October 14th, 2024: Holiday season preview, what’s happening with Shop Promise? Former Amazon leader Dave Clark raises $100M for Auger and marketplaces like eBay are dropping their fees
It’s October 14, 2024 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Holiday Season Preview
What’s Happening with Shop Promise?
Former Amazon Leader Dave Clark Raises $100M For Auger
Marketplaces Like eBay Are Dropping Their Fees
- and finally, The Investor Minute which contains 5 items this week from the world of venture capital, acquisitions, and IPOs.
==
To hear new episodes of the show every Monday morning, subscribe now at rmwcommerce.com/watsonweekly and wherever you get your podcasts.
==
[PAUSE]
BUT FIRST in our shopping cart full of news….
Holiday Season Preview
Begun the eCommerce Clone Wars Have
Did I say clones? I meant dupes. 🙃
I expect this to be the highest discount percentages not only at Amazon but across all retailers in recent memory why?
Despite job report voodoo, I still do not see the consumer being in good shape. Now expenses like travel and gifts are going to go up. Meaning the dollar needs to stretch even further. And with the jobs report it just means that interest rates will not come down as fast as many would like to see.
This year the eCommerce tale has been flat-ish GMV on higher number of transactions.
Unit volume is the new GMV growth. Get used to that it’s possible many will defer self-gifting that they may have done in years past to prioritize friends and family.
This is the first holiday season in memory that Amazon has real competition at the top. Namely Temu and Walmart. Get your credit and pay later ready. It’s going to be a ride this year.
[References:]
Our Second Story
What’s Happening With Shop Promise?
It's been a minute since I've talked about logistics and Shopify in the same sentence. For good reason.
Last June, Shopify sold its previous acquisition Deliverr to Flexport. The consideration for this purchase was 13% ownership in Flexport, some paper dunnage, and a bag of packing peanuts. Time will tell which parts of this consideration are worth more.
At the time, Flexport took on a new responsibility: be the primary provider of what is called Shop Promise. Shop Promise was intended ultimately to be part of Shopify's answer to Prime, but in particular what's called EDD: estimated delivery date calculations for Shopify sellers. Shoppers know when products will arrive, raising conversion rate.
In January of this year, rather than see their investment go to zero, Shopify chose to invest another $260M in Flexport, at which time the CEO Ryan Petersen cited their "fortress balance sheet". Luckily (for Flexport) Shopify did not seem to force Flexport to revalue the company.
Meanwhile, at this time it's my contention that the next time Flexport is revalued by the market, it will become a wholly owned subsidiary of Shopify.
Which will essentially put Shopify back in the freight forwarding business, at least until it writes down the value of its investment to zero, and sells whatever remains to a real freight forwarder with physical assets.
Here we are in October, and another round of layoffs hit Flexport. This time, the company has exited the fulfillment business for small and medium businesses - in other words, Shopify's traditional core market.
This means there is almost zero value to Shopify's current relationship with Flexport. And it almost certainly means that Flexport is no longer providing any "Promise" to Shopify sellers regarding estimated delivery dates.
Let's be clear: Shopify itself has no business calculated estimated delivery date for anyone. The function requires deep integration with carriers, of which Shopify is only integrated with a few. It has no data advantage over dedicated providers.
In short, Shopify should outsource Shop Promise to others -- allowing third parties like ShipperHQ, Shipium, Narvar, ShipBob, (the list goes on) to provide data back to Shopify to appear in their customer experience flows. Not only is this just smart from a business point of view, from a technical point of view it's the only way it will actually work and be improved over time. As it is not a marketplace, Shopify has no skin in the game here.
Shopify needs to reboot its Shop Promise strategy. "Shop Promise" falls under the consumer-facing "Shop" brand which has recently seen some engineering reorganization mentioned in my LinkedIn feed.
While it seems like a needed function which Shopify does likes to own at the entry level, it seems better outsourced due to the reasons stated above. If that's the case, I expect an EDD RFP could be on the docket soon.
[References:]
Our Third Story
Former Amazon Leader Dave Clark Raises $100M For Auger
Dave Clark has come out of the shadows after his ... err crash course in the educational school of Flexport (still on his linkedin btw). And it's with a new startup called Auger.
From reports it sounds like:
* Integrates all the supply chain and forecast data
* Forecasts using AI (duh)
* A "single pane of glass"
* Chatbot you speak with (duh)
* Dave comments that he is trying to reproduce the "end to end" planning tools he had at Amazon.
* Dave comments he wants to replace Excel processes.
* The VC firm Oak HC/FT says it invests in healthcare and fintech (curious).
I have a few thoughts on this mission:
* This is a real problem. There is a wide canyon in large companies between data lakes/BI tools, supply chain software, OMS, and financial planning software. He is 100% right this often gets done in Excel.
* ... but it's hard to replace Excel. This sounds like FP&A software to me. But the AI version, you know...
* To justify a no software, no revenue, no customers, barely any employees $100M seed investment on who knows what valuation, this has to be sold into Enterprises. No SMBs, please and thank you. Maybe not even mid-market, although that's what the article mentions (I don't buy that explanation).
* This is going to be more difficult then thought. Enterprise software is hard, on its own. But keep reading.
* Also, Enterprises are notorioiusly slow to change their supply chain software. Harder than martech or even eCommerce platforms which are difficult to supplant.
* Data integration and unification is also hard on its own. And it actually does not involve skills that Dave Clark had to learn particularly much at Amazon (they built their own software) or Flexport (primarily small to mid-sized businesses with simpler systems). Other ecosystem neighbor participants may not take so kindly to having their data sucked into Auger's AI.
* It seems designed to compete with the Oracle and Blue Yonder-type of supply chain solution.
But Dave is smart. He knows all this already. So this means to me:
* He's not actually looking to replace existing software. He's going to need to create a new category of software. Also very hard.
And finally >>
Dave Clark will have to create a Marc Lore Jet-style exit to make this work. I say this explicitly because Marc Lore was famous for valuing his companies far far ahead of revenue, traction or anything, finding a mark (in Jet's case, Walmart) and then pursuing them relentlessly in the hopes of outrunning their outsized valuation. Not impossible, but hard.
Dave is a relentless, take no prisoners style of operator, and sounds energized to be on this journey again... which -- sounds like a big challenge that could go horribly wrong.
But, that's the kind of asymmetric bet startups need to make to attain an outsized valuation. Those who are about to go into battle, we salute you
[References:]
[PAUSE]
And Our Last Story
Marketplaces Are Dropping Their Fees
eBay has been testing reduced fees for private sellers in Germany. Depop, Vinted piled on. Poshmark threw its fees through the shredder. Now eBay UK has dropped its fees for private sellers across most categories except auto. eBay wants you to "think differently" meaning, why not sell this item from your house now?
The real question is not "why not sell this" but more "why on eBay"? And more to the point: why is it so damn hard to sell on eBay?
eBay thinks that its rent is too high. But is it the core issue?
It's undeniable that reducing fees should add inventory. Particularly lower cost items. While Amazon is also busily reducing its own costs to serve, and adjusted their own apparel fees earlier in the year.
You might think it's due to Temu, but I think there is another reason. Facebook Marketplace is also in the mix. And niche marketplaces have also eaten share.
However, it's not the items that are just missing. It's also a reason to list there. My question is simple: why eBay and not other places?
A marketplace must have a reason to exist to thrive. eBay still seems to be searching for a sustained growth strategy in a crowded market. Listings are one thing, how about those buyers? eBay is betting on the flywheel.
Witness: It's much easier to list and sell on Facebook Marketplace or even Craigslist than eBay. In response, eBay has done something recently it has not done in a while. Actually innovating on its listing tools using AI. "Magic Bulk Listing" it calls it.
The winning marketplace could be the one to harness AI to capture more items, and later more buyers. That flywheel rears its head again. Time will tell if its enough to reverse a decade+ of going sideways.
[References:]
It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
Spreetail Acquires Customer Insights Platform Echo
Spreetail, an e-commerce accelerator for big-and-bulky products, has acquired a customer insights platform, Echo, for an undisclosed amount. How do customer insights help an accelerator such as Spreetail? Follow the talent. This one feels like an acqui-hire to me.
Second
Shiptop Closes $500K In Seed Round Funding
Third-party logistics provider ShipTop has raised $500K in seed to be invested in its technology platform and expand its service offering and marketing. Seems like odd-timing in a market flooded with warehouse space.
Link: https://finance.yahoo.com/news/leading-ecommerce-fulfillment-provider-shiptop-130000329.html
Third
Rainmakers Acquire Shipsi From Auctane
Consulting and startup incubator Rainmakers has acquired Shipsi, a same-day on-demand delivery platform from Auctane, for an undisclosed amount. Is this the start of a larger breakup of Auctane?
Link: https://www.dcvelocity.com/shipsi-plans-to-expand-its-express-delivery-reach-after-acquisition
Fourth
EGYM, a Connected Fitness Startup, Raised $200M at a $1.2B+ Valuation
EGYM, a global fitness technology platform, raised just over $200M in Series G funding at a valuation of over $1.2B, which will be used to expand in the US and UK and further build its AI assistant. Is this an IPO candidate or an acquisition target for an incumbent? As we have learned, a hefty valuation is also a potential curse for a company in a discretionary sector such as health and fitness.
AND FINALLY …
Website Optimization Platform Nostra AI Raises $8.9M
Nostra AI, which enables website optimization, raised $8.9M, which will be invested in its technology and expansion into the Shopify and Salesforce ecosystems. Website speed impacts conversions, and core web vitals directly impact search engine results.
Today’s final word for the week of October 14th is <Planning>:
Hope you’re ready for 2025 everyone, it will be here before you know it!
[PAUSE]
Did you know that RMW Commerce has a brand new podcast? Check out The Watson Weekend for an unfiltered and lively eCommerce chat each week with me, Rick Watson, my co-host Jess Lesesky, and an array of interesting guests and topics. All focused on eCommerce. You can find the Watson Weekend by searching for it on iTunes, Spotify, or Youtube.
That’s all for this week! Till next time Watsonians.....
[PAUSE]
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.