September 19th, 2022: Shopify changes COO and CFO, Instagram scaling back, Shopify's new cross-border features, and Amazon's Accelerate Conference
It’s September 19, 2022 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Shopify Changes Its COO and CFO - And Stock Price Is an Important Reason
Instagram Scaling Back Its eCommerce Ambitions
Shopify Introduces New Cross-border Features to Accelerate Its MOve into Europe and Asia
Amazon’s Accelerate Conference Takes Amazon In New Directions
- 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….
Shopify Changes Its COO and CFO - And Stock Price is an Important Reason
Shopify made some major leadership shakeups last week and in doing so, revealed its priorities.
The biggest news is CFO Amy Shapero is moving on and Jeff Hoffmeister is coming to Shopify, after spending his career at Morgan Stanley, and leading the IPO from the other side of the table.
The CFO could have been someone who had been at large, Enterprise or SaaS companies their entire career. That is not what just what happened. That selection would indicate a focus on SaaS fundamentals like ACV, attrition, and growth.
Jeff Hoffmeister has never worked at a software company as a financial operator. This tells me their focus is not necessarily on typical software company CFO tasks. It's more about managing Wall Street, and having Shopify "look like" a company that Wall Street will keep investing in.
In other words, what is the most important question on the new CFO’s mind at the moment?
"What the hell is happening to the stock?"
Of course that's the same question that Shopify investors are asking who are "buying the dip" and are learning it might be a falling knife instead - at least in this market.
Shopify also made a change at COO, promoting VP Product, Merchant Services, Kaz Nejatian.
One way to think about the role of COO at a software company is it is the connection between Revenue and Delivery. Previously, Kaz was Head of Product Management at Shopify, so he likely knows exactly what he is getting into here and Tobi trusts him with product roadmap decisions. It appears Kaz's scope expands from just Merchant Services like payments and capital to Subscription Services as well.
In a software company, a COO is kind of a hybrid role, and Kaz brings more Product-thinking to the function rather than previous COO Toby Shannan who was previously on the Revenue side of the equation.
One role I keep waiting for them to fill?
Chief Supply Chain Officer.... tick tock Shopify.
[References:]
Our Second Story
Instagram Scaling Back Its eCommerce Ambitions
In what should be a surprise to no one, there are reports from The Information that Instagram is scaling back its eCommerce ambitions.
Ecommerce was always a longshot proposition at Meta. Advertising companies pretty much never figure out eCommerce because eCommerce is about operations, and operations are a much lower margin business than an advertising business.
But even against that backdrop, the major things that have happened since Facebook announced eCommerce was a priority are as follows.
One, they changed their whole named to Meta in Mark Zuckerberg’s quixotic quest to create a virtual fantasy world in order to escape from his current life which is probably a virtual hell.
Two, Apple beat Facebook up and took their lunch money with regards to their ability to track users. Since then, advertising effectiveness has gone down.
Oh, did I mention there was this company Tiktok which no other company on the planet seems to understand how to stop?
In short, Meta seems to have much bigger fish to fry at the moment than eCommerce. This also probably should reduce everyone’s focus on topics like Live Shopping as well. If a company with as much traffic as Meta can’t figure out Live Shopping, then most other companies will not be able to figure it out either.
[References:]
Our Third Story
Shopify Introduces New Cross-Border Features to Accelerate Its Move into Europe and Asia
Last week, Shopify announced two new offerings for its merchants. One is called Shopify Markets Pro, and the other is called Shopify Translate and Adapt.
These are actually big moves that I think have not gotten enough coverage in the last week.
Shopify Markets Pro essentially allows merchants offer localized payments internationally using what’s called a merchant of record model. A merchant of record is who the financial institution holds liable for the financial transaction, and requires a local entity in specific market to benefit from the best rates and lowest rates of declines.
Another example of a merchant of record model from a payments provider outside of the eCommerce platform space is the cross-border payments provider Reach.
This type of cross-border merchant of record of model was pioneered by past companies like Borderfree and Global-E, which is actually the technology that Shopify is using under the covers to power this buyer experience.
The second announcement is something Shopify is calling Shopify Translate and Adapt. This technology allow automatic translations, likely powered by a third-party, as well as the ability to manually edit those automatic translations.
This type of translation capability could be used to take the place of Javascript overlay technologies which have been prevalent in the cross-border space over the years that can really slow down page load times. It’s hard for me to say if that’s the case here, however, since I have not seen the technology live.
Automatic translation is fine for a baseline, but it won’t work for everyone, however. In particular, shoppers in France and Japan are critical markets where a nuanced localized translation is important.
One of the things that gets lost in the narrative about Shopify is what their real priorities are. If look at it from a high-level, in the direct to consumer segment, there is only so much new growth they can get from North America. Instead, their biggest opportunity for growth is actually in Europe and Asia.
If you track Shopify’s careers page over the past two years, a big percentage of Shopify’s hiring has been in Europe and Asia, mostly in sales and account management roles.
Why does this matter for European and Asian brands? Well for the average US merchant, cross-border is not an enormous opportunity, usually representing about 3 to 5 percent of sales. In Europe, the game is shifted. Up to half of sales can be cross-border for the average merchant in the United Kingdom or Europe.
Something that Shopify has been paying much more attention to.
[References:]
And Our Last Story
Amazon’s Accelerate Conference Takes Amazon In New Directions
Last week I traveled from New York to Seattle to be a part of Amazon’s Accelerate event. Similar to the old days of eCommerce where it was important to be at eBay Live, it felt like we are at an inflection point in Amazon’s history coming out of COVID, with a new CEO Andy Jassy, a major new initiative like Buy With Prime being announced, and Amazon becoming a general third-party logistics company.
Any one of these items on their own seem transformational, but the combination of these factors made it seem almost essential to be here.
Here are a few things I learned this week.
Amazon’s Buy With Prime is in invite only mode, and this is Amazon’s way to bring the Prime promise of fast and free shipping to direct-to-consumer websites like Shopify, BigCommerce and WooCommerce. Even just letting that sink in is hard to do for most people.
The core of Amazon’s logic here is that 49% of buyers say that high shipping costs at checkout lead to abandonment.
Amazon Buy With Prime is built on shoulders of giants, including Amazon Multichannel Fulfillment or MCF, and Amazon Pay.
On top of this, Amazon has already released two additional offerings to pair with Buy With Prime. One is a marketing kit which allows merchants to explain Buy With Prime to its shoppers. The second is Buy With Prime Sponsored Ads.
If you think it’s a big deal to have Prime off Amazon, then Sponsored Ads will blow your mind even further. This is Amazon allowing you to pay to send traffic off Amazon on a cost-per-click basis. In order to access it, the brand will need to be a part of Amazon’s Brand Registry.
A few brands to check out that were up on stage include Bossy Cosmetics, Great Circle Machinery, Epic Water Filters, and the Cut Buddy. I would encourage you to check out both their Amazon brand storefronts, particularly Epic Water Filters, as well as their direct to consumer websites.
Amazon released a few other items as well.
Amazon Tailored Audiences which allows Amazon sellers to use e-mail to remarket to certain segments of their Amazon shoppers directly. While this is all well and good, I’m not sure why Amazon is reinventing the wheel here. If they want brands to adopt this, what they really need to do is release the data and APIs for this to be integrated into existing marketing tools like Klaviyo and Salesforce.
Amazon Warehousing and Distribution (or AWD) was also re-announced here which turns Amazon into a full third-party logistics provider. Just some statistics for you, Amazon now has:
- 20 million square feet of warehouse space.
- 85 aircraft, and
- 200 thousand employees in its supply chain organization.
Amazon is also going further down into the supply chain by supporting curbside and pickup in store with their Local Selling and Today initiatives.
Amazon talked again about its new Seller Wallet feature, and introduced the idea of a Marketplace Product Guidance product which sounded like a clone of something like Jungle Scout.
To recap, this felt like a very different Amazon event than I expected. While I was sitting in the audience, if I closed my eyes and didn’t pay attention to where I was, you would almost think you were at a Microsoft event, and instead of Steve Ballmer dancing and sweating on stage talking about Developers, Developers, Developers, you have Amazon here talking about the importance of brand-building and owning the customer relationship.
What kind of bizarro world had I stumbled into?
This is such a huge shift from the past and I think you are seeing a different focus from Amazon now. The big question?
Will they be able to follow-through and build trust with a naturally skeptical brand community?
[References:]
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It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
Lily AI raises $15 Million from Canaan Ventures to help improve product search and discovery
The company seems to be solving the problem that most people’s search, browse, and filter experiences on their websites are dealing with extremely limited information. Lily attempts to expand the amount of attributes and relevance of the information available for shoppers so that they can find and buy products more easily.
Second
Startup Deliverider raises a seed round to improve the consolidation of multi-item orders
The promise here is that sometimes for a multi-item order, items are not all in the same facility. This technology allows retailers to receive items just-in-time from multiple facilities in order to consolidate the last-mile into one shipment. While this seems helpful, it is probably not as important as trying to get the inventory in the right place to begin with.
Link: https://www.calcalistech.com/ctechnews/article/rydxa1fji
Third
SMB and Mid-market Warehouse Management system SkuVault Has Been Acquired by Inventory Management Software Provider LinnWorks
Isn’t it ironic that both ChannelAdvisor itself and SkuVault who built their business on top of ChannelAdvisor merchants were both acquired within the same week?
Fourth
Instacart continues its acquisition spree by buying AI pricing and promotions platform Eversight
Normally companies that are in an IPO quiet period, especially during a confidential IPO filing, are … you know … quiet during this period.
Instacart has already announced two acquisitions in the last few months. At some point that company needs to settle down and actually implement these acquisitions to deliver any value, so I don’t expect this trend to continue indefinitely.
AND FINALLY …
Kinderhook-backed ASAP acquires tools supplier Romac Industrial Parts
This acquisition continues the trend of private equity being interested in accelerating industries like tools and auto parts through digital commerce.
ASAP is a North American supplier of replacement agricultural and construction parts.
Romac specializes in replacement ground engaging tools (“GET”) including bucket teeth, blades and rubber tracks utilized on excavators, graders, bulldozers and other heavy construction equipment.
Link: https://www.pehub.com/kinderhook-backed-asap-acquires-tools-supplier-romac-industrial-parts/
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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.
