NRF, Walmart’s new offer, Lacoste’s brand turnaround, and Amazon’s capacity system
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It’s January 23, 2023 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
NRF 2023 Was the Biggest Big Show Ever
Walmart to Offer Fulfillment Tech and Delivery Services Through Salesforce
Learning from Lacoste’s Brand Turnaround
Amazon Updates New Fulfillment By Amazon Capacity System
- and finally, The Investor Minute, which contains 5 items this week from the world of venture capital, acquisitions, and IPOs.
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To hear new episodes of the show every Monday morning, subscribe now at rmwcommerce.com/watsonweekly and wherever you get your podcasts.
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BUT FIRST in our shopping cart full of news….
NRF 2023 Was the Biggest Big Show Ever
Stats from NRF 2023 as relayed to me include more than 35,000 attendees, 1,000 exhibitors, 175 sessions, and 350 speakers. Being at NRF for two days straight definitely felt like the biggest retail event I have ever been to.
Of course it was great to meet so many old and new friends at NRF this year. It is extremely humbling to walk the show floor and have people I’ve never met come up and thank me for the content that I produce. You Watsonians make it all worthwhile.
Here are a few takeaways from the event:
* First you have to get a picture of the space. Multiple massive show floors. The bottom level was the dungeon, and the top level was in the sunlight.
Both of those top and bottom levels were unfortunately referred to as the kid’s table because it was less expensive to get a booth in these areas.
The other two main levels were more expensive and more heavily trafficked.
* Most people are happy with the start to 2023. There is a lot of optimism and energy out there.
BUT....
* Most people understand that we didn't have a full read on the consumer until April last year, and at that point it was too late to "undo" major investments (purchase orders, etc). So people are trying to delay big investments until the crystal ball is not so cloudy.
* Most were happy with the show floor traffic.
* I am often asked what is hot and new. To be honest, I didn't see a lot of hot and new. I personally think that is a good thing. Most companies are still bad at the basics and would be better served not chasing fads.
Other Watsonians reported that the holograms for retail applications were the coolest things they saw.
* Beyond this, there was definitely tension in the composable commerce market. Shopify had its own booth for its components, and the MACH Alliance had its own Mach Haus off-site with its own content agenda for the members in the MACH Alliance. What is shaping up is pretty interesting.
Shopify is attempting to split its platform into components, but it’s still a new adventure to them. From what I understand, all the components will come from Shopify itself.
Unfortunately there aren’t a lot of live examples at the moment. At any rate, I would not underestimate Shopify here. I have a feeling the company likes being underestimated. Seven years ago did anyone think that Shopify could overtake the GMV of Adobe and Salesforce?
Here’s how I would look at it: This is important to Shopify. Shopify Components is Shopify’s stake in the ground in the Enterprise market.
From the MACH point of view, the Mach Alliance has a more open approach. MACH has definitely moved past the collection of friendly vendors that marked the start of the program into something more like an alliance and philosophy for how to build software for the long-term.
It’s always tough to build a multi-vendor coalition, but the MACH Alliance has already progressed very far in just a couple of years. Where it goes from here is anyone’s guess.
[References:]
Our Second Story
Walmart to Offer Fulfillment Tech, Delivery Services Through Salesforce
Another company that was out in force at NRF 2023 was Walmart Commerce Technologies. This is a new division of Walmart that has been incubated the last couple of years to add value beyond fulfillment. Supply Chain Dive recently reported on a Walmart partnership with Salesforce.
The short story is this will help Salesforce customers adopt both its GoLocal fulfillment solution, as well as its StoreAssist technology designed to help retailers ship from their stores more efficiently.
I’ll say this about Walmart, it is committed to a direction and seems to be building teams that know what they are doing. Most retailers not named Amazon fail miserably when they try to become software companies and Walmart is at least demonstrating that it understands how to help retailers adopt its software more efficiently.
Which, ironically, means Walmart must have learned a lot of these lessons on its own and not from Amazon because it has never built great software for sellers!
[References:]
Our Third Story
Learning From Lacoste’s Brand Turnaround
Lacoste's sales rose 26% year-over-year in the middle of a reprioritization of consumer spending that affected apparel the most. Its owner, MF Brands, is trying to replicate this success.
A successful fashion brand not doing a lot of discounting and is growing year over year is a standout story right now, so it makes sense to pay attention.
The Wall Street Journal recently ran an article about the owner of Lacoste pursuing an acquisition strategy even during difficult times.
This strategy is similar to one pursued by WHP Global and Authentic Brands Group – find good brands in bad situations and "glow them up." Some firms operate the brands in-house, and some outsource the operations, but the strategy is still simple.
Here are the primary elements:
* Find a brand people know and – at least used to – care about. Google searches are a good proxy.
* Expand internationally through partnerships.
* Add licensing partners in additional categories.
* Give the brand a digital heartbeat that it may have been missing before -- DTC, social, etc.
* Make smart use of retail.
What's that about the economy? Why does this plan work in any economy?
There are only a few simple ingredients, from what I gather:
* Buy low. This is the most important part and requires an accurate valuation process. In the past few years, deals would often get bid up too high. You need valuation conviction and be able to walk away.
* Reserve cash. Cash creates opportunity, particularly in this environment, and provides leverage to see new deals.
* Be patient and invest. While this part is Important, it’s not as critical as buying low! Of course, the right kinds of investments matter.
Finally -- the point about Google searches is a killer. Over the past few years, sometimes I type in the hot new buzzy brand into Google Trends and compare it to the brand that no one seems to care about anymore, and find the older brand beats it ten to one!
That is what you call an opportunity for transformation.
[References:]
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And Our Last Story
Amazon Updates New Fulfillment By Amazon Capacity System
Amazon released a significant update last week with the introduction of an additional Fulfillment by Amazon Capacity System. Inside is the following news:
First, Amazon has removed the distinction between restock and storage limits and introduced one flat set of monthly capacity limits.
Amazon will also release a prediction of the next two months of capacity limits to help sellers better plan. The new capacity limits consider inventory currently in Amazon’s facilities and shipments on the way to Amazon.
Second, sellers can request a higher capacity limit to FBA based on a specified reservation fee. This request applies only to the space above your capacity limits.
Amazon indicates that a certain percentage of its warehouse space (now measured in cubic feet rather than units) will be reserved for this program. If Amazon grants you this space, your extra reservation fees are used as credits which can be earned if you sell through the inventory in the extra space you requested.
My take?
First, simplifying anything about FBA is a huge benefit. These capacity limit changes are easier to understand than what's currently being done. This is faint praise, but it's still an improvement. Plus, it’s good news that sellers will also be able to see the next two months of predicted capacity limits. Very helpful.
Second, as long as you can sell through the inventory, FBA storage is now a second price auction which acts as a carrot and a stick simultaneously. If you sell through inventory and use the system correctly, you are not charged extra. If you request more and don’t use it, your reservation fee is a penalty.
This seems well thought-through and designed to incentivize specific behavior while giving Amazon flexibility. It's complex, but so is Amazon.
Third, these systems don’t create new space in Amazon’s facilities or help the company with its staffing plans. This will only be helpful if Amazon can continue to open new facilities and adequately staff them. This has been a challenge.
Fourth, the fact that some warehouse capacity will be held back does give Amazon the flexibility in real-time to offer this extra capacity to the hottest-selling items. It’s not that hard to imagine that an even higher percentage of Amazon’s capacity could go to a system like this in the future.
Fifth, this gives Amazon another way to screw up your FBA bill. More fodder for my friends at GETIDA Yoni Mazor.
Finally, these kinds of carrots and sticks are extremely common, particularly in top marketplaces around the world. It’s part of doing business as a seller. However, having to bid for storage is undeniably more complex than simply being able to pay for more when you need it.
[References:]
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Hey there, Watsonians, want to discuss the topics on the show? Head on over to community.rmwcommerce.com to connect with other listeners!
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It’s That Time, Friends, for our Investor Minute. We have 5 items on the menu today.
First
Fashion B2B wholesale solution Fashion Cloud received a €25 million investment.
The German-based company looks similar to Joor and NuOrder in the U.S.
Link: https://bmmagazine.co.uk/get-funded/fashion-cloud-receives-e25-million-investment/
Second
Partly raised $21 million to provide auto parts buying solutions for retailers.
The New Zealand-based company is primarily a data solution that works with suppliers to normalize their data to power great eCommerce experiences.
Third
Used apparel finder Beni raised $4 million to be the finder for the resale economy.
Beni is a browser extension that finds used or resale alternatives for the items you’re browsing online. Given the rise of used and circular economy items out there, I can definitely see how this will be useful. Is it truly an investable idea? Possibly as a rollup opportunity by a larger player in the space.
Fourth
Online pharmacy PetMeds will acquire PetCareRX to roll up the pet wellness business.
The company is looking to become the go-to source for everything related to pet health and wellness. In eCommerce there are a few very large profitable niches that I don’t see going away for a while, and pets is one of them. Products for your pets are perishable, repeatable, and high margin – a great formula for any retail business.
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AND FINALLY …
WPP acquired Salesforce agency Fēnom Digital
This is great news for Rich Lyons, Jen Kijek and my other friends at Fenom, and continues the large agency consolidation trend. Big agencies definitely need more expertise with cloud-based platforms as customers demand a faster time to market.
Link: https://www.wsj.com/articles/wpp-acquires-fenom-digital-01672927746
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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 Alex Brouwer; 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.