September 30th, 2024: John Donahoe steps down from Nike, Amazon introduces new supply chain service, what’s going on with the retail job market? And the fight over de minimis and how this will end
—Today’s episode of The Watson Weekly Podcast is sponsored by Mirakl
It’s September 30, 2024 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
John Donahoe Steps Down from Nike
Amazon Introduces New Supply Chain Service
What’s Going on With the Retail Job Market?
The Fight Over Deminimis And How This Will End
- and finally, The Investor Minute which contains 5 items this week from the world of venture capital, acquisitions, and IPOs.
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To hear new episodes of the show every Monday morning, subscribe now at rmwcommerce.com/watsonweekly and wherever you get your podcasts.
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BUT FIRST in our shopping cart full of news….
John Donahoe Steps Down From Nike
John Donahoe Was Pushed: But He Will Make More Than His Successor
I guess there is something to Bain negotiation skills if this is true.
You know there is something wrong with CEO salary when the CEO who is pushed to resign in defeat makes more than the incoming CEO hired to turnaround. The new CEO Hill will make $27 million. Donahoe's comp package was valued at $29 million. Of course it was originally valued at $32 million, but.. you know, that pesky stock price.
The Board of Nike made one cardinal mistake: hiring Donahoe at all. And who can forget this famous quote:
"I remember well when John Donahoe turned around eBay"
- No one ever said this.
Donaohoe instead made several of his own mistakes with Nike:
* Not restarting Nike's diminishing innovation pipeline.
* Wiping out entire channels of wholesale business without allowing time for their replacements.
There's more of course, but these are the cardinal sins in my mind.
You've heard this quote before, right?
"Our customers want to shop in fewer places."
Oh you haven't? It seems like a simple principle but it was forgotten.
Nike is innovation plus marketing. Tech is an enabler, but it was never the entire story. I am suspecting that Nike started to get activist investors sniffing around with a gold-plated shovel to put dirt on top of JD. Stock popped 8% after hours tells you all you need to know.
And Nike's Board was in no mood to be in a poor performing economy with a poor performing CEO, with no innovation pipeline, and flat marketing.
Hill as an insider at least has the "culture thing" to restart the innovation pipeline, as he is essentially a Nike lifer, starting as a sales rep in 1998.
A powerful innovation pipeline and cooler marketing in a down economy is much better than neither in a down economy. Here's to hoping that Mr. Hill reboots Nike - the right way this time.
[References:]
Our Second Story
Amazon Introduces New End to End Supply Chain Service
Amazon's Supply Chain Service a Small Brand's Dream: Copied a Page from AWS S3
From a warehouse anywhere, have Amazon pickup your items, Amazon will calculate and distribute your inventory, replenish and fulfill across any channel. Sounds like a dream right?
Some logistics services have this capability, but not at Amazon scale.
Amazon started its supply chain journey with FBA - Fulflllment by Amazon to help third-party sellers get the Prime badge. Amazon built a Global Logistics service - AGL - to help sellers manage the flow of product Amazon later added MCF - Multi-Channel Fulfillment - to fulfill to any channel in white boxes without the Prime logo. AWD - Amazon Warehousing and Distribution is, in Amazon AWS/S3 terms, the "Glacier" - long-term storage. And MCD - Multi-Channel Distribution - for bulk shipment.
Amazon's new announcement is AWS Intelligent Tiering brought to supply chain. Auto-calculate where the inventory needs to be, every minute of every day, and precisely deliver it. Every time.
Shopify acquired Deliverr and tried to .. err.. deliver on a similar vision a few years back. Shopify didn't have the expertise, capital or patience to make it happen and went back to the eCommerce software knitting. Later partnering with Amazon for logistics while still hedging its bet on a post-Dave Clark Flexport.
So... If you're in the logistics business (3PL or 4PL), where is your next bet?
* Customization. Amazon as a global provider will have difficulty adding all the customizations that high-touch brands need to survive. Multiple specialized inserts, advertising programs, bundling and kitting, white-glove installation all come to mind.
* Verticalization. In other words, niche down by industry. If you are in beauty, great, specialize there. UPS is betting heavily on healthcare as one example.
* Customer Service. Many brands just want to get someone on the phone to hold their hand. Good luck with that from Amazon. Here's a web page. Your inventory just got held? So sorry. It could be a bit to figure out how or why. What's the number to your account rep? Meet Mr. Chatbot.
Logistics is a cost optimization exercise. For small to mid-size brands - especially ones that work on Amazon - even for many Shopify brands this could be a dream. For FBA replenishment, it's probably a good idea as well and I'm sure Amazon will use its "don't call it a monopoly" power to incent sellers to use more aspects of its supply chain. Similar to the way that if you use Amazon FBA, Amazon will not penalize you for shipping defects.
Amazon in B2B bulk moves, however, could be a challenge. The large retailers that matter - Walmart, Target, Home Depot and others... have preferred partners for store distribution. And for damn sure Amazon will not be on the "preferred list".
Amazon is coming for all the boxes. And with cost optimization happening everywhere, "why not" becomes an increasingly difficult question to answer
[References:]
Our Third Story
What’s Going On With the Retail Job Market?
obs, AI and the Cavalry That Isn’t Coming
It started with Elon. Of course.
Then it spread to Meta and Shopify. Amazon recently announced its own ratios of managers to contributors.
The sneaky and heartwarming notion that there is some magic equation to a business or organizational structure. Combine this idea with the previous hollowing out of middle management, and tendency to outsource anything that can be outsourced, you have two major trends overlapping in Western economies:
- How few employees do I need?
- How much of this could I outsource?
Oh did I mention AI? The irony is that corporations didn’t need yet another excuse to reduce headcount but one is staring them right in the face.
This is hitting agencies and outsourcing firms too. In some ways for the first time.
But perhaps interest rates will save us. Won’t that create new investment? Yes, some. But even new investment is going where?
AI.
“Couldn’t AI do this?” Is a seminal question that every VC is asking across every business model right now.
Clumsily at first and then in a more skilled way. If ChatGPT is to AI what iPhone was to mobile…
It’s not clear to me yet we have what “Uber” was to mobile - something native we could not imagine before the new technology. That is what is being chased.
But back to jobs. VCs are not here to save us and you should not expect interest rates to. Reskilling and imagination are needed.
I’ve never seen so many senior people on the street. I have no prescription but waiting it out will not make it better. Healthcare and other growth oriented regulated industries seem more immune as a rule but for how long?
All this remains clear. If you have 10+ years to retirement your world just got rocked. The sooner you convince yourself you CAN reinvent yourself with new skills, the better.
Innovation and reinvention in this kind of economy is the only safety.
[References:]
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And Our Last Story
The Fight Over Deminimis and How This Will End
Even if the US ends up regulating deminimis, many are hoping Chinese founded marketplaces will lose their relevance in the West. Forgetting that Amazon went on a similar journey too.
It’s not like these firms are only dependent on the small demiminis margin difference. There are 3 advantages:
- ability to decide what to sell and manufacture to begin with based on consumer data.
- ability to generate at scale in small batches
- ability to air freight directly from Asia’s to consumers doorstep, injecting as deep as possible into the US.
Setting aside compliance issues - because any gaps must be handled - the biggest savings is not duties. It’s inventory. As a result adjustments can and will be made by Shein and Temu.
The cure is local logistics - and there is no shortage of firms or companies that would want to help any business that can generate demand, regardless of where they are headquartered. However, it will also take a lot of duties charges to deplete a $39B growing Temu cash pile, don't you think?
The idea here is simple - realism. This is not to cheer the business model or anything else, but if you engage in fanciful thinking regarding outcomes, you will make worse decisions as business owners.
Recall another powerful firm famously skirted rules for years fighting tax and other jurisdiction laws - Amazon. I remember for years Amazon employees could not visit certain places even for fear of generating nexus for tax purposes.
Many predicted doom for Amazon saying no way consumers would keep choosing them without the tax benefit. Their profitability would plummet they say if Amazon was forced to pay its fair share.
How did that prediction turn out? In short major multinational corporations are often able to run rings about regulators - not that they cannot force compliance, it’s just that the effects of that compliance aren’t destruction.
There can be debates about what regulators can do with and without congress. Ultimately true enforcement I feel will require funding from Congress. Regardless.
The future will look more like modification of behavior and coexistence with Shein, Temu, and similar models. And not elimination.
[References:]
It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
Gnosis Freight Announces Strategic Growth Investment from Vista Equity Partners
Gnosis Freight, a supply chain visibility and execution software platform for ocean freight, has raised an undisclosed growth investment from Vista Equity Partners. The funding will be invested to further develop its proprietary Container Lifecycle Management Platform.
Link: https://www.gnosisfreight.com/post/gnosis-freight-announces-strategic-growth-investment-from-vista-equity-partners
Second
Bluprintx Strengthens Commerce Capabilities With ITG Commerce Acquisition
British-based global digital transformation consultancy business Bluprintx has acquired ITG Commerce to add Adobe services and commerce capabilities to its services offered. When was the last time you heard of an agency being acquired for Adobe and Salesforce solutions? Really?
Third
Pickommerce AI Robotics Raises $3.4M
Pickommerce AI Robotics has raised $3.4M in funding that will be used for the development, production, and marketing of its innovative PickoBot piece-picking robot. Is the future of pick and pack inside warehouses via automated robots? Sure feels like it.
Link: https://www.producebluebook.com/2024/09/19/warehouse-robot-innovator-secures-new-funding/
Fourth
Rebelstork, Returns and Recommerce Marketplace For Baby Gear Raises $18M In Series A Funding
Rebelstork, an overstock and open-box baby gear marketplace, has raised $18M In Series A funding that will be used to invest in its proprietary returns and recommerce technology. This sounds like a good idea as long as they aren’t selling used car seats on the website. I’m also familiar with companies like Good Buy Gear as well.
Link: https://finance.yahoo.com/news/rebelstork-north-americas-largest-returns-140000656.html
AND FINALLY …
Two Boxes Secures $5.3M in Funding
Two Boxes, a returns processing platform, raised $5.3M in funding that will be used to grow its engineering and go-to-market teams and enter.new geographies.. Congrats to Kyle Bertin the CEO of Two Boxes and friend of the program on this financing!
Today’s final word for the week of Septemver 30th is OpenAI. If you haven’t heard the news, OpenAI is switching its governance model from a non-profit organization to for profit corporation.
Recall this is the organization originally created with the help of Elon Musk to shepherd the future of AI to ensure it doesn’t get out of hand. As part of this process, Sam Altman has a share in the company. And by the way a bunch of long-time executives, some of which had a hand in Sam Altman’s previous ouster, are now exiting.
Look, I’m all for people getting a share in their creation. But when the whole process has been preceded by this holier than thou structure where when it fell apart Sam immediately went running to Microsoft, it’s clear what’s really going on here.
I’d like to believe the OpenAI is committed to the fact that we will not see a SkyNet situation happening and the Terminator knocking at our doorstep. I’d also like to believe the new corporate structure will also ensure that appropriate guardrails will be placed on AI going forward.
I’d like to believe that I can trust Sam Altman more than is apparent through this whole charade.
Long-time listeners might know I grew up in Louisiana, and we had a saying there, which goes something like, if you believe you can trust OpenAI, I have some swampland in Nebraska to sell you.
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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.
