October 10th, 2022: Google’s new shopping tools, Walmart’s GoLocal, Poshmark acquired by Naver, and Macy in the inventory race
It’s October 10th, 2022 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Google Can Become Essential Search with its New Shopping Tools
Walmart GoLocal Continues its Nationwide Rollout
Resale Shopping Site Poshmark Acquired by Korean Search Giant Naver
Macy’s Winning the Inventory Race So Far
- and finally, The Investor Minute, which contains 5 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….
Google Can Become Essential Search with its New Shopping Tools
Within the last two weeks, Google announced that it is releasing some new shopping tools in what looks to me like a slight shift in strategy. The primary thing I took away from the new announcement is that Google helps you research and learn.
But before I get into Google, let's talk about Amazon a little.
Amazon continues to win in eCommerce for a few reasons:
First, its product detail pages are often the best on the Internet for that product.
Second, you can trust the availability and delivery promise.
Combined with the fact that Amazon Prime creates lock-in and friction to buy elsewhere, that is the entirety of Amazon's promise.
Unlike what a lot of people think, Amazon is not the best deal, and definitely not for great merchandising.
Over the years, this has left blogs and Google to essentially become merchandising for Amazon. Often these sites are Amazon affiliates, too. Did I mention one of my favorite websites is Wirecutter?
These tools – which do not appear to be released yet – can be accessed using the keyword “shop,” such that if you type “shop” and then whatever you are looking for, Google will design a custom experience for those terms.
I’m guessing Google is finding either that not many people are clicking the Shopping tab, or it wants to give itself more permission to incorporate features to help shoppers directly into its main search results.
Some of the new features released in the Google Shopping Tools include:
* Display of trending items based on your search terms
* Automatically generated 3D models of products based on a website’s imagery
* Buying guides to help determine what types of products in a particular category are a fit for the shopper – It doesn’t say who’s writing those buying guides, but I assume it is going to be crowdsourced to all of us.
* “Shop the Look” feature to help you put together outfits of various clothing and accessory items – I guess Google’s AI thinks it’s a fashion consultant now.
Reviewing the release, Google's new tools are built on a few ideas.
The first is that Google has more data than anyone.
Second, Google feels its AI is better than anyone else’s.
This is an interesting point of view, and probably right overall.
But that leads me to my next point which is essentially that Google is betting it could provide a better or at least more useful front-end of eCommerce exploration than any individual website could provide on its own.
Finally, it seems like Google is done trying to play Amazon’s game. What I mean by this is that Google is not trying to own eCommerce. What this release is telling me is that Google is trying to determine how to make itself essential to shoppers.
Whereas Amazon has been slowly taking over being the default or first eCommerce search engine in North America –partly so because Google’s search hasn’t always been so useful.
Is this approach "enough" for Google? That's unclear. Is it a step in the right direction? Absolutely. It embraces the best of Google and improves the customer experience.
This is a strategic approach I can get behind.
[References:]
Our Second Story
Walmart GoLocal Continues its Nationwide Rollout
For those unaware, Walmart last year announced a local delivery program called GoLocal to a somewhat skeptical audience. Does the world need another local delivery service?
However, there were a few interesting elements to the service in that Walmart can leverage its nationwide stores, and the service is a white-label service which means that it’s not a typical marketplace model that is trying to own your customer.
This kind of differentiation is smart, and that has enabled Walmart to pass two important milestones recently — over 1 million parcels delivered and an ability to deliver from over 5,000 retail and business locations. The company has customers such as The Home Depot and Chico’s.
One point that I can’t get my head around is that Walmart promises consistent delivery partners, which seems difficult to do with a contractor model, but I am guessing that the contractor-based Spark Driver program is possibly augmenting more permanent delivery service partners.
In any event, this is a smart plan for Walmart to leverage its nationwide coverage and its logistics experience to help other retailers in a way that preserves its customer’s experience. It also seems like this service would be difficult for Amazon to provide at the same scale with its Amazon Today offering, which seems like it was launched as a response to Walmart GoLocal.
[References:]
Our Third Story
Resale Shopping Site Poshmark Acquired by Korean Search Giant Naver
Korean Internet search giant Naver recently announced that it has acquired second-hand clothing site Poshmark. If you're wondering who Naver is, it's one of the only companies that has managed to hold off Google globally, as it owns more than 50% of the Korean search market and has many other properties.
The price of the transaction was $1.2 billion and Poshmark stock popped on the news. It was an all-cash deal and at a premium to Poshmark's current stock price – making it extremely hard to ignore in a declining economy.
Of course, it's not lost on me how far afield Poshmark had to go for this exit – to Korea.
The press release mentioned that the social aspect of Poshmark's experience was the most valued. Naver will add its experience in search, AI, and recommendations to scale the platform further.
Looks like Poshmark will continue to operate globally, and likely Naver will use this as a wedge into the global market – whereas the company is primarily focused on East Asia today.
What about the rest of the social shopping fashion marketplaces like Rent the Runway, TheRealReal and ThredUp? I expect continued financial troubles there. TheRealReal has a new CEO who is likely trying to find a buyer, whereas Rent the Runway may be determined to stay independent....I expect pain for the next year for all these players.
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And Our Last Story
Macy’s Winning the Inventory Race So Far
One of the hardest hit categories in this year’s consumer spending reprioritization is apparel, causing many retailers like Gap, Target, Nike,Nordstrom, and Kohl’s to struggle with either write-downs, extreme markdowns, or packing up the inventory for future seasons.
Not Macy’s, however. A recent Wall Street Journal article highlighted how rare it is that a retail CFO is paying attention to the shifting market at a critical time, and you know, doing his job by determining how to help the merchandising team acquire appropriate mix of merchandise for the upcoming fall season.
If you recall, sometime around February or March it started to become more obvious that 2022 was not going to go as planned. Different retailers took different approaches to this situation.
Because many retailers have had a rough time in the past few years during the pandemic, many were determined to buy their way out of the problem in the hopes that consumers would respond.
Clearly that has not happened.
Macy’s instead tapped the brakes on many of its orders and reduced the size of many others. While I’m sure this upset more than a few brand partners, it may have saved the company. In fact, the company’s inventory is only up 7% at the end of this most recent quarter, as compared to companies like Kohl’s and Gap, which have inventory up over 40% compared to last year.
How did Macy’s do it? Collaborative planning, communication, and a willingness to undershoot. Another thing that helps Macy’s in this situation is that it doesn’t have a lot of private label goods — instead it sells more national brands so the lead-time for ordering isn’t as long.
Let’s contrast this to Nike. Nike’s inventory grew 65% in the first quarter, but revenues grew only 4%, which led to a 22% decline in its net income.
I guess that’s better than Target, which had an 80% decline in its net income last quarter.
There is a lot of talk in the industry about forecasting and the failure of retailers in the past 6 to 9 months, but more than anything what’s important is inventory mix.
And inventory mix is based on what is important to consumers at any point in the future. My advice is for both retailers and brands to keep investing and paying attention to their customer analytics and even small shifts in spending.
Another key piece of advice? Ensure you have a tightly integrated planning process. If your merchandising, marketing and supply chain teams aren’t constantly communicating and learning from each other, you are going to struggle in this mixed economic period we are entering.
[References:]
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It’s That Time, Friends, for our Investor Minute. We have 5 items on the menu today.
First
Growth equity Firm PSG announced a strategic investment in merchandising and search solution SearchSpring
SearchSpring has long been a player in the Shopify ecosystem, an extremely competitive market with other players like Nosto and Klevu.
Many times, these types of investments are acquisitions, but that’s not how they announce it. It’s not clear if that’s the case here but the fact that this is not announced as something like Series B or C could point to the fact that this is an acquisition.
Second
Predictive analytics company Kumo AI raised $18 million to bring its offerings to the Enterprise.
The round was led by Sequoia. The types of use cases that Kumo tackles include scenarios like customer acquisition, retention, forecasting, and fraud modeling and detection. There is definitely a new generation of VC funding going into predictive analytics and forecasting tools at the moment.
Third
Underwear manufacturer Knix was acquired for $320 million.
The company previously announced it was being acquired by Essity, an international health and hygiene brand. Knix is an intimates brand known for its leak-proof underwear, two words I thought I would never say here on the Watson Weekly.
Fourth
Software company Stockly raised $12 million to sell out-of-stock items via other retailers.
From what I can tell, this app essentially automates arbitrage between retailers, but on your own website. Which I guess is helpful, but doesn’t seem like a great long-term plan for a retailer unless you are really more like an affiliate publisher trying to build a simple marketplace.
AND FINALLY …
Digital signage provider Raydiant acquired in-store digital shopper platform Perch.
From what I can tell, this could enable an interactive digital smart-shelf that could be deployed in stores, giving insights into how consumers are interacting with it, and reacting to their behavior.
In other words, the companies are trying to bridge the gap between physical and digital experiences.
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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.
