October 24th, 2022: Kroger and Albertsons Merge, Shein launches retail, Toys "R" Us joins forces with Macy's, mixed holiday predictions
It’s October 24, 2022 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Kroger and Albertsons Merge to Create Grocery Challenger to Walmart
Ultra-Fast Fashion Site Shein Launches Resale
Toys “R” Us Launches in 451 Macy’s Stores Ahead of Holiday Season
Advertising and Ecommerce Analysts Predict Mixed Holiday Quarter
- 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….
Kroger and Albertsons Merge to Create Grocery Challenger to Walmart
Well, that happened fast, Watsonians.
Just a few days after hearing that Kroger and Albertsons were in definitive talks to merge, the companies have announced a definitive merger agreement.
Details from Kroger include:
The deal, which seems to be a mix of cash and stock, represents a 34% premium to the current Albertson’s stock price.
Kroger expects about half a billion dollars in corporate synergies from the transaction and expects to invest about $1.3 billion in Albertsons stores to upgrade experiences there.
Another billion dollars is expected to be invested in raising wages and benefits for employees in the combined entity.
This is a big move by Kroger, and not only could it accelerate the digital transformation of Kroger, but it could also lead to more digital advertising revenue for the company as CPG brands look for places to put their advertising dollars.
The combined entity is expected to reach 85 million households and 5,000 stores, making it the largest dedicated grocer in America, keeping in mind that Walmart is not just a grocer.
Reports are that Albertsons has struggled with profitability the past few years and has had trouble breaking through to that next level of growth. Creating a new large combined grocery firm could help the firm, however.
Estimates show Walmart at $467 billion in sales, which includes Sam’s Club.
A combined Kroger and Albertsons would clock in around $200 billion in sales, or still only half the size of Walmart.
Mergers go wrong as often as they go right, so it remains to be seen whether this is good for both the consumer and the combined entity going forward. I am most excited about the huge retail media assets that Kroger now possesses.
[References:]
Our Second Story
Ultra-fast Fashion Site Shein Launches Resale
In a widely misunderstood move, Shein has started a pilot of its peer-to-peer resale program, Exchange in the United States.
Let’s get this out of the way first: this is not a brand rehabilitation exercise, even though Shein has joined World Circular Textiles Day. No one will accuse Shein of caring about the environment anytime soon.
From my checks on the website and the app, it does not appear that the program is available. Here are my few takeaways from this initiative:
First, consider the fact that Shein is responding to its customers. There are likely hundreds of thousands of Shein listings on eBay (I couldn’t tell because eBay stops counting at 65,000), and while I couldn’t directly count Poshmark Shein listings, I Googled Shein on the Poshmark domain and came up with over 500,000 results. That is a lot of resale activity by any metric.
Second, I found from Shein’s press release that Shein did not build this resale marketplace independently. It’s powered by a third-party marketplace provider called Treet (T-R-E-E-T) which powers resale marketplaces for brands like Coclico and Boyish.
Third, the company can integrate the resale marketplace directly into the user’s purchase history, something I wish eBay had done like 20 years ago. This purchase history integration will make the marketplace accessible to its user base.
Finally, Shein says it plans to launch the initiative formally next year after piloting this year.
I think this is a savvy move by Shein and it seems clear that they are responding to what its customers are doing. This makes me bullish on the idea of a Shein resale marketplace, if not the idea of Shein as a fast-fashion brand itself.
While other brands like Athleta have partnered with Thredup, launching this resale site gives the brand much better control over its customer’s experience while reducing the fees paid by the buyers simultaneously. A win-win.
[References:]
https://www.retaildive.com/news/shein-launches-resale/634254/?utm_source=pocket_mylist
https://poshmark.com/search?query=shein&type=listings&src=dir
https://www.ebay.com/sch/i.html?_from=R40&_trksid=p2380057.m570.l1313&_nkw=shein&_sacat=0
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Our Third Story
Toys “R” Us Launches in 451 Macy’s Stores Ahead of Holiday Season
A few months after announcing their major partnership, Toys R Us has launched in over 400 Macy’s Stores in advance of the holiday season.
This has been coming for some time. Watsonians may recall that in March of 2021 a controlling interest in Toys R Us was acquired by firm WHP Global. WHP Global acquires brands and invests in high-growth distribution channels to revitalize these brands. Since then, Toys R Us seems to be on a determined pace. For example:
In December 2021, Toys R Us announced its first store in the famous American Dream mall in New Jersey, later visited by Kim Kardashian.
On July 18th, Toys R Us announced a major partnership to bring the brand to every Macy’s store in America.
And finally, Macy’s announced Toys R Us areas in 451 Macy’s Stores this year, including the flagship Macy’s store at New York’s Herald Square.
This news is coordinated with a week of events with major brands like LOL! Surprise.
If you think back to the horrific journey of Toys R Us in the last ten years from bankruptcy to rescue, it’s hard to imagine a better outcome for all the Toys R Us kids out there.
From this point forward, the focus is on Macy’s execution and the consumer response to these new product offerings. The fact that these products are ready for the peak holiday season should give the world a clear picture of how successful the partnership is very soon.
[References:]
https://abc7ny.com/toys-r-us-american-dream-new-jersey-east-rutherford/11351663/
https://www.axios.com/2022/10/15/macys-toys-r-us-grand-opening-events
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And Our Last Story
Advertising and Ecommerce Analysts Predict Mixed Holiday Quarter
A recent article from MediaPost provided a good summary of the state of the eCommerce industry from the point of view of advertisers and analysts.
The top 20 US media agencies saw new billings decline 35% compared to the same period a year ago, through the first 8 months.
Baird Equity Research reports that consumers prioritize values this holiday season with Amazon, Walmart, and eBay gaining the most share, and expect consumers to turn to marketplaces more this holiday season.
While Baird predicts holiday eCommerce to grow 10% year-over-year, its survey of 1,000 shoppers indicates that a larger portion of consumers expects to spend less online this year than last year. This suggests that Baird believes shoppers with higher incomes will make up the difference.
Overall the results from the Baird survey are somewhat higher than what other analysts are predicting with Adobe at 2.5% growth, Bain at 4%, and Mastercard at 4%.
What’s most interesting from this news is the shift towards marketplace spending this holiday season, benefiting Amazon, eBay, and other retailers with a wide selection and value pricing. Does this mean those brands not on these channels could see a rough holiday?
Magic 8 Ball says... All signs point to yes.
Let’s say you decide that sales rising 4% year-over-year this holiday season is a decent consensus estimate, which includes marketplace sales. The subtext here is not great for direct-to-consumer sales, even if that's true.
This is because marketplaces will generate an even greater share of wallets this holiday season than last year.
It means that the average direct-to-consumer forecast for non-discretionary purchases could be flat to slightly up, and the same forecast for discretionary purchases could be off by 5% or more as lower-income consumers deprioritize full-price spending.
[References:]
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It’s That Time, Friends, for our Investor Minute. We have 5 items on the menu today.
First
EDI network provider SPS Commerce bought InterTrade Systems for $48 million.
Intertrade was a wholly owned subsidiary of mdf Commerce and provided services that enabled B2B trading, with a particular focus on apparel and general merchandise customers.
This acquisition continues the general theme of larger players in the market looking for ways to get larger.
Second
Sustainable household restocking service The Rounds raised a $38 million Series A.
The system involves forward and reverse logistics for consumers to send back containers to the sources. This concept is similar to what Nathan Faust’s Olive is doing for traditional merchandise, but this is more for CPG and pharmacy items.
Third
Pet lifestyle brand Yummers closed a $6.3 million seed round.
Pets are always a great market because owners consistently look for ways to spend more money on their pets.
The company’s primary products seem to be mix-ins to traditional dog and cat food for health and taste purposes. Although I have yet to verify the claims of better taste personally.
Fourth
Delivery startup Getir is in advanced talks to buy Gorillas.
The long-awaited death of the Quick Commerce market is finally at hand. I think most people would say it’s about time... maybe?
Still waiting for the “need a stick of butter in 10 minutes” use case.
AND FINALLY …
UK-based construction B2B marketplace YardLink raised $17.5 million in Series A funding.
Yardlink is a B2B procurement marketplace specifically for the construction industry connecting contractors, suppliers, and equipment for purchase or hire.
The company plans to use the funds to double its headcount and accelerate its growth. This continues a digitization theme in an industry that still does not have a large percentage of purchases happening online.
Link: https://www.finsmes.com/2022/10/yardlink-raises-17-5m-in-series-a-funding.html
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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.
