Daily Consumer #6 - The Headless Commerce Trend Gains Momentum
Plus an earnings recap for several brands, omni-channel retailers, and marketplaces.
My Work
My Portfolio Company Nacelle Raises $50M To Enable Headless Storefronts
I won’t go into long detail on what headless is, but the short of it is an API-driven approach to building a storefront that allows for maximized speed and customizability. As more of commerce shifts online, the need to optimize the frontend experience grows and a headless architecture unlocks much greater possibilities for how to build a differentiated experience. It’s an early trend and certainly has its complexities. For folks looking to get educated, I’d be happy to make the connection to the Nacelle team. More here on the fundraise.
Community
I’m adding this section where subscribers can ask for advice from others. Please feel free to raise an ask for consideration. Would you be willing to share your expertise?
Alexi, the co-founder of Because, asks for some advice on setting up an Amazon presence (product page optimization, pricing strategy, sponsored ads).
Rod, the co-founder of Lovevery, asks for some perspective on advertising on connected TV platforms like Roku.
News
Activewear. Allbirds launches its first activewear collection, called Natural Run. It includes running shorts, bike shorts, T-shirts and tank tops, all made from natural materials like eucalyptus fiber and merino wool
Advertising.
The large ad platforms are sharing less and less data. By anonymizing and aggregating more customer data, the ad platforms themselves are taking increasing ownership of how attribution is defined. A thoughtful perspective on leverage being taken away from marketers.
Bytedance, the parent company of TikTok, grants equity ownership to the Chinese government and adds a government representative to its board. Social media is increasingly intersecting with politics.
“Rush outfit-of-the-day” posts on TikTok from University of Alabama’s sorority rush week are going viral with the hashtag #BamaRush achieving 235M views. Brands are sprinting to build association.
Facebook tests Reels in their core Facebook “blue” app. More shots fired at TikTok.
Affiliate Marketing. Red Ventures is a massive media network that few have heard of. Generates >$2B in revenue and see 751M website visits per month across its network of media assets, which includes Lonely Planet, CNET, Healthline, The Points Guy, BestColleges, etc. “Is leading a shift toward “intent-based media”, a term for specialist sites that attract people who are already looking to spend money in a particular area (travel, tech, health) and guide them to their purchases, while taking a cut.”
Amazon. Surpasses Walmart as the largest retailer outside China. Customers spent more than $610B at Amazon over the 12 months ending in June, compared to $566B at Walmart.
B2B Commerce. Vietnam wants to develop a digital marketplace for its agriculture economy. Wants to establish a digital presence for its 9M agricultural production households. Is targeting having 5M households live by EOY. “Emphasize the need for ecommerce sites as an additional channel for farmers especially in the context of the pandemic.”
BNPL. A long writeup on the history of Afterpay. “Early merchant customers liked the proposition. One of the first to sign up was Princess Polly, an online fashion brand. Afterpay soon grew to support one in five of its purchases, increasing its revenues by as much as 15%.”
Customer Support. Etsy launches “Star Seller”, a badge on shop pages and qualification that may influence how shops rank on Etsy. Will require shops to respond to 95% of messages within 24 hours, ship 95% of orders on time with tracking, have 95% of reviews with five-star ratings, and have had at least 10 orders and $300 in sales over the past three months.
Earnings.
Brands
Estee Lauder saw overall revenue grow 62% in their fiscal Q4 to $3.9B. Mentioned that 40% of revenue came from ecommerce in their full fiscal year 2020 (which ends June 30th).
Natura & Co, a publicly-traded beauty brand business focused on Latin America, saw Q2 2021 overall revenue grow 36% YoY to $1.8B. “Digitally-enabled sales represented 51% of total revenue, up from 48% in the previous quarter, even with customers gradually returning to stores as they reopen. Nevertheless, the share of digital channels is 4x above pre-pandemic levels, demonstrating a step-change in the Group’s digital transformation. Relationship selling using apps has also progressed.”
Omni-Channel Retailers
Walmart saw overall revenue grow 2.4% to $141B. “Ecommerce sales growth cooled in the quarter, rising 6%, as more customers returned to in-store shopping. Online growth on a two-year stack more than doubled, up 103%. Global e-commerce sales are on track to reach $75B by the end of the year.”
Target saw overall revenue grow 9.5% YoY to $25B. “Digital comparable sales were up 10%, led by same-day services such as order pickup, drive up and Shipt, which up 55% in the quarter.”
Petco saw overall revenue increase 19% YoY, recurring revenue was up 60% in the quarter, the number of recurring revenue customers grew by 50%, ecommerce sales were up 14% compared to a year ago and 150% on a two-year stack, and over 50% of Petco's ecommerce revenue comes from recurring revenue customers. “Petco has tapped into recurring revenue streams, from automatically scheduled delivery for pet food, its subscription PupBox for new pet owners, insurance, and its Vital Care membership that offers checkups, vaccinations, grooming, and discounts for $19 a month. Vital Care now has more than 100K members since launching at the end of last year.”
Marketplaces
Ebay saw Q2 GMV decline 7% YoY to $22B as the marketplace lost 7M active buyers compared to Q2 2020. Overall revenue grew 14% YoY to $2.7B. Is investing significantly in its payments capabilities. “eBay continues to scale its management of payments globally, launching the new experience for sellers in all markets. In Q2, 71% of global on-platform volume was processed through managed payments.”
Wish saw revenue decline 6% to $656M in Q2 2021 despite analysts expecting growth. Claim its due to user retention dropping as offline store re-open and also saw marketing efficiency degrade.
Farfetch saw 43% revenue growth YoY to $523M. Now has 390K SKUs from almost 1.4K sellers.
Poshmark saw Q2 revenue of $82M (22% YoY growth). “During the second quarter, similar to others who use digital marketing, we began to see the impact of IDFA, which effectively increased the cost of mobile advertising due to less efficacy when running targeted marketing programs. Because our marketing mix is highly diversified and adaptable, we adjusted by focusing on strong ROI user acquisition channels as well as investing in upper funnel strategies, such as TV and influencer partnerships to counter the effects of IDFA. The increase in marketing costs drove a decrease in profitability.”
Ozon, a publicly-traded ecommerce retailer in Russia, is attempting to become the Amazon of Russia. Q2 2021 GMV grew 94% to $1.2B. Has a target of achieving $34B GMV in 2026. Now has 50K active marketplace sellers which drive 62% of total GMV. Is rolling out 90 minute delivery for 20K items, financial products for customers, and advertising.
Email Marketing.
Could hit a rough patch as Apple seeks to improve the privacy of Apple Mail which may entail hiding user IP addresses, locations and additional data from email senders, which could prevent brands from pulling information like open rates and location.
George Mack, who runs a marketing agency called Multiply, shares how he took a client from generating 0% to 45% of revenue via email.
Food and Beverage. Demand for plant-based foods is expected to 5x by 2030 to $162B.
Grocery Delivery. Albertsons is rolling out 3 new digital offerings: 1) FreshPass, a subscription delivery service for unlimited free delivery; 2) a free deals & delivery app; and 3) a new “Albertsons for U” loyalty program.
Influencer-Driven Commerce. Nike’s SNKRs app was top of mind for sneaker lovers for the drop of the Travis Scott Jordan 1 Low shoes. Unfortunately, most missed out on the few thousand pairs available but weren’t shy about sharing their disappointment on social media.
Live Virtual Events.
Sephora is re-launching “Sephoria”. Used to be an in-person, ticketed event but is returning as a free, virtual event that will feature 30 participating brands who will showcase products, share tutorials, and do other forms of brand activation.
Modern Retail shares perspectives on how virtual trade shows are an ideal format to bring wholesale commerce online. “Faire has hosted 3 digital trade shows so far, beginning with its Faire Summer Market last August. Across all shows, Faire has overseen 300K orders, and those numbers are rising. Sales volume 4xed during its summer market this July compared to its first summer market last year.” (Paywalled, reply to this email for access)
Logistics. Fedex is testing a robotic system from Berkshire Grey in a NY-based fulfillment center where robotic arms autonomously pick and pack boxes. Does the cost structure of package delivery shift downward over time as humans get removed from the process?
Loyalty.
Target’s Circle Rewards program hits 100M members since launching in fall 2019. “Circle offers members early access to Target sales, as well as a rotating selection of digital coupons and discounts. Target is mainly using its loyalty program to get people to add on more products, and drive more conversions, by offering personalized deals.”
Petco's nutrition and grooming loyalty program surpassed 700K members, nearly doubling for the prior quarter.
NFTs.
OpenSea, a leading marketplace to buy and sell NFTs, crosses $1B of monthly transaction volume. If you annualize this volume, OpenSea is on track to be bigger than Etsy!
Alibaba launches NFT auction capabilities with one of the first items being a Star Wars illustration.
Vogue postulates that brands will work with popular video games to most seamlessly participate in the rise of NFTs/digital goods. (Paywalled)
DraftKings launches its NFT marketplace in Canada with exclusive Wayne Gretzky content.
Omni-Channel Retail. Amazon is rumored to be opening large, department-like stores around the US. Fashion is rumored to be a particular area of focus for potential stores. “Amazon approached some U.S. apparel brands roughly two years ago with the idea of opening large-scale stores that would showcase their products.”
Outdoor Products.
Forbes profiles YETI, an $8.5B publicly traded outdoor products brand that has amassed a cult-like following for its products that are ‘Built for the Wild’. “Performance over the past two years has been driven by a shift in the company’s business model from primarily being a wholesale business selling to retailers to balancing both a DTC business with the current wholesale model. Net sales were up 44% reaching $605M and net profits soared 107%.”
Sales of outdoor products are booming per NPD as people want to spend more time outdoors post-Covid. “In the 12 months ending May 2021, sales of kayaks grew by almost 30%, backpacking tents up by almost 50%, sleeping bags up by 28% and the list of product categories with exploding sales goes on and on.”
Private Label. Target now has more than 45 owned labels across fashion, home, beauty, and more. 10 of them generate >$1B annually and 4 earn more than $2B. At the same time, Target is partnering with more DTC brands to bring them to stores counting 22 relationships to date.
Product Display. Lamborghini is using leading game engine Unreal to build digital configurators of its cars. For cars to be successfully sold online, consumers need to be able to see them from many angles and in many configurations which photos/videos don’t necessarily allow. Will game engines play a bigger role in the future of PDP?
Restaurants.
The restaurant industry is having its ecommerce moment. Taco Bell unveils their latest restaurant design that is optimized for delivery and pickup orders. Eating within fast food restaurants and getting up for unlimited refills seems like a behavior of the past.
Krispy Kreme is looking to grow ecommerce revenue. “Digital transactions represented only 19% of the company’s overall sales. For context, Starbucks’ mobile orders make up 26% of transactions, and Tim Horton’s digital sales account for over 30%. The power of eCommerce is clear. In the full year 2020, 82% of U.S. eCommerce delivery transactions were incremental to sales, and eCommerce transaction values have increased as we expand our offerings into new areas like catering, gifting and dark kitchen expansion.”
Same Day Delivery.
Trust and Safety. Amazon is banning marketplace sellers who violate their rules. Many of these sellers are based in China and the Chinese government is now stepping in to support them. “More than 50K Chinese stores have been closed on the Amazon platform, which has led to estimated losses over 100B yuan. Shenzhen, the ‘cross-border e-commerce capital of China,’ has been hit the hardest.”
TV Marketing.
SheIn launches a TV show that will follow 30 emerging designers as they compete to win $100K and will feature a star-studded panel of five judges, including Christian Siriano, Law Roach and Khloé Kardashian. Will be available to stream on Shein’s app and social media platforms.
Netflix is collaborating with fashion brands to create Bridgerton-inspired products.
Funding and Exits
Brands
Eyewear. Kering acquires Lindberg, a Danish eyewear brand known for its made-to-order capabilities.
Food and Beverage.
Apeel Biosciences raises $250M at a $2B valuation from Temasek for its plant-based coating for fruits and vegetables that keeps them ripe longer.
Trifecta raises $20M from Spring Lake Equity Partners. Aims to be the “Peloton of Nutrition” by offering fully prepared meals on subscription. “Is already profitable with an annual revenue run rate north of $100M.”
Cirkul raises $30M from AF Ventures for its water consumption products than include flavor cartridges that work with patented water bottles. It’s estimated that 75% of Americans are chronically dehydrated.
Starday raises $4M from Equal Ventures and Slow Ventures to build data-informed food products starting with Gooey Snacks, an all-natural, low-sugar chocolate hazelnut spread that is made without dairy or palm oil.
Textiles. Lululemon invests in Genomatica, a manufacturer of plant-based nylon. Sustainability of materials and material supply chain is of increasing focus for apparel brands.
Marketplaces
Agencies. Breef raises $3.5M from Greycroft for its marketplace connecting brands with agencies.
B2B Commerce.
Alerzo raises $10.5M from Nosara Capital for its marketplace that allows street-side vendors and shops in Nigeria to buy their consumer products with Alerzo controlling the logistics.
Farmers Edge acquires CommoditAg, an online marketplace for high-quality agriculture products that serves 170K customers.
Bttn raises $5M from Fuse to bring wholesale medical supply commerce online. Boasts more than 300 customers, including individual practices and surgical centers, and multiple government contracts.
Brand Rollups. D1 Brands raises $123M of debt and equity from CoVenture and Crossbeam Venture Partners to acquire brands selling on Amazon. “Company is profitable and predicts it will see revenue of $100M by year-end. D1 currently owns 20 brands.”
Custom Merchandise. Gelato raises $240M from Goldman Sachs and Softbank at a $1B valuation for its custom printing services that allow brands to print products on demand.
International Retail. Mail.ru invests $60M in a joint venture with AliExpress Russia. AliExpress Russia did $3.1B GMV for the fiscal year ending March 31, up from $2.8B. Unique buyers on the platform exceeded 26M.
Logistics. RaRa Delivery raises $3M from Sequoia Capital India’s Surge program and East Ventures for its same-day logistics services in Indonesia.
Petcare. Private equity firm Hellman & Friedman acquires Germany based, publicly-traded online pet food retailer Zooplus for $3.5B.
Resale. Danggeun Market raises $162M at a $2.7 billion valuation from DST Global. Operates a resale marketplace that is centered around local geographic communities (similar to Nextdoor). Has 14M MAUs and is present in 72 local communities. Plans to roll out a payments service called Karrot Pay.
Same Day Delivery. Airlift raises $85M at a $275M valuation from 20VC and Buckley Ventures for its 30 minute delivery service in Pakistan. Airlift today operates over 30 dark stores and processes hundreds of thousands of orders each month.
Used Cars.
Canada Drives raises $79M from Honor Ventures for its Canada-based, Carvana-like car buying platform.
Cars24 is rumored to raise $350M from DST Global, Softbank, and others for its India-based, Carvana-like car buying platform.
Software
Advertising. Moloco raises $150M at a $1.5B valuation from Tiger Global for its machine learning platform that automatically manage performance marketing campaigns. “Is getting ready to launch its Retail Media Platform, currently in beta, which helps ecommerce companies create revenue streams like sponsored ads.”
APIs.
Brex acquires Weav, makers of a universal API for commerce platforms, for $50M. “Weav’s products allow customers to connect to multiple platforms with a single API that was developed specifically for the commerce platforms that businesses use to sell products and accept payments. The Weav team will basically manage any third-party integration, so that Brex can be your financial operating system no matter where your data is.”
Rutter raises $1.5M from Haystack, Liquid 2 and Basis Set Ventures for its unified e-commerce API that enables companies to connect with data across any platform.
Ecommerce Platform.
Automattic, the parent company of Wordpress, raises $288M from Blackrock, Wellington, and others. Cites WooCommerce as a big area of investment.
NuvemShop raises $500M at a $3.1B valuation from Tiger Global and Insight Partners for its Latam-focused, Shopify-like platform.
ERP. Xentral raises $75M from Tiger Global and Meritech for its ERP product that serves SMBs. The platform covers services like order and warehouse management, packaging, fulfillment, accounting, and sales management. The majority of its 1K customers are in Germany.
Headless Commerce.
Nacelle raises $50M from Tiger Global for suite of APIs that allow merchants to separate their backend (where data lives) from frontend (the user interface, which merchants want to change and adapt constantly). “Grew 690% in the past year in terms of revenue.”
Shopistry raises $2M from Garage Capital, Mantella Venture Partners and others. Offers a suite of APIs to build a storefront in a more modular manner. “Haidar expects headless will become the dominant architecture over the next five years.”
Image Analysis. Il Makiage, a beauty brand, acquires Voyage81, which owns patented technology that enables hyperspectral imaging capabilities on smartphones, allowing users to see into the ultraviolet and infrared wavelengths. The technology can be utilized in the beauty industry to perform various types of analysis on skin and hair.
Live Shopping. CommentSold raises capital from Permira for its software platform that enables small sellers to host live shopping events. “Makes money by selling a software subscription and gets a cut of about 3% of purchases. Its platform has more than 12M registered users, 6K active sellers, and the value of goods sold on it more than tripled in 2020 to over $1B.”
Marketing Analytics. Adverity raises $120M from Softbank for its marketing analytics platform which allows brands to centralize all marketing performance data in one place.
Product Line Management. Browzwear raises $35M from Radian Capital for its software that allows fashion brands like Lululemon, Nike and Adidas to create virtual 3D renderings of designs.
Rebate Management. Enable raises $45M from Norwest Venture Partners for its technology that automates how distributors and manufacturers create, execute and track rebates, a big component of B2B commerce.
Fintech
BNPL. Zilch, a UK-based BNPL player valued at $500M, acquires Neptune Financial to expand its presence into the US. NepFin is a fintech platform that focuses on lending to SMBs between $10-100M in revenue.
Neobank.
Chime raises $750M at a $25B valuation from Sequoia Capital Global Equities. Provides checking and savings accounts and introductory credit cards to consumers through its smartphone app.
Uala raises $350M at a $2.45B valuation from Softbank and Tencent for its Argentina and Mexico-focused neobank that has issued 3.5M cards to date.
Eco raises $60M from Activant Capital and L Catteron for its mobile banking product that aims to blur the lines between checking and savings.
One raises $40M from Progressive to bring “all-in-one banking” to the middle class. Claims to have “hundreds of thousands” of customers.
Payments. Paysafe acquires SafetyPay for $41M. SafetyPay enables ecommerce transactions at over 180K cash collection points through open banking and eCash offerings primarily in 11 Latin American countries and Europe.
Product of the Week
My girlfriend is addicted to P.F. Candle. I must admit, these candles are amazing. I have one on most of the day while I’m working from home. You can buy one here.