May 30th, 2022: Stripe’s new app marketplace, the state of the consumer, Ulta’s announcement, and the secondhand US market.
It’s May 30th, 2022 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Stripe Launches New App Marketplace
What Do Recent Earnings Calls Say About the State of the Consumer?
Ulta Announces Its Own Retail Media Network in Beauty
Secondhand US Market to Reach $82 Billion by 2026
- and finally, The Investor Minute, which contains 3 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….
Stripe Launches New App Marketplace
Last week, payments juggernaut Stripe launched its App Marketplace. The company is valued at $95 billion and the marketplace will provide access to apps and scripts from third-party developers. Some examples include Docusign, Xero, Signifiyd and Mailchimp.
This is savvy. Consumers getting refunds quickly and staff having access to refunds, chargebacks, and other payments-related functions quickly, and in apps that are integrated with their daily workflow is a huge time-saver for businesses of any size.
Anyone who has worked in eCommerce operations knows that you need one foot in your eCommerce platform backoffice, and one foot in your payment processor's backoffice. All payments data, settlements, and other information simply do not flow through to these other platforms.
This could eliminate that second foot altogether, if apps and platforms take advantage of the flexibility offered by Stripe's App Store.
And at the same time, it could make it more difficult to choose an alternative payment processor. Another big win for Stripe.
A few other notes:
- Unlike the Shopify or Apple App Store, however, this marketplace does not provide payment rails for its app partners, which is ironic for a payments company.
- Literally my first reaction to this news is “What do you mean Stripe doesn’t already have an App Store?” Better late than never, I guess?
- A bit of puzzling news on focus:
Bowen Pan, the Head of Product for Stripe Apps, tried to provide more guidance saying apps on its marketplace can’t just be quiz apps; they have to have real business functionality. Of course, that clarifies nothing. "Real business functionality" is about the most nebulous theme for an app store I’ve ever seen. Are they trying to compete with Google or Microsoft now?
Things that are payment-related I understand, like fundraising, financing, fraud, etc., and there are some apps like that already. Even beyond payments, customer service seems like an important category for integration because customer service teams are often the ones handling refund escalations, which involve payment processors.
In the short-term I expect the fact that Stripe itself is a big draw will get new apps in there, but I would like to see more focus around apps that are actually integrated with Stripe for this to be impactful long-term.
[References:]
https://venturebeat.com/2022/05/24/stripes-new-apps-marketplace-brings-third-party-tools-to-the-mix/
Our Second Story
What Do Recent Earnings Calls Say About the State of the Consumer?
Well, we are through earnings season and everyone you meet at the supermarket is now a professional economist in their spare time. Here are a few things I pulled from recent retail earnings:
* Retail general merchandise, like electronics and appliances, seem like the biggest area under pressure — prices are up and consumers are trying to budget.
* Categories related to gifting, travel and experiences are definitely up as people are prioritizing getting back to normal after a long pandemic.
* As we head into the summer months, home improvement remains incredibly strong as both Home Depot and Lowes had relatively good earnings. Patio furniture seemed up at Walmart as well.
* Overall the number of items consumers are purchasing are down, but average order values are up across many retailers. This is the effect of inflation, your dollar goes further but in categories where consumers have needs, they are tending to buy in bulk to stretch their dollars further.
While everyone you meet is an armchair economist, of course the reality is that no one knows what’s going to happen next in this economy.
But we do know a couple of things for sure that I thought I would leave you with for this segment:
1 - The downturn will end at some point. Nothing lasts forever.
2 - Absolutely no one knows if we are just getting started, halfway through, or we will be in this another year and a half.
And finally, your customers are still buying things.
In this kind of environment, I always advise people to get back to basics. Having actual real conversations with your customers about what they are buying and why, what replacement purchases they are making, and how they think about the priority of your type of product versus their other spending priorities.
[References:]
Our Third Story
Ulta Announces Its Own Retail Media Network in Beauty
Ulta, the leading specialty beauty retailer in the US, operates over 1,300 stores and claims 37 million rewards members.
Retail media sites have been sprouting up all over obviously with the decline in usefulness of third-party data from Amazon to Walmart to Target to Instacart to Home Depot, but new entrants like GoPuff, Albertsons, Lowes, Dollar Tree, and now Ulta are cropping up.
Which leads me to my question -- how many retail media sites will the market support?
Overall, I have more questions than answers at this stage.
How many platforms can a brand or even an agency support in good conscience?
Is the effort worth it?
Will the category splintering of retail media sites lead to agency splintering as well after the last few years of general agency consolidation?
We have been traditionally calling each site its own retail media network, but perhaps we will change that terminology since one website isn’t really its own network.
Overall, beauty is an interesting category because there are many different types of people in the world and brands want to be able to target them in interesting ways. If I was an up-and-coming beauty brand, I would definitely be interested in this offering. Which leads me to think that this kind of micro-targeting will continue to get more common.
[References:]
https://www.marketingdive.com/news/ulta-beauty-retail-media-network-loyalty-program/624059/
https://www.emarketer.com/content/retail-media-networks-hit-their-stride-2021
And Our Last Story
Secondhand US Market to Reach $82 Billion by 2026
A recent RetailDive article about the growth of the US secondhand market got me thinking.
While the stories in the past year or so have been about brands going direct with resale, it still seems to me that the long-term dynamics of marketplaces are unchanged.
With limited inventory supply, and a singular audience, your returns on this program are only going to be so high. Which further limits supply, which depresses your potential audience. Not to mention, unit economics on resale returns are not great.
However, there is another opposite force at work: namely, authenticity.
In any sufficiently scaled brand, there is the risk of knock-offs. That risk or even the perception of the risk acts as a depressant on price. Call it "the eBay effect" -- essentially, you may never know 100% if the product you are buying is always authentic, or who the seller is and how they got it, and that can lower the amount you will pay for it.
This doesn't mean that resale isn't a good idea for brands - it is. In the future, I think most high-end brands will offer multi-condition sales -- isn't it better to keep that relationship with the buyer rather than cede it to a marketplace partner? And they may be able to get a premium for it because the buyer knows it’s authorized. Brand experience is important.
For the general shopper, however, there are other things at work. Namely, convenience. Going to a place focused on resale, with a multi-brand portfolio, that potentially already has your credit card on file, gives you a reason to keep coming back.
These are all the well-known benefits of marketplaces, and they aren't going anywhere either.
The other side of this equation is the brand’s purpose. Many brands like REI have sustainability at the core and wanting to control how that is presented to the consumer makes all the sense in the world.
[References:]
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It’s That Time, Friends, for our Investor Minute. We have 5 items on the menu today.
First
WMarketplace, an eCommerce marketplace promoting women’s businesses, has raised $1.4 million. Mission-driven, specific marketplaces can thrive if they dive deep into a particular niche and care more about the needs of their audience than larger marketplaces. It can also go sideways quickly if there is no real merchandise differentiation, however.
Second
Klarna is looking to raise up to $1 billion in a down round that could put it in the $30 billion valuation range.
It’s these types of companies that could have the most problems, as they are forced to keep growing quickly. Let’s say it has $2 billion in 2022 revenues projected, that would put it at a 15x revenue valuation, which is not completely unreasonable in normal circumstances.
In these times, though, who knows what it will result in? The company was previously valued at $46 billion just last year.
AND FINALLY …
Shoppable-video startup Firework raised $150 million in a funding round led by SoftBank.The company offers shoppable video and livestream technology to brands and the new funding values the company at $750 million.
A quick update:
I’m out of town for the next two weeks but don’t worry Watsonians — I’ve lined up two very special interviews for you in the next two weeks which will release the next two Mondays June 6th and June 13th.
The digest format will return on Monday, June 20th.
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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.
