
Where does that leave the future merchant experience for brands that don't use the preferred provider? There is more to be revealed here, also.
[References:]
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And Our Last Story
Amazon Gives Shoppers Incentives to Pick Up Their Orders
Apparently Amazon is testing a new service in the wild which was discovered by some customers. IIf you are willing to pick up your order from an Amazon pick-up location like Whole Foods or Kohl’s, then Amazon will give you a $10 incentive. An Amazon spokesperson said it's been testing for some time.
This follows other Amazon incentives for changing your delivery activity. One of the most popular Amazon Prime incentives is a digital services credit for shipping items to you on a Friday.
Another (dis)incentive that Amazon recently announced was that it will start charging the customer $1 when shipping a return back through a UPS store instead of a Whole Foods, if the Whole Foods is closer to the customer’s house.
This program is a little different, however. This new incentive feels like a way to reduce shipping costs, except when you realize that losing $10 per order gets pretty expensive pretty fast. That is almost certainly higher than what it costs Amazon to ship an order end-to-end, so why such a high incentive?
Here are two ideas for you. First, what if this is about reducing the company’s risk to Delivery Service Providers? What does this encourage? Larger B2B moves which could be handled by fuller truckloads, and avoiding the use of DSPs or Delivery Service Providers.
What is the biggest flashpoint in supply chain these days? It’s labor. Costs are rising, and there is increasing risk that workers will unionize which will increase Amazon’s costs and reduce Amazon’s bargaining power, or Federal regulators will change their stance on Delivery Service Partners.
To me that $10 could be seen as a risk reduction payment to reduce the company’s exposure to its Delivery Service Partner network if ever happens. It’s also not lost on me that most carriers are consolidating routes this year. If enough volume moves that it can cut back on routes, it could help win in other areas.
Second, another thought would be that Amazon is testing the consumer response to its owned network, and how many customers would be willing to get out of their house to pick an order rather than have it delivered? From there, it can run all sorts of sensitivity analysis to learn if there is some correlation between distance from the customer’s home to the pickup facility, item value or type, or some other correlation that might help them determine how to optimize their network further — including when to open a new facility.
While this isn’t a widespread program now, I might consider picking up $10 if it were offered to me in the future, or at least it might make me think twice if there was an Amazon pickup point nearby.
It could also be a solution for porch pirates in certain areas in the United States.
[References:]
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We’ll be right back after a word from our sponsor.
<CT>
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 Miles Thomas was using AI to generate product content. Only thing is, better verify it’s accurate.
You can contribute to the conversation at community.rmwcommerce.com.
It’s that time, Friends, for our Investor Minute. We have 7 items on the menu today.
First
Construction solutions provider EquipmentShare completed a $290 million funding round.
ConstructionShare provides contractors visibility into all their operations on the job site. This includes things like bottlenecks in their fleets, machines that have gone offline, and job and equipment utilization reports. Although I am skeptical that there will be so many winners in this kind of visibility market, it is likely that there could be one winner for the industry given that customers tend to follow each other's solutions.
Second
Home fitness solution Tonal received new funding and a CEO.
It’s really unclear to me how these connected fitness companies keep getting funding. Here are the details: A new $130 million raise from L Catterton. This is on top of a $250 million Series E the company raised in 2021, and the company now says it is REALLY CLOSE to profitability. Which I’m sure is exactly why they raised over $100 million, because they are so close to cash-flow breakeven.
Third
Composable checkout platform Rally raised $12 million.
The company looks like it ripped off Shopify’s Shop Pay flow; it then even has a payment solution called Rallypay. But it is bringing this checkout to other platforms. At this point, it will go head-on with solutions like Bolt and Bold. It’s a tough market to crack as many people think that the eCommerce platform itself should provide a checkout solution.
Fourth
AI-based computer vision company Groundlight raised a seed round.
The company is solving an interesting problem – how to meld AI chatbot interfaces and the large amount of video and imagery that are inside of corporations. The goal would be for operators to be able to query what is happening in video streams using text, and receive answers to those queries with verification. Kind of a clever idea.
Fifth
Supply chain firm Descartes Group acquired Australian last-mile scheduling platform Localz.
Localz looks like a startup that was acquired for $6.2 million from Descartes, which is a large player in SaaS supply chain technology solutions for B2B applications. It seems to me this fills a gap in its offerings, which allows its customers to reschedule and be notified in real-time about a shipment’s progress.
Link: https://www.freightwaves.com/news/descartes-acquires-australian-firm-localz
Sixth
Licensing firm Authentic Brands Group acquired intellectual property of fashion brand Vince.
Authentic Brands Group is one of the largest brand licensing firms in the world and it’s owned by Jamie Salter. Vince sold this for $76 million dollars to ABG, but still holds a 25% interest in the new entity. While Vince will pay an ongoing royalty fee to the new IP owner, it will also receive 25% of the cash generated by the business. If you’ve ever watched Shark Tank, this is one of those deals that Mr. Wonderful would love.
Link: https://www.retaildive.com/news/vince-sells-IP-to-authentic/648442/
AND FINALLY …
Composable commerce platform Elastic Path acquired no-code frontend Unstack.
In the composable market in the past year, there has been somewhat of a shift. Both Commercetools and Elastic Path have acquired front-end software. It appears even composable platforms like certain things all-in-one, although both platforms still allow the flexibility for buyers to choose any front-end software stack they want.
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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.
