May 16th, 2022: Instacart’s confidential IPO, Amazon’s Selz acquisition, the launch of Shopify Audiences, and Amazon’s last mile rural delivery
It’s May 16, 2022 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Instacart Files for a Confidential IPO After Reducing Its Valuation
Amazon Shuts Down Its Selz Acquisition with Recent Launch of Buy With Prime
Shopify Moves Into the Advertising Space With Launch of Shopify Audiences
Amazon Launches Last Mile Rural Delivery With Independent Convenience Stores
- and finally, The Investor Minute which contains 2 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….
Instacart Files for a Confidential IPO After Reducing Its Valuation
It's difficult to follow the Instacart bouncing ball. In short, the company is troubled. It really went from a perfect storm of growth (people can't visit stores in person), to a perfect storm of inflation (the company is affected by its workers and grocer's ever-rising costs).
The transition from the founder to Fidji Simo was questionable in even the kindest of interpretations, after a series of missteps with the misuse of VC funds, IP patent grabs, and failed acquisitions.
Meanwhile, Walmart is executing quite well in online grocery, Target continues its investment in grocery as well, and chains like Kroger and Albertson's continue to grow their digital capabilities -- even if it's been a winding road for them, too.
Nov 2020:
Goldman was reported to be tapped for an IPO at $30B valuation. Didn't materialize.
Nov 2021:
Fidji Simo says we aren't going public now, instead next year or later.
March 2022:
Fidji Simo "we aren't going public now, we are building the company."
Oh hi there, did I mention they recently cut their valuation from $24 billion from $39 billion. Instacart now says it has $1 billion in cash on hand.
May 2022:
Instacart confidentially files for IPO.
Why file confidentially? Ultimately it gives the company more flexibility because there is no "set date" for IPO, it keeps the company's financials under wraps from competition and the press (particularly if there is bad news hidden in there), and still gives financial analysis several weeks before the IPO to evaluate the financials publicly.
Why file at all? The short answer is shareholders are getting restless and Fidji Simo may likely exit the business shortly thereafter. She was hired as a good name to clean up the issues from the Founder previously, but as an ad exec, she is not enough grocery operator to lead the company to the future.
Another possible answer is the company says it doesn’t need any money. Which is exactly what you are supposed to say if you actually need money. While the company is $1 billion dollars in cash on hand,
It is possible the company gets acquired, but I would say the valuation needs to go down further, and who are the targets?
My bet would be on Walmart. It's possible Walmart could use it to strengthen its GoLocal offering similar to Target's previous acquisition of Shipt.
[References:]
https://www.marketwatch.com/amp/story/instacart-confidentially-files-for-its-long-awaited-ipo-11652325211
https://www.pymnts.com/news/delivery/2022/instacart-ceo-plans-to-build-company-not-ipo/
Our Second Story
Amazon Shuts Down Its Selz Acquisition With Recent Launch of Buy With Prime
Geekwire learned that Amazon is shutting down Selz - an eCommerce platform it acquired last year -- as its employees are now focused on "Buy With Prime." Indeed, no new signups are now happening on Selz, and merchants will have 60 day notice to find new platforms.
First, ouch. That's a short amount of time. Not many merchants I'm sure, but ...
Second, if Amazon was going to use Selz as a foundation for anything, they surely would have at least kept those small amount of merchants, right?
In the past few years, Amazon has acquired a few different eCommerce companies around the world: Veeqo, Selz, and Perpule. It seems primarily for acqui-hire purposes.
Amazon often likes to put existing employees in a new area even if they have no experience there, but after some fumbling with their Stores strategy, their approach changed to bring in some outsiders with a vision for eCommerce.
It was thought that Amazon was planning on (re-) introducing its own eCommerce platform. But perhaps Amazon has decided that the best eCommerce platform is "all of them" and Buy With Prime is the initiative that they will put all their effort behind. Focusing instead on partnerships with platforms like BigCommerce, WooCommerce, etc.
It's a bit of a risky play -- essentially that the value of the services and Prime will be enough for merchants to pull this into their ecosystem, rather than having control over your own distribution in your own eCommerce platform. We've seen a lot of companies recently stumble that didn't control the distribution channel for their own products.
Amazon needed off-Amazon Prime to be successful first, so I agree with their prioritization here, and it doesn't rule out building an eCommerce platform later on.
As Amazon has shown in the past - that's a two-way door decision.
[References:]
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Our Third Story
Shopify Moves Into the Advertising Space With Launch of Shopify Audiences
Shopify just released its Audiences feature, designed to help Shopify merchants find new customers more efficiently. Here's what it does.
- Allows you to select a product and build an audience around it, which is submitted to Facebook from aggregated Shopify data from OTHER stores (not your own) that are opted in. Your own customer data is not sent.
- This data is then sent to Facebook's targeting algorithm which then matches to an audience which is used to display the right ad, which then drops a user on a landing page, which then is going to lead to conversion.
Keep in mind, Facebook's targeting has been pretty much crippled due to the tracking data Apple is allowing them to get now. If Facebook is unable to classify a user's behavior properly and match then to the right audience this isn't going to help a whole lot. Perhaps marginally.
Overall my response is a little meh on this and I can’t believe how late this feature is.
- 2-3 years ago peak Facebook, this would have been a good idea, now this just feels a little too late.
- The message Shopify is sending here is that we think you should be doing more media buying, rather than trying to get more organic reach.
- There's still a lot a merchant can get wrong in their conversion funnel that's unrelated to which audience it gets matched to. In particular, most landing pages are pretty terrible. Many ad units are pretty terrible. How is Shopify helping merchants diagnose what's happening in the marketing funnel?
- I would rather see Shopify instead focus on a few important areas related to advertising:
-- Cutting out media buying altogether. Ultimately this Audience tool helps with media buying. Shopify should be pushing towards cutting out media buying in certain situations altogether by creating an advertising network out of the huge number of web pages that it controls. To do this, it would need to acquire or build an advertising exchange. That would be unique and interesting!
-- Improving Shopify SEO. Compared to say WooCommerce and BigCommerce, I would say that Shopify has much less flexibility here.
-- How good is Shopify going to be at understanding user intent across its merchant base? That remains to be seen.
- From the instructions, you select a product at a time to do this. This means if you have a few products in your store, perhaps it's useful. But hundreds or thousands? Unclear.
- I would love to see features in Shopify that make it easier for its merchants to do daily storytelling through imagery and video. That is the core of what I'm on Shopify for.
The softer side of me thinks this is the start of a journey and we should wait and see the impact it has in the wild, and what Shopify has in store over time.
But in the short-term, this is not going to be a step-change in anyone's business who is more than likely struggling with profitability than anything at the moment.
[References:]
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And Our Last Story
Amazon Launches Last Mile Rural Delivery With Independent Convenience Stores
Vox had an interesting article yesterday about how Amazon was trying to make inroads into the rural delivery market using a different model than it has tried for more dense areas.
Let's review the facts:
- About 31,000 post offices in the United States, yet there are something like 2,000 FedEx office and 5,000 UPS stores.
That means there is a large gap in network coverage within 10 miles of a final delivery station.
- Amazon looking at paying mom-and-pop shops something like $2.50 to $3.50 / package to deliver something like 600 to 800 packages weekly.
- Amazon is not able to replicate its Delivery Service Partner program in these rural areas to to lack of demand, not a big enough opportunity. Instead, they plan to use "slack" in existing shops and perhaps throw some of these independent businesses a lifeline at the same time.
My thoughts:
- On LinkedIn other Watsonians have pointed out that this is exactly Amazon’s playbook in rural India where the delivery infrastructure is not great. So they are following a known playbook.
- This shows that Amazon is thinking on the right scale. There are ~150k convenience stores in the US, most of which are independent (not chains). It means that theoretically the strategy could work.
- This is straight out of the Amazon playbook of not "owning" things (i.e. more flexible than building 20k delivery stations) -- similar to their shipping DSP program.
- Assuming that the price is right per parcel, it could be a win-win for both sides.
- If Amazon could pull this off, they could be the de-facto nationwide delivery partner if the USPS is not able to modernize its infrastructure.
I might even predict that within the next 3-5 years, you could see a partnership between UPS and Amazon for Amazon's last mile delivery, in a twist of fate.
[References:]
https://www.businesstoday.in/latest/corporate/story/amazon-onboards-1-lakh-local-shops-kiranas-to-deliver-order-this-festive-season-274617-2020-10-04
https://logistics.amazon.com/marketing/delivery-partner/dma1
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It’s That Time Friends, for our Investor Minute. We have 2 items on the menu today.
First
Cross-border service provider ESW to Acquire Ecommerce Platform Scalefast
ESW has traditionally been the leader in the Enterprise segment of cross-border eCommerce with customers like Nike to Victoria’s Secret. The other big players are in the space are really Global-E and Farfetch. This is a good fit for them as they lack their own eCommerce platform offering.
Second
Supply-Chain Startup Stord Reaches $1.3 Billion Valuation with new investment
While I have never worked with Stord personally, the company looks like a hybrid of an asset-light and an asset-heavy approach. Almost a cross between Deliverr and Shipbob.
I’m not surprised that there continues to be heavy investment in the supply chain space, there is still room for quite a bit of innovation. With a declining market, I see consolidation more in our future than continued growth in warehouse space.
Link: https://www.wsj.com/articles/supply-chain-startup-stord-reaches-1-3-billion-valuation-11652184003
Must be a sign of the times, fewer IPOs this year and somewhat slowing investments.
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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.
