Daily Consumer #23 - Amazon's Landlord is a $115B Company
Plus some astounding results for new payments systems being rolled out in Brazil and China.
My Work
Amazon's Landlord is a $115B Company
Prologis is an amazing company and story. Prologis’ origin lies in Abbey, Moghadam, and Burke Property Corporation (AMB), a real estate investment company founded in 1983 by Hamid Moghadam, who is CEO of Prologis today. Originally, this real estate business invested in office, industrial, and community shopping centers. In 1999, the company shifted its focus to industrial real estate exclusively. The reason for this shift is an interesting one. Hamid met the CEO of Webvan, the Instacart of the late 90’s, and in it saw a preview of the future. From a Forbes profile:
“Prologis' ecommerce strategy dates in one way or another to 1998, when Moghadam met the bookstore entrepreneur Louis Borders, who was raising money for the online grocer (and soon-to-be dot-com-bubble poster child) Webvan. Moghadam was then running Prologis' precursor, AMB Property Corp., which invested $5 million in Webvan, built it 3 warehouses and divested a $1B retail portfolio, plowing the proceeds into more industrial space. That $5M briefly swelled to $55M before crashing to nothing. But the loss had a big silver lining: Moghadam's billion-dollar bet on warehouses formed the backbone of Prologis' current portfolio. “Webvan opened our eyes to the possibility of e-commerce very early,” says the 61-year-old Moghadam."
A few years after the strategy shift to industrial, AMB became the largest owner of warehouses in the US. Frequently, additions to the portfolio took the form of land purchases with AMB building warehouses itself on top. Later, AMB leaned into M&A to accelerate its portfolio growth. After a merger in 2011, AMB was renamed Prologis.
Webvan didn’t turn out to be a stellar tenant for Prologis, but Prologis certainly made up for it in their relationships with Amazon (its largest tenant), Fedex, Walmart, Home Depot, and others. With those businesses growing (and especially their ecommerce businesses), the need for Prologis as a provider of warehouse space grew tremendously. Fast forward to today, Prologis manages 1B+ square feet of warehouse space, up from 670M square feet in 2016. Their real estate footprint spans 19 countries. To a degree, it can be said that Prologis is Amazon’s landlord.
Is it good business to be Amazon’s landlord? I’d say definitively yes. As you can see in the graphic below, Prologis averages 97% occupancy for its warehouses and is growing its rent 30% YoY as of last quarter. The company consistently generates >$1B net income.
Why is Prologis needed by these retailers? Shouldn’t they own their own warehouses? There are a few reason why Prologis has become a key partner to them instead:
Exclusive supply. Prologis was early to the gold rush. They either acquired or built prime facilities in heavy trade geographies before intense competition emerged. Now, everyone wants warehouse space outside of major metros like San Francisco, but it’s very hard to find.
Purpose built for the warehouse business. It is capital intensive to buy or build warehouses. Even retailers like Amazon can’t afford to tie up billions of dollars in getting warehouses up when they need that capital to finance inventory and operations. It’s the same reason why most big companies don’t own the big building they house their workers in. Prologis attracts investor capital for exactly this line of business and has become a specialist in building quality warehouses, including pioneering the concept of multi-story warehouses.
Fluid supply chains create tenants. Even large retailers are often making adjustments to their supply chains which influences where and for how long they might need a warehouse. Renting has its benefits over buying as a result.
What’s ahead for Prologis? Hamid estimates another 800M square feet of warehouse space is needed to make the supply chain resilient. Demand doesn’t seem to be a problem. The real question lies in the supply. Is there space to build new warehouses around the dense cities where consumer demand is concentrated? Will warehouses continue to be these mega facilities or will they get miniaturized and scattered across a city? How will regulation impact warehouse supply? The trucks streaming in and out of them cause significant traffic and pollution after all. If history is any precedent though, Prologis will continue to find the gold mines of infrastructure that enable modern commerce to happen.
Community
Italic is hiring a Head of Women’s to run their biggest business segment.
A great set of ecommerce trends from the folks at Primary Ventures.
News
Alcohol.
Online alcohol sales reached $6.1B in the US in 2021, up from $2.6B in 2019.
As of Oct 2021, non-alcoholic beverage sales grew 33% YoY to $331M and grew 315% in terms of ecommerce sales.
B2B Commerce.
McKinsey explains why B2B commerce will get digitized and the steps towards making it happen.
BNPL.
A deep dive into how BNPL works, both on the consumer and merchant side. “BNPLs pitch themselves to businesses as more marketing efforts and less simple payments rails. They’re more expensive than cards by about 300 bps. They claim they radically increase conversion rates (by X0%), basket sizes (by X0%), and repurchase frequency, without substantially cannibalizing card sales.”
Affirm is partnering with Verifone to offer BNPL at checkout both in-store and online.
Content + Commerce.
Chinese Commerce.
Shopify partners with JD.com, China’s 2nd largest ecommerce marketplace with 550M users. Partnership will make it easier for US merchants to sell to consumers in China.
A profile of Alibaba, China’s largest marketplace that generates $1.2T in GMV per year from 939M MAU.
Gen Zs in China are driving demand for imported goods. “The emerging Gen Z cohort values individuality higher, and they spend more on enjoying themselves.”
DTC Brands.
Almost 60% of Americans bought from a DTC brand in 2021.
Earnings Spotlights.
Procter & Gamble saw revenue grow 6% YoY to $21B in its quarter ending Dec 31st. Increased prices 3% in the quarter and will continue to increase prices due to growing labor, freight, and raw material costs. “Consumers are switching to pricier, higher-end products, such as trading liquid laundry detergent for costlier single-dose pods. The consumer is very resilient and very focused on these categories of clean home and health and hygiene.”
Bytedance saw revenue grow 70% to $58B in 2021. TikTok’s revenue specifically was estimated to be $4B in 2021.
Puma is seeing a resurgence. Revenue grew 32% YoY to $7.7B in 2021.
Fashion.
Kid’s fashion is a $40B industry in the US and growing quickly given we live in the Instagram era and want our kids to show well.
Grocery.
Sainsbury’s, a large British grocer and #2 in grocery delivery behind Tesco, shares updates on its business. Slide 33 shows the online weekly orders are in decline at 650K currently which is down from a peak of 850K.
HomeValet launches its temperature-controlled smart box for grocery deliveries which costs $499. Also announces a partnership with Walmart for seamless grocery delivery.
Headless Commerce.
Nacelle expands its headless commerce APIs to support other major ecommerce platforms including Adobe Commerce, Salesforce Commerce, and BigCommerce.
Holiday Shopping.
Shein, On Running, Away, and Zara were the biggest brand winners during the 2021 holiday shopping season.
Influencer-Driven Commerce.
James Harden launches a fragrance line in partnership with Art of Sport.
Martha Stewart is launching a CBD skincare brand.
John Legend is building a skincare brand for people of color.
Live Shopping.
CommentSold saw GMV on its platform grow 40% YoY to >$1B.
Logistics.
Warehouse automation is a growing theme amongst retailers. DHL has plans to deploy up to 2K robots in warehouses, Walmart is allocating nearly $14B for warehouse automation and related business areas. Uniqlo aims to have a fully automated warehouse online in China by the end of August as part of $865M investment aimed at speeding up the online business.
Walmart is opening a 1M square foot fulfillment center in Mississippi in 2022 which will support its ecommerce business.
Shopify is retracting from its logistics ambitions likely after seeing firsthand how complex and nuanced logistics operations are. Doesn’t feel like anyone can catch up to Amazon on this front.
Loyalty.
Rebag, a luxury bag resale marketplace, is launching a loyalty program that awards points that can be redeemed to future purchases.
Luxury.
Luxury good sales grew 36% YoY in China in 2021. The world’s largest luxury market is only getting bigger.
Luxury brands are all getting into streetwear. “Generations Y and Z are already the main growth engine of the luxury market. By 2025, they are expected to account for 45% of total luxury spending.”
Yoox is launching a marketplace to compete with Farfetch. Historically has been a retailer itself responsible to purchasing inventory wholesale and retailing it to consumers.
Macro.
Inflation is happening. “Inflation has reached a 40-year high as we see several structural changes take hold. Consumer demand has shifted from services to household goods as people are spending more time at home and benefiting from higher levels of savings. Labor shortages are causing supply chain bottlenecks as people have more choice in the gig economy. The quit rate in the United States has ever been higher reflecting the confidence of employees." -BlackRock CEO Larry Fink
Organized theft is a real issue for retailers. "I think Congress needs to step up a little bit here because the magnitude of the problem is -- it's enormous. We've had, I don't know, 10 years where shrink is at -- And I'm not going to -- it sounds precise, it's not the exact number. It's a little over 2% of shrink, 2.25%. It's currently running at 3.25%. We estimate the shrink is about 40% to 50% higher on a percentage basis than it was prior to prior to '20. And it's organized crime. This is not petty theft." -Walgreens Boots Alliance CFO James Kehoe
Metaverse.
OpenSea, the leading NFT marketplace, now has ~1M cumulative users who are now accounting for $4.3B of monthly volume in USD equivalent.
Coinbase is partnering with Mastercard to make it easier for consumers to purchase NFTs by using Mastercard cards.
Twitter is layering NFTs into its subscription service, Twitter Blue. Allows users to connect their cryptocurrency wallets and set profile pictures based on their NFTs. Facebook is rumored to be exploring something similar.
Ralph Lauren is “all in” on the metaverse. Shared during NRF 2022 that the brand has already sold 100K pieces of digital clothing to outfit avatars. “First and foremost, it’s an opportunity to engage with mostly younger customers.”
Puma filed trademarks implying it will soon start selling virtual goods.
Vox assesses the utility of digital clothing. “What matters is the emotion that these clothes evoke. Fashion is an emotional experience.”
StockX is starting a service that allows users to trade sneakers without ever taking possession of them. Uses non-fungible tokens tied to physical products that sneaker traders can buy and sell instantly using blockchain technology to ensure authenticity.
Neobanks.
Shopify launches Balance, a no-fee banking service for its merchants with its own rewards program and expedited payouts for Shopify sales.
Instacart launches a branded credit card in partnership with Chase. “Will allow consumers to earn accelerated points on purchases across the Instacart marketplace if 700+ retailers.”
Omni-Channel Commerce.
Amazon is launching a 30K square foot fashion store in a mall in Glendale, CA. “Will offer more than double the number of styles as traditional stores do because only one of each piece of clothing will be on display, with the rest in the back room. Items are chosen by Amazon curators who also use feedback provided by millions of customers shopping on Amazon.com.”
Tom Brady will sell his BRADY fashion brand in Nordstrom stores. See more about his brand launch in last week’s edition.
Payments.
Pix, the payment system rolled out by Brazil’s central bank, is a runaway success so far. Was launched in Nov 2020 and now has 108M registered accounts, more than 50% of the population. Payments volume is already equivalent to 80% of debit and credit card transactions and 30K transactions occur per minute now. 73% of transactions are person to person.
China is seeing 261M users for its digital yuan test which translated to $8.3B of payment volume in the last 6 months. The world is moving to cashless economies and that won’t just mean using a credit card.
The Fed is discussing a digital currency for the US dollar but has no early views yet. “It would be a digital liability of a central bank that is widely available to the general public. In this respect, it is analogous to a digital form of paper money.”
Cash App, owned by Square, is integrating Lightning Network to enable all US users to send bitcoin for free to any other user in the world.
Visa wants to turn any internet-connected device into a payment terminal.
Private Label.
GoPuff launches its own line of products starting with bottled water, cleaning products, batteries, paper products, and food storage. Plans to launch 4 brands and >100 products in 2022.
Resale.
A great profile on the founder of Facebook Marketplace, the world’s 2nd largest marketplace in terms of monthly users after Amazon. “5 years after launch, the Marketplace Tab on Facebook now has over 1B MAU, more than Snapchat and Twitter combined.”
Retail Media.
Family Dollar is proving out an advertising business. “In all, there were over 72K ad variants served 28M times.”
Same-Day Delivery.
GoPuff’s metrics leaked as part of their recent fundraise. Generated >$2B revenue in 2021 and -$500M EBITDA. Have 578 micro-fulfillment centers, up from 383 in 2020. Claims to have 3M active customers in 2021 and covers 30% of the US population.
Skincare.
Proactiv is rebranding to Alchemee and is launching 2 new product lines targeted at rosacea and eczema.
SMS Marketing.
Klaviyo publishes a case study of customer Dagne Dover which aggregated 170K SMS subscribers in <12 months.
Social Media.
Studios like Netflix and social media platforms like Instagram and Twitch are spending an estimated $250B in annual content costs. Entertaining consumers is as quickly growing source of spending, but when do we hit peak content?
Instagram is rolling out subscriptions for creators that enable creators to charge a fee to offer fans additional content.
Subscriptions.
Amazon Prime has an estimated 150M members in the US and 98% annual retention. “Prime members typically spent more than $3K a year with Amazon. Those that didn’t belong to Prime spent half as much.”
Internet Retailing estimates that consumer subscriptions will grow into a $275B market in 2022 with product subscriptions accounting for 45% of this.
7-Eleven is launching a subscription service called 7NOW Gold Pass which costs $5.95 per month and provides free delivery, double rewards points, and select freebies. Trying to make delivery more profitable?
1-800-Flowers is launching floral subscriptions. Customers can choose from nearly 40 unique arrangements and choose the frequency they want it delivered.
Sustainability.
Parade is partnering with Terracycle to help consumers recycle underwear of any brand. “Will send free Second Life by Parade packages, which include a biodegradable bag and a prepaid return shipping label, upon request from the Parade website.”
Try Before You Buy.
Amazon rebrands Prime Wardrobe to Prime Try Before You Buy. Allows you to try on any eligible fashion items for 7 days before deciding what you want to keep and what you want to send back. You only pay for what you keep. and shipping and returns are free.
Funding and Exits
Brands
Alcohol.
Flying Embers raises $20M from Beam Suntory for its hard kombucha brand.
Betterware acquires Jafra Cosmetics for $255M, a beauty and fragrances business that sells through a network of 443K consultants.
Apparel.
Aimé Leon Dore raises capital from LVMH for its streetwear brand.
Hair Extensions.
Rebundle raises $1.4M from M25 for its hair extensions made from plant-based materials.
Temporary Tattoos.
BIC acquires Inkbox, a DTC temporary tattoo brand, for $65M. Had $27M in sales in 2021. “Inkbox's temporary tattoos and markers empower individuals to be their continually-evolving, fluid selves.”
Marketplaces
B2B Commerce.
Green Labs raises $140M from BRV Capital Management for its Asia-focused marketplace aiming to “digitize the entire value chain of agriculture space from crop production to distribution.”
TradeSquare raises $28M from Tiger Global for its Australia-focused B2B marketplace that connects SMBs to 1K suppliers who offer 150K products on wholesale. Resembles Faire and Ankorstore.
Dropee raises $7M from Vynn Capital for its Malaysia-focused B2B marketplace connecting 80K SMBs with suppliers and facilitating >$100M in annual GMV.
Custom Merchandise.
HugePOD raises $40M from Joyy Inc. for its print-on-demand service that allows customers to make customer merchandise.
Grocery.
Calii raises $22.5M from Dalus Capital and Jam Fund for its Latam-focused, vertically integrated grocery delivery services that offers 5K products.
Metaverse.
Autograph raises $170M from Andreessen Horowitz and Kleiner Perkins for its NFT marketplace that is co-founded by Tom Brady. “Autograph is essentially an agency go-between for celebrity athletes and entertainers looking to find a personal presence in the incredibly noisy NFT world.”
Burnt Finance raises $8M from Animoca Brands for its DeFi-based NFT marketplace. “Will provide permission-less access to NFTs and claims to have low fees and fast speeds, with 160K users on its waitlist.”
Same-Day Delivery.
Milkrun raises $75M from Tiger Global for its Australia-focused 10-minute grocery delivery service. Is currently available in 35 Sydney suburbs.
Software
B2B Commerce.
Proton raises $20M from Felicis Ventures for its software serving wholesale distributors and equipping their sales reps with data and suggestions to grow sales. “Saw its monthly recurring revenue increase by 241% over the past year.”
Channel Management.
Cart.com acquires SellerActive, a provider of software to online merchants to manage multiple sales channels. Has 800 brands as customers and synchronizes 50M+ listings per day.
Customer Support.
Chatdesk raises $7M from Cultivation Capital for its customer support software that finds “superfans” of a brand to become Chatdesk Experts and handles the hiring, training and staff scheduling to instantly scale the brand’s customer support team. “Hundreds of brands including Thinx, Shea Moisture, Factor Meals, Moo.com and Mented Cosmetics use it to scale their customer support and drive sales.”
Zowie raises $5M from Gradient Ventures and 10xFounders for its chatbot software that aims to automate responses to 50%+ of customer support tickets for agents at ecommerce brands. Has 100 customers currently.
Ecommerce Platform.
Shoplazza raises $150M from Softbank for its ecommerce platform that resembles Shopify.
BukuKas raises $80M from Tiger Global and Sequoia Capital India for its Indonesia-focused software that enables SMBs to build online storefronts and its bookkeeping software. “GMV of LummoShop grew 11x from December 2020 to December 2021. The app attracted more than 1M merchants.”
Dukaan raises $11M from 640 Oxford Ventures for its largely India-focused software platform that allows anyone to set up an online store and sell their products. “Has facilitated over 1.5M transactions and a new store is being created every 2 minutes.”
Product Development.
Turing Labs raises $16.5M from Insight Partners for its simulation software that helps CPG companies speed up the process of making new products. “Works with some of the world’s biggest consumer packaged goods companies.”
Restaurants.
Castiron raises $6M from Bowery Capital, Foundry Group and High Alpha for its ecommerce platform for independent chefs. Offers customizable websites, inventory management tools, order fulfillment tools, and marketing tools.
Fintech
Neobanks.
INDmoney raises $75M from Steadview Capital, Tiger Global and Dragoneer for its India-focused neobank that now has 3.5M users.
Shipping Insurance.
Route raises $200M from an undisclosed investor at a $1.25B valuation for its shipping insurance product offered to merchants. Also offers shipment tracking software. “Has signed up >11k merchants and tracked >175M packages. Revenue more than doubled last year to an estimated $80M.”
Logistics
Fulfillment Services.
Supply Chain Software.
7Bridges raises $17M from Eight Roads for its AI-powered logistics management software that unifies logistics data to understand and optimize performance.
Warehouse Automation.
Exotec raises $335M from Goldman Sachs Asset Management at a $2B valuation for its large scale automated warehouse systems. “Is used by customers like Gap and Geodis and has doubled its revenue and tripled its customer base since closing its funding round in fall 2020.”
Wearables.
StrongArm Technologies raises $50M from Drive Capital at a $200M valuation for its wearable protective technology that helps industrial workers avoid injury and employers lower their workers compensation insurance bills. Expects $25M revenue in 2022 and has deployed >30K devices to date.
Product of the Week
I recently got this Enro mask as a gift, and it’s a game changer. It’s extremely comfortable and is also more protective than a N95 mask. Since the pandemic isn’t over yet, I highly recommend it. Buy it here.
Daily Consumer #23 - Amazon's Landlord is a $115B Company
loved the prologis deep dive!