Daily Consumer #3 - Ecommerce is Top of Mind for the Big Internet Companies
Unpacking (l)earnings from Amazon, Facebook, Google, Pinterest, Shopify, Snap, and Twitter.
My Work
Q2 Earnings Calls Are Behind Us. What Lies Ahead?
Amazon, Facebook, Google, Pinterest, Shopify, Snap, and Twitter reported earnings over the last two weeks. I dove into the earnings press releases and call transcripts to understand how the largest players in the ecommerce ecosystem are performing / what trends are worth highlighted and put together some notes.
I don’t expect you to read all of the above, but certainly feel free to. Overall, there are 3 main types of stakeholders in US ecommerce and here is how I hypothesize that their positioning will evolve over time based on information shared during these earnings calls.
Advertisers - It’s a Facebook and Google-driven world.
Google and Facebook will continue to be the only advertising platforms with true scale (2B+ users globally each). They will continue to be the digital top of funnel for ecommerce merchants and will keep adding ad formats around their assets (product list ads on Search, video ads on YouTube, influencer-driven ads on Instagram and Reels). If you’re an ecommerce merchant, experimenting on and mastering these channels is worth the effort.
In the context of ecommerce, Snap, Pinterest, and Twitter continue to be experimental channels given their limited reach or, in the context of Twitter, limited relevance for commerce. With that said, all are launching products to try to appeal to ecommerce merchants more.
Amazon - A platform for products, not for brands.
Amazon, due to Prime, has a captive ecommerce audience of 150M+ US households. Merchants want access to this audience.
Amazon drives consumer value through utility. Their core loop is:
User has a need and searches
Sees products on page 1
Adds something to cart and checks out
Receives the product quickly
Amazon is ramping advertising quickly. No longer are page 1 rankings for keywords objectively determined by brand/product quality or customer satisfaction. Instead, what a consumer sees is increasingly likely to be the result of a merchant paying for the ranking.
Brands will be increasingly unlikely to participate in this “pay to play” game, especially if their products are shown next to lower quality products.
The ramifications? Amazon may see retail growth continue to decelerate if it can’t penetrate more brand-driven categories like beauty, skincare, food, fashion, etc.
The positives? Ad revenue is incredibly high margin and will increase the profitability of Amazon’s overall retail business significantly.
Shopify - A platform for brands with an opportunity to play a part in discovery.
Shopify continues to be the core online point of sale for brand businesses and will increasingly monetize the transactions that it facilitates via different forms of financial services (payments, BNPL, etc.).
Shopify will continue to see GMV grow significantly over time as brand-driven categories (beauty, fashion, furniture, etc.) continue to shift online.
An unspoken opportunity that seems inevitable to me is for Shopify to become a discovery platform. If you aggregate all the traffic to Shopify merchants’ stores, Shopify would be one of the most trafficked web properties on the internet. Building an ad exchange with deep user-level personalization feels inevitable… and may already be in the works.
Don’t agree with one of these hypotheses? I’d love to hear from you! Debate leads to learning.
News
Advertising. Walmart partners with Adobe. Partnership will enable Adobe Commerce and Magento merchants to offer in-store pickup options at Walmart and to showcase product availability at Walmart stores. Will also enable merchants to easily list their products on Walmart’s online marketplace. “This is the first time Walmart has made its retail technologies available to other businesses.” Walmart leaning into its massive store network to differentiate its ecommerce strategy.
B2B Commerce. Watsco, a distributor of HVAC equipment (think your AC unit), saw ecommerce revenue grow 28% YoY and constitutes about 33% of total revenue. Now have 350K ecommerce users who made 400K online orders in the quarter.
Cryptocurrency. Rumors emerged last Sunday that Amazon may accept Bitcoin and seven other crypto-currencies as a form of payment. The news caused the price of Bitcoin to surge 13% on Monday. The rumor are not true.
Cryptocurrency. Shopify is allowing merchants to sell NFTs to consumers. The Chicago Bulls are one of the first Shopify merchants to do so.
Headless Architecture. Divante shares specific examples of what headless ecommerce software architectures look like.
Influencer-Driven Commerce. Content creators with big online followings are building successful ecommerce businesses. The Nelk Boys, pranksters sharing their videos on Youtube, are on track to sell $70M of merchandise this year and just launched their own hard seltzer brand that is selling out nationwide.
Influencer-Driven Commerce. Express launches Express Community Commerce, which is a network of style experts who will be able to sell and earn commission on specially-designed, seasonal collections. Ties into Express’ goal of achieving $1B in ecommerce sales by 2024.
Influencer-Driven Commerce. McCormick, a food brand that makes spices and seasonings, partners with Tabitha Brown, a food influencer on TikTok. Will co-host live events and co-produce a line of seasonings.
Influencer-Driven Commerce. Who What Wear, a leading online editorial focused on fashion trends, is now getting into the fashion game themselves. Will launch Who What Wear Collection, a new brand, that will release quarterly collections. Brianna Mobrem, the President of Who What Wear, is a friend - go Bri!
Live Shopping. Emarketer shares statistics on what products are purchased most on live shopping platforms in China. Snacks, apparel, and makeup and skincare top the list.
Live Shopping. Brian Beitler, CMO of QVC, thinks video-based shopping is the next big thing in ecommerce. “What livestream does well, though it doesn’t have the physical environment, is it brings the connection of shopping with people into the experience. As more consumers discover this and as more brands enter, we’ll see a very large movement from what we might call e-commerce to ‘v-commerce’.” Ecommerce companies are becoming entertainment companies.
Live Shopping. WWE, the popular wrestling brand, will host their first live shopping event on Youtube this week. Will Youtube become the next big commerce platform? Leading indicators seem promising - 33% of shoppers say that they've purchased products that they discovered on YouTube, while watch time of shopping videos on Youtube with “sale” in the title has increased by more than 400% in the past year.
Live Shopping. Buzzfeed is excited about live shopping and is experimenting with events on Amazon Live. The media company has hosted 50 events to date including a 16-hour long event on Prime Day. “One of the biggest barriers to entry with livestream shopping was finding a platform or a tech stack that would enable easy transactions that would not pull away from the programming, which is why her team is working with Amazon Live. The plan is ultimately to build a livestream platform that will work on BuzzFeed’s owned and operated sites, but there are no set plans for that launch yet.”
Loyalty. Athleta launches AthletaWell, an online community + loyalty program for Athleta customers. Will include 4 components: 1) Spaces - a forum for users to discuss topics around wellbeing; 2) Guides - discussions held by female leaders; 3) Activations - live events held both online and offline; and 4) Workouts - provided by Obé Fitness.
Resale. StockX releases its mid-year report on what’s trending in its marketplace. Birkenstock is the fastest growing brand in terms of transaction growth, up 610% YoY. Collectibles are also re-selling well with Kanye West’s collections growing the fastest in interest.
Resale. Fabletics is partnering with ThredUp to enter the resale space. “Allows Fabletics customers to mail pre-owned clothing to the brand and receive store credit for any item deemed resellable. Customers can package Fabletics clothes and non-Fabletics clothes together in their shipments. Sellable Fabletics pieces will be re-sold through the brand’s new resale shop and sellable non-Fabletics pieces will be sold through ThredUp.”
Resale. Harley Davidson launches H-D1 Marketplace, which aggregates all used motorcycles being sold in dealerships nationwide and also allows consumers to list their bikes directly. “The H-D1 Marketplace platform will connect our customers, community and our strong dealer network, with the goal to become the largest marketplace for pre-owned Harley-Davidson motorcycles in the United States.”
Resale. Forbes profiles Archive, a startup enabling brands to own resale themselves. Provides a white-label marketplace that brands can integrate onto their existing storefronts. “Our vision for this and where we see the market going is that every brand wants to have ownership of resale. It becomes a significant part of their revenue.”
Robotics. Instacart announces a big shift in strategy as it looks to in-source fulfillment. Will begin fulfilling orders in the US and Canada from Instacart-owned warehouses instead of stores. Will leverage robotics to make those pick-and-pack operations efficient via a partnership with robotics startup Fabric. An inevitable shift towards becoming a vertically-integrated online grocery player that can control all sources of cost and drive them down. The big question though is around what role the retailer, which Instacart has historically partnered with as the source of inventory, plays in this new model.
Social Commerce. Lillian Li shares an excellent (but long) profile of Pinduoduo (PDD), the pioneer of group buying and fastest growing ecommerce startup of all time. The TLDR on the model is that if you aggregate enough demand around a product, you can get the supplier to give you a lower price, which then attracts more demand. PDD has now aggregated 800M active buyers and almost 9M suppliers and is on track to achieve $20B revenue in 2021.
Social Commerce. Verishop partners with Snapchat. Will launch an app on Snapchat called Verishop Mini which will allow users to shop a rotating selection of fashion and beauty brands and try on the products with Snap’s AR features.
Social Commerce. Snapchat is upgrading Bitmoji so that avatars are now 3D. Snap is also signing deals with notable brands like Adidas and Vans so users can outfit their Bitmoji avatars in recognizable clothing.
Sustainability. Kenco Logistics survey of 1.3K consumers suggests consumers value both convenience as well as sustainability. “Although 49% of consumers said they prefer two-day delivery, most said they are willing to wait longer for deliveries of more personalized and sustainable products and experiences. 74% said they are either highly likely or likely to wait longer for such deliveries from smaller, more unique brands, and 69% said they are either highly likely or likely to forgo faster delivery options for more sustainable options.”
Sustainability. Lululemon partners with LanzaTech which produces polyester yarn and fabric from recycled carbon emissions. Lulu will use these materials in new product lines as the company tries to achieve their goal of making 100% of its products with sustainable materials by 2030.
Funding and Exits
Brands
Babycare. Owlet goes public via SPAC at a $1B valuation. Sells products to parents that monitor the health of their baby. Their leading product is the Smart Sock which can track a baby’s breathing and heart rate, which is top of mind for parents given the prevalence of Sudden Infant Death Syndrome.
Babycare. Lalo raises $5.6M from Willow Growth Partners for its brand of high chairs, strollers, and humidifier sets.
Beauty. Glossier raises $80M from Lone Pine Capital at a $1.8B valuation. Will use the capital to grow its ecommerce business and grow its store count. Note - this is an Index company.
Beauty. MyGlamm raises $71M from Accel to scale up its India-based portfolio of brands in the beauty and personal care spaces. The company previously acquired POPxo, a startup that has built a community around content, influencers and commerce with 60M monthly active users - this asset is driving them 250K new users per month “without spending any real money”.
Health. Hyperice acquires Core, makers of a handheld meditation device.
Food & Beverage. Spinn raises $20M from Spark Capital for its proprietary connected coffee machine and marketplace of coffee from 500 roasters around the world. Their coffee machine uses centrifugal force to spin, instead of press, coffee grounds.
Food & Beverage. NotCo raises $235M from Tiger Global at a $1.5B valuation. Sells plant-based milk, called NotMilk, in the US and is on track to reach 8K retail outlets by the end of 2021.
Food & Beverage. Urban Remedy raises $18M from Manna Tree. Produces plant-based ready-to-eat meals, snacks, and cold pressed juices.
Jewelry. Eterneva raises $10M from Tiger Global for its D2C brand that creates diamonds from the cremated ashes or hair of people and pets. Eterneva has created nearly 1.5K diamonds to date.
Pets. Embark raises $75M from Softbank at a $700M valuations. Sells dog DNA kits that tell owners about their dog’s breed, health risks, and other attributes.
Marketplaces
Advertising. Taboola acquires Connexity for $800M. Connexity allows advertisers like Walmart, Wayfair, and Macy’s to reach more than 100M potential shoppers via ads served on content published by Condé Nast, DotDash, Hearst, and other publishers. Affiliate marketing is having its moment as merchants look to diversify their marketing channels.
Apparel. Queenly raises $6M from Andreessen Horowitz. Operates a resale marketplace for used formalwear.
Apparel. Rent the Runway files for IPO. Allows customers to rent clothes and shop second-hand merchandise from over 750 designer brands.
Beauty. Sephora reportedly acquires UK-based online beauty retailer Feelunique for $183M. Feelunique sells over 35K products and has 1.3M active customers.
Brand Rollup. Valoreo raises $30M from Kaszek , FJ Labs, and others to scale up their acquisitions of ecommerce brands in the fitness, home, and beauty categories that sell on Mercado Libre and Amazon.
Cryptocurrency. Lolli raises $10M from Acrew Capital for its bitcoin rewards marketplace. Allows 1K partner retailers like Kroger and Microsoft to reward customers with bitcoin when they make a purchase. Has driven over $3.5M of rewards to date. Merchants are likely seeing this as a way to tap into a new profile of shopper who is interested in or investing in cryptocurrencies.
Flowers. Colvin raises $53M from Eurazeo for is Europe-based D2C and B2B flower delivery service.
Grocery. HappyFresh raises $65M from Naver Financial Corporation and Gafina for its Indonesia-based on-demand grocery service.
Logistics. Shipbob raises $200M from Bain Capital Ventures for its technology-driven network of warehouses that provide fulfillment services for ecommerce merchants.
Plants. Sproutl raises $9M from us at Index Ventures for its UK-based marketplace for gardening supplies (plants, pots, etc.). The co-founders come from our former portfolio company Farfetch where they were execs.
Resale. Soda raises $56M from SoftBank at a $220M valuation. Will scale its Japan-based sneaker resale platform, acquire its competitor Monokabu, and expand to new geos in Asia.
Resale. ThredUp acquires Remix Global, a Europe-based fashion resale company for $28.5M. Accelerates ThredUp’s entrance into the Europe market.
Social Commerce. NOWwith raises $18M from a group of notable investors including Alex Rodriguez, Dolly Parton, Marc Lore, Dick Costolo and others. Is building a mobile app centered around shoppable video.
Used Cars. Droom raises $200M from 57 Stars and Seven Train Ventures at a $1.2B valuation. Operates a marketplace in India to help people buy and sell used cars and motorbikes. Is at a $1.7B GMV run-rate at $54M net revenue run-rate.
Vitamins. iHerb files for IPO. Is a leading marketplace for vitamins, minerals, and supplements. Operates in 185 countries globally.
Wholesale. Dastgyr raises $3.5M from SOSV. Enables mom-and-pop retailers in Pakistan to procure inventory for their stores using its mobile app. Currently feature over 2K SKUs from different suppliers, offer next-day delivery, and serve 30K retailers since launching in Sep 2020.
Wholesale. Notch raises $12.5M from Accomplice and BDC Capital. Provides restaurants with apps to centralize and digitize their food inventory ordering.
Software
Content Management. Contentful raises $175M from Tiger Global at a $3B valuation. Provides an API-based software service that allows merchants to manage and deliver content across platforms seamlessly.
Customer Support. Dixa raises $105M from General Atlantic for its cross-channel customer support platform. Merchants can engage with customers across channels like live chat, email, voice, and direct messaging.
Data. BigCommerce acquires Feedonomics for an undisclosed price. Feedonomics helps merchants share product data across advertising channels and marketplaces they sell through.
Robotics. Covariant raises $40M from us at Index Ventures for its robotics-as-a-service business. Installs robotic arms in warehouses that can automate how to process of packing products into boxes.
Search. Algolia raises $150M from Lone Pine Capital at a $2.25B valuation. Provides ecommerce merchants with search technology that they can integrate into their storefront (think the search bar on a website). Has 10K customers and processes 1.5T search queries per year.
Fintech
BNPL. Klarna makes 3 acquisitions to work its way up the value chain from being a payments provider to becoming a discovery platform. 1) Acquires Hero, a social shopping platform, and will integrate it into its core app. Hero provide consumers with inspiration and immediately shoppable content produced directly from retailers' physical stores. 2) Acquires APPRL, a collaborative software product that allows content creators and retailers to work together to produce shoppable content. 3) Acquires Stocard for $130M. Stocard provides a digital wallet to house all loyalty cards in one place and has over 60M users.
BNPL. Zilch raises $110M of equity and debt from Goldman Sachs Asset Management, DMG Ventures, and others. Enables merchants to offer buy-now-pay-later in a manner that requires no integration.
BNPL. Behalf raises $19M from MissionOG, Viola Growth, and others. Allows B2B ecommerce businesses to provide financing options to their end customers at checkout.
Product of the Week
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