September 5th, 2022: eBay’s acquisition of auto parts and trading cards, Locus Robotics scores with Geodis deal, Walmart’s new cash rewards and Amazon launches new warehousing and distribution service
It’s September 5, 2022 and this is the Watson Weekly - your essential eCommerce Digest!
Happy Labor Day!
Today on our show:
eBay Moves Ahead With Acquisitions in Auto Parts and Trading Cards
Locus Robotics Scores With Major Geodis Deal
Walmart New Cash Rewards Could Help Its Walmart+ Program
Amazon Launches Major New Warehousing and Distribution Service To Be Your Sole Logistics Provider
- 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….
Our First Story
eBay Moves Ahead With Acquisitions in Auto Parts and Trading Cards
One of my old friends Ina Steiner from online site eCommerceBytes reports that eBay has made two acquisitions in the last few months, one in Motors and the other in Trading Cards.
Lets talk Motors first. eBay has long been a leader in the auto parts category, and one of the most complex problems in the industry is which parts work with different makes and models of cars, something the industry calls fitment.
To this end, eBay acquired two companies in this space - myFitment and Ilumaware. I checked out the websites of these companies, and was impressed at them overall. First, myFitment is dedicated to helping not only eBay sellers but also Amazon and Walmart sellers list auto parts on marketplaces. Second, Ilumaware has a database of parts that matches with standard industry databases of parts.
So what is eBay getting out of this? Essentially three things.
One, they get employees that understand how to help parts sellers succeed online. This alone is a big win.
Two, they get fitment technology to help parts sellers succeed. The most important part of this technology is the parts catalog itself. The more comprehensive your parts catalog is, the more buyers and sellers you attract to your platform.
In short, in many categories online it’s not just listings that are important. It’s the data. Whoever has the best industry and catalog data will be able to enable the best buyer and seller experience.
Three, they get to potentially throw a proverbial wrench into Walmart and Amazon’s plans to make inroads into this category, not that they are very far but it doesn’t hurt to protect your turf from competition and double-down on a strength.
With regards to trading cards, eBay just acquired marketplace TGCPlayer for almost $300 Million - a company that connects buyers and sellers in the hobby gaming industry around the world, which incidentally aligns nicely with eBay’s mission.
Likely this was a play for improving eBay’s selection online as well as introduce new buyers to its brand.
It’s not often I talk about eBay on this program, and it’s not because eBay is not a great company. As one of the OGs of eCommerce, eBay is both large and very profitable. Something you couldn’t say about most of the market, including most of the other marketplaces that have traded growth for profitability in the next 10 years.
On the other hand, eBay’s growth has been anemic for a long time and the company has been plagued by at least a decade of poor leadership, strategic moves, and execution.
eBay brought in CEO Jamie Iannone as someone who could unlock the value of what makes eBay great, and that strategy has served him well in the short time he has been there. No one can turnaround a company eBay’s size quickly, but Jamie’s steady leadership has been appreciated nonetheless.
The big question is, with eBay’s known technical challenges and previous execution missteps, can they integrate these acquisitions successfully?
References:
Our Second Story
Locus Robotics Scores With Major Geodis Deal
Megan Ruggles from Supply Chain Dive reports that Geodis - after testing Locus Robotics on a smaller number of facilities in the last few years, has signed a major expansion of its deal to deploy 1,000 autonomous robots across its network.
On its surface, this is a major win for Locus in the warehouse automation wars that are being fought at the moment from a number of players, including Shopify’s own 6 River Systems which I am sure would have loved to have gotten into this deal.
As an aside, would I be surprised if in the future Amazon doesn’t also get into warehouse automation for third-parties? No I would not, particularly when you look at their automation efforts within retail stores. A warehouse is actually a more controlled environment.
Watson Weekly listeners may not know the origin story of Locus Robotics. Prior to Amazon’s acquisition of Kiva Systems in 2012, Quiet Logistics founded by Bruce Welty was using Kiva robots. Well, one of the terms of the Kiva acquisition was that all the previous installations of Kiva be completely ripped out. A very painful process.
Of course that means there was no great alternative to Kiva on the market, and so Quiet Logistics went and developed its own robotics solution which it spun out into an independent company called Locus Robotics.
Interestingly enough, Quiet Logistics itself got acquired by American Eagle Outfitters and forms the foundation of its fulfillment solution.
In case this isn’t interesting enough, some of you may know that early Kiva members also went on to found 6 River Systems which was acquired by Shopify a few years ago. So there are a lot of players looking at this same market.
In fact, the biggest battle to watch in the eCommerce market right now is who is going to be providing our supply chain services?
Or software companies like Shopify?
Or is it going to be from independent supply chain providers like Flexe and GXO?
Is it going to come from retailers like Amazon and American Eagle?
[References:]
Our Third Story
Walmart New Cash Rewards Could Help Its Walmart+ Program
Walmart+ has seemed like it's been slow to get off the ground, but momentum finally seems to be building and Walmart is now bringing out the big guns -- cash. Recently Walmart introduced a new item-level cash rewards program that are only redeemable and bankable by Walmart+ subscribers.
Knowing you can generate cash rewards by shopping (and in the future other ways) is very powerful.
The big question for everyone is will this perk be motivating enough for brands to offer rewards given how early the program is?
How aggressive will Walmart be with early rewards to entice new signups?
Walmart also hints that Walmart+ members could earn rewards in other ways in the future. Which might even mean that these rewards are a centerpiece of the program - along with the discount on gas.
I don't care what kind of economic bracket you are in -- cash is cash.
Another interesting element of the program is the company's tie-in with iBotta and allowing brands to offer item-level rewards to members. These rewards will appear in search results.
While this item reward service (and other retail media services) is something that Amazon offers today, Walmart seems to have a partner rather than build approach, which is certainly a faster way to get to market for services that are not truly novel. Plus, many brands are already signed up with iBotta which gives Walmart leverage and a faster time to market, another smart idea.
That's not to say that Walmart might never build on its own, but learning quickly is also important particularly in an important area of growth for the company - namely, the intersection of Walmart+ membership and its advertising business.
[References:]
Our Last Story
Amazon Launches Major New Warehousing and Distribution Service To Be Your Sole Logistics Provider
Never content to rest on its laurels, Amazon has introduced a major new supply chain service called Warehousing and Distribution Service or AWD - which signals its clear intention to be the sole supply chain provider for retailers and brands.
And yes friends, you better believe this feeds Amazon's flywheel. Amazon rarely launches point solutions that don’t reinforce other areas of its business.
* Amazon truly trying to get "all of sellers inventory", even slow-moving. Amazon is promising sellers no storage limits. Personally I find this claim as unbelievable now as Gmail's 1GB storage offer was in 2004.
* The service will also handle automatic -replenishment to Amazon’s FBA which is a huge problem for sellers as this service is key to sellers winning the Buy Box.
* AWD will also work globally, and sellers can consolidate their global inventory under Amazon instead of managing multiple zones like Amazon US and Europe, etc.
* Next year, Amazon will also expand the service to work in wholesale and retail scenarios to send inventory to stores.
One word, wow. Here are my thoughts on the new offering.
First - Similar to the way that Amazon can offer lower parcel rates than anyone in the industry, Amazon will likely have lower storage rates than anyone else too.
Just to break it down for you, more volume than anyone for fulfillment, means lower cost per shipment which is why buying postage from Amazon is so cheap. By the same token, more warehouse square footage than any other provider in North America means lower cost per square foot than anyone else also, and this is savings they can pass along to brands who almost certainly do not have the same kind of leverage.
Did I mention that logistics is entirely a volume game? ;-). This is a smart move on their part to go for the whole enchilada.
Second This move reminds me of AWS Storage tiers for fulfillment. In AWS there are no fewer than eight different classes of data storage (S3) with different performance characteristics that sellers can select individually or that Amazon can auto-manage for you. From high-availability to options like "Glacier" for mostly archive and read-infrequent.
I've been waiting a long time for Amazon to bring this idea to supply chain.
Third - FBA has been limited FOREVER, and Amazon needed to expand its storage options for its Buy With Prime launch, as FBA only really works from a storage or profitability point of view for small, very fast-moving items. This service promises to completely remove those limitations.
I also think that many people are missing the Buy with Prime angle here. Amazon needs to offer cheap storage to brands for the Buy With Prime service to be successful.
And by offering it before Shopify is able to expand its new Deliverr service in my mind puts a lot of pressure on that acquisition to show tangible results.
Fourth - The biggest threat is to existing 3PLs in my point of view. The 3PL industry has been consolidating greatly over the past few years, and this should accelerate that trend due to the benefits of greater scale. Likely acquirers include players like Flexe, Maersk and Shipbob. Those without physical facilities could suffer.
Fifth - One of the big challenges with this idea in a retail scenario is how optimized this inventory can be for curbside and buy online pickup in store scenarios? A retailer like Target has optimized its entire supply chain to make its stores more efficient. However, most have not and it’s very difficult for Amazon to cover this use case in an optimized way because the regional distribution centers need to be optimized to provide inventory to stores efficiently, including sending eaches.
Amazon has major competitors are nipping at their heels in various parts of the supply chain: Shopify, AEO, Flexport, and Maersk, to name a few. This announcement definitely removes some oxygen from the room in this space.
No one carries more parcels than Amazon, and this service shows they are focused on extending their lead rather than resting on their laurels. Leave it to Amazon to turn a massive facility overinvestment into a competitive advantage.
[References:]
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It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
Philadelphia-based Return Logic raises a Series A for its returns management software.
Returns software is a competitive space with established players like Narvar, Happy Returns, Returnly, and Loop. New returns vendors need to find a niche, and I think ReturnLogic slots in for lower end merchants given their pricing.
Second
Autonomous robot creator Geek+ raises $100 Million in a Series E financing
Amazingly we were just talking bout robots, and Geek+ is another large player in the space with its Intel-based robotics platform for eCommerce, but also for a number of other industries like pharmaceuticals and automotive.
The company plans to use the funds to expand globally and accelerate R&D.
Link: https://www.scmr.com/article/geek_announces_100_million_series_e1_financing_round
Third
Supply Chain Purchasing Software Stimulus Raises Seed Round
The focus of the software seems to be a way to discover, evaluate and collaborate with suppliers. I noticed in particular that it allowed suppliers to be held to diversity and sustainability standards that are increasingly important to many buyers.
Fourth
Direct to Consumer Customer Service Software Gorgias Raises $30 Million with Participation from Shopify
Gorgias has been a very popular choice of CRM for many Shopify-based brands and this investment cements that fact. Although I did notice the other day that the customer service for Shopify’s Shop App is provided by Zendesk. Maybe someone didn’t get the memo about the investment yet?
Link: https://www.gorgias.com/blog/series-c
AND FINALLY …
Lighting Distributor All Star Auto Lights Acquires Blackburn OEM Wheel Solutions
All Star Auto Lights is owned by Atlantic Street Capital and is just another signal that private equity is waking up to the eCommerce potential in non-traditional categories like automotive.
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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.
