October 7th, 2024: Lightspeed exploring strategic alternatives, Loop creates offset return feature, CVS conducting a strategic review, and Travis Hess named new BigCommerce CEO
It’s October 7, 2024 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Lightspeed Exploring Strategic Alternatives
Loop Creates Offset Return Feature
CVS Conducting a Strategic Review
Travis Hess Named New BigCommerce CEO
- 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….
Lightspeed Exploring Strategic Alternatives
Lightspeed, a major POS player and serial acquirer of a number of smaller retail-oriented startups announced it's exploring strategic alternatives for the company. Meaning, it's generally looking to get acquired and trying to solicit interest and ideas.
While Lightspeed does not get a lot of industry press, it looks to me this company will have serious options. Let's start at the beginning from their last financial report.
* Growing > 25% y/y, revenue should cross $1B this year. Just to use a comparable many might be familiar with, they are about 3x BigCommerce and growing about 2x faster.
This is the biggest reason options will exist.
* $45M adjusted EBITDA expected for 2024.
This is the second biggest reason. Combine these two, and there will be multiple bidders.
What does Lightspeed have? The biggest items are:
* POS that works across industries.
* NuOrder which is the exclusive wholesale buying platform for Nordstrom, and works with others like Macy's, The Bay, Saks (I'm not certain if they are exclusive outside of Nordstrom).
* ECWID which is a long-running smaller market eCom platform. Not sure what the value of this would be in a transaction.
* Shopkeep (likely went into their POS stack)
* Vend (APAC-based omnichannel operations)
Yes, a little bit of a dog's breakfast, but there are major assets here with important retailers and brands involved. The right partner could have a lot to work with here.
What options?
* Take private by private equity. Vista Equity and others could be likely. Vista Equity owns Kibo Commerce which seems like an interesting fit.
* Merge with another player.
Salesforce with its recent acquisition of Predict Spring is off the table, but it's possible they could merge with someone like a BigCommerce as part of a larger transaction who potentially now needs a core POS partner. Adobe could use it to expand into POS. Intuit also might be interested in the POS (currently partnered with Shopify).
Bigcommerce has indicated they are not selling, but everything is for sale at the right price. If Vista Equity + another capital partner is involved, you would have:
* Kibo (PIM/OMS/mid-Enterprise ecom)
* Avalara
* Bigcommerce (low-mid ecom)
* Lightspeed
* Vista is also invested in Klarna, which gives it advertising/affiliate/payment assets
Combining assets does not yield success and personally do not believe it would change the fundamental dynamics of Shopify/BigC/Salesforce, but private equity would make money here.
The reality is, even the biggest Shopify boosters must admit that Shopify needs great competition to move it to new heights, and there is a lack of great competition out there. With the right operator, this could be a serious player in the mid-market, if not Enterprise.
[References:]
Our Second Story
Loop Creates Offset Return Feature
To help merchants claw back some of the costs of not only returns processing, but also its own software, Loop has introduced an Offset feature which charges a small fee up-front for a purchase in order to have a free return later.
For the consumer, it's like a call option on a free return. Given that even on Amazon many consumers have now become accustomed to paying for returns (Loop reports ~60% of its merchants charge returns fees) this is not just a junk fee - it's a hard business cost that must come from somewhere.
Speaking of fees, it's hard not to mention the broader economic trend of increasing fees for consumers not just in tips (which are requested everywhere - for what reason?) and the fact that in many restaurants post-COVID new "quality of life" fees have been instituted - which one hopes benefits the restauarant employees.
Regardless, Offset feels different to me. A few thoughts on the program:
* With vendor consolidation and trading down in the software market becoming more prevalent, software that not provides a premium service and also pays for itself is doubly appreciated. By any metric I've seen, Loop is the leader in the returns market by a wide margin. For them to innovate on their core business model like this shows a degree of comfort with experimentation risk that is not common in the software world.
I've often wondered why services like Shop Pay or Paypal did not pay their own merchants back in some way for building their consumer networks. One can dream, right?
* Consumer fees in checkout are also common in the cross-border space. Having spent some time at Borderfree, it was common to charge currency conversion, duty drawback or parcel protection fees for the convenience of cross-border transactions. The model was widely copied in the cross-border market beyond this.
* Like all software settings, uptake of the Offset service likely depends a lot on the "default" nature of the fee. Loop reports 80% uptake of the feature. I can't imagine that would occur if it were not the default.
The delta between someone's return rate + shipping and the "breakage" of those who adopt Offset but never use it can then be used to fund the returns software itself as well as defray returns shipping costs for the buyer.
Anyone online knows the friction that can come with a returns experience -- a smaller fee up front preventing a larger fee later I do believe can be a win for both sides - consumer and merchant.
In my mind, Offset has some hints of a parcel protection program, without the sliminess that can come with the feeling of insurance programs. Especially since consumers are under no illusion any longer that returns are free forever.
The value is real, and so are the discounts.
[References:]
https://www.linkedin.com/posts/ecommercestrategyconsulting_loop-returns-offset-feature-excellent-timing-activity-7245050705458139138-ykYQ/?utm_source=share&utm_medium=member_desktop
Our Third Story
CVS Conducting a Strategic Review
Laid off 100 people.
Conducting a strategic review.
>> closer
[References:]
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And Our Last Story
Travis Hess Named New BigCommerce CEO
You could kind of feel this coming in the past few years. It's been clear that at some point Brent would step down and find a designated hitter. After former BigCommerce President Steven Chung was hit by a pitch, Travis Hess stepped into the on-deck circle. Now Welcome Travis as BigCommerce CEO.
Batter up.
First, the human side. Congrats to Brent and Travis on their transition and new roles. But the take!! You came here for the take, you say. Strap yourself in.
Umm, how do I say this politely? It could already be too late, and there is much more work to do.
If BigCommerce does not reignite growth in the next 12 months, its options will seriously diminish. The company could easily be sucked inside of a larger ERP or CRM offering, in a "best of a set of bad options" choice. A larger POS player might be possible but much less likely.
Why ERP/CRM? It is and will be core to B2B in a way that is not common in a consumer-oriented setting.
There is a happy path, however. The low hanging fruit path to glory over the next 2-3 years for Travis is simple:
1 - Stop development on B2C. It's mostly not working anyway. Losing ground not gaining.
2 - Find a couple of very key strategic partners (hint: TD Bank is not on that list) in the above three-letter acronym spaces (i.e. ERP/CRM)
3 - Get realllllll close. Like kissing-cousin close.
4 - Later on, get hitched formally. Merger/acquisition/take private.
5 - Travis rides into the sunset ready for his next rodeo.
Even this happy ending would involve some degree of lucky breaks.
At this point, Shopify is a already positioned as a generational company and the mainstream SMB and mid-market B2C use case is fairly locked up. Barring obvious mistakes.... which, hey, can happen. Shopify has been distracted by shiny ... err... side quests before.
Shopify also has serious Enterprise risk too and it involves payments, I also think Enterprise POS penetration will be much trickier than Enterprise eCom penetration. Even today if I ask 100 people today "how does Shopify work with Adyen or Braintree" the answers are fuzzzzzzzzy.
Winning a platform war involves bringing superior focus to a value proposition, even against a greater force. BigCommerce 2023 R&D spend is $84 million and shrinking. Shopify's 2023 R&D spend is 1.73 Billion and growing. Yikes.
In short, BigCommerce must place an asymmetric bet to thrive, or be relegated to one of dozen or more niche platforms out there everyone kind of half-remembers.
For BigCommerce, the only path with any degree of credibility is in B2B through and through - and likely in a large and growing niche of that segment. Even if it remains generally neutral, it seems unlikely BigCommerce will cross the Enterprise B2C chasm to make up for any Shopify payment risk.
So, to Mr. Travis. Here are some honey and apples for the New Year, but don't eat too much. The road is arduous ahead of you.
[References:]
https://www.linkedin.com/feed/update/urn:li:activity:7247568634812731392/?commentUrn=urn%3Ali%3Acomment%3A(activity%3A7247568634812731392%2C7247821087227465728)&dashCommentUrn=urn%3Ali%3Afsd_comment%3A(7247821087227465728%2Curn%3Ali%3Aactivity%3A7247568634812731392)
It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
Augmodo Raises $5.3M to Scale Out Of Stock Wearable Technology
Real-time inventory tracker wearable maker Augmodo has raised $5.3M in Seed funding that will be invested in brand and retailer pilots. How does this help retailers battle against out-of-stock and get stock back on shelves?
Second
LEGO Brick Sorting Service Sort A Brick Secures €1.15M
LEGO blocks sorting circular service Sort A Brick has raised €1.15M in venture funding to launch their service in Germany in 2025. Who does not love a service that sorts old LEGO blocks and repackages them with missing ones to create toys with a second life? Does this scale, and what is their relationship with LEGO?
Third
Lucky Energy Closes $11.75M Series A Funding
Lucky Energy, a better-for-you energy drink, has raised an oversubscribed $11.75M Series A Funding round that will be used to invest in marketing and strategic partnerships and accelerate retail growth in 2025. How many energy drinks do we need in a highly competitive sector dominated by incumbents? Also is there any more useless word in the English language than the word oversubscribed?
Link: https://www.finsmes.com/2024/09/lucky-energy-closes-11-75m-series-a-funding.html
Fourth
PepsiCo Agrees to Buy Siete Foods For $1.2B
PepsiCo entered a definitive agreement to acquire better-for-you Mexican-inspired products maker Siete Foods for $1.2B. Pepsico continues its healthier snacks strategy with this acquisition as consumers pay more attention to what they are eating. Who would have guessed that in 2024 PepsiCo, Mars, and J.M. Smuckers would spend billions on acquiring companies when consumers are trading down?
Link: https://www.wsj.com/business/retail/pepsi-nears-deal-for-tortilla-chip-maker-siete-foods-bb56047b
AND FINALLY …
Retail Data Platform Crisp Raises $72M Series B
Retail data platform that connects brands to retailers, Crisp raised $72M in Series B funding that will be invested in its technology, new partnerships, and new hires. Data accuracy is a challenge for everyone who has worked in commerce. How does Crisp enable less food waste?
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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.....
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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 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.
