December 23rd, 2024: Amazon building 25% of all warehouses, UPS hiking SurePost rates by 10%, Lowes develops a new marketplace, and Quickbooks partners with Amazon Marketplace Seller Central
Today’s episode of The Watson Weekly Podcast is sponsored by Mirakl - the global leading provider of eCommerce software solutions. Create a value flywheel for your business with AI-powered marketplace and retail media solutions from Mirakl. Over 450 customers across the globe are unlocking new revenue opportunities with Mirakl - what's holding you back?
It’s December 23 and all through the house, not a creature was stirring except the Watson Weekly podcast - your essential eCommerce digest!
Today on our show:
Amazon Building 25% of all Warehouses
UPS Hiking SurePost Rates by 10%
Lowes Develops a New Marketplace
Quickbooks Partners With Amazon Marketplace Seller Central
- 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….
Amazon Building 25% of all Warehouses
25% of the $9B in warehouses being built in the United States are due to Amazon, according to a report from IIR. A cool $2 billion dollars (cue Dr. Evil laugh)
A few other stats in the report:
* Census Bureau says that eCommerce is growing overall 7.4% year over year based on Q3 numbers.
* eCommerce accounted for 16.2% of total retail sales in Q3 also.
And these are the scaled back Amazon plans! Recall Amazon has deferred or canceled some construction, and is through doubling its fulfillment network as of early 2023. This doesn't mean that growth has halted however.
Furthermore, judging from the performance of the inbound and middle mile of Amazon's network during Q4, Amazon may have a lot more optimization to do. Don't worry too much for them, however -- Amazon tends to figure this kind of stuff out in the long-term.
At this point, Amazon is still investing in all layers of its network. As D'Angelo Barksdale says in The Wire, "The king stay the king." Something about this statement rings true in this new data, and to this observer Amazon does not seem likely to relinquish this position as king anytime soon.
[References:]
Our Second Story
UPS Hiking SurePost Rates by 10%
Surepost Rates Moving on Up. Thank Shein and Temu.
Last earnings call was a warning shot. UPS came up with a new euphemism.
Why do I love earnings call euphemisms? Another tale.
"two new ecommerce entrants" with explosive growth running a completely different model. Only two guesses needed for these names. Shein and Temu.
25% growth in UPS SurePost volume. In a single year. Really unprecedented.
In response, UPS increased the price of Zone 2 parcels (51-150 miles) by around 10% for parcels . [It's likely difficult for these providers to inject closer than this]. That 10% price hike probably represents the new margin of UPS who is likely making exactly zero margin on these parcels at all now.
I expect it will have immediate ripple effects at Shein and Temu who will seek alternatives. Of course they have negotiated agreements, but the writing is on the wall, and UPS is nobody's fool.
Meaning: light, low cost, late injection, high-growth. Essentially taking advantage of the hardest parts of the network: the last mile, while bypassing first and middle miles of all the providers: both UPS and USPS.
I predict all carriers will need to respond to this. Carriers cannot afford to be taken advantage of. And these low-cost shippers can't afford someone else's margin.
Ultimately, putting politics to the side, it's possible Shein and Temu could be forced to buy a network in the United States to accomodate their volume in much the same way Amazon did -- possibly through a holding company or US co-invested entity if politics did become involved.
Such a new logistics provider would have quite a different model indeed, as well as guaranteed volume.
[References:]
Our Third Story
Lowes Develops a New Marketplace
Lowes is launching a Marketplace, and it is unequivocally a smart idea.
On the last earnings call, the CEO of Lowe's was asked a simple question about the potential of a marketplace:
"What's the common denominator of brick-and-mortar retailers that are transitioning to an omnichannel environment that's created explosive growth? And 1 common denominator was a marketplace."
more from the CEO:
"then, we conversely asked the question, can we grow our online sales at the rate we desire without having to create capital-intensive investments in fulfillment centers, et cetera? And how do we do that and do it in a profitable way where we are driving profit contribution? And marketplace, again, was the answer."
The fact that we have category-killer retailers that still don't have scaled marketplace programs as we sit here in 2024 is somewhat impossible to believe.
Some facts, though:
* Half of Walmart's operating income growth is coming from advertising (a significant percentage of which is driven by marketplace) and loyalty (Walmart+).
Lowe's is investing straight out of Walmart's playbook:
* Increased investments in consumer loyalty as well as professional loyalty programs.
* A closed but aggressively planned marketplace which will also propel expansion of its retail media revenue.
* Lowe's has invested this year to expand in-store retail media options for advertisers as well.
Lowe's overall comp sales are down 1% y/y, but digital comp sales are up 6%. Lowe's leaning into the progress of its online revenue, but in a capital efficient way, should produce good results for them.
It's not a panacea though. Lowe's says it will add products to its new marketplace that are both value-oriented consumers as well as those are for affluent consumers. But the products need to be relevant. There is nothing magical about adding a SKU to your assortment (even one you don't purcahse) unless your consumers value that SKU.
Additionally, we also need to look to execution and commitment. In my experience it takes 5-10 years to scale a marketplace to a size that can be meaningful.
Most retailers don't have that kind of patience. So, while I like the strategy, the devil still remains in the execution.
[References:]
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And Our Last Story
Quickbooks Integration with Amazon Seller Central Deepens Existing Partnership
Late last week, Intuit and Amazon made an announcement that they would integrate Quickbooks with Seller Central.
On both sides:
* Intuit gets distribution in Seller Central to millions of Amazon sellers.
* Amazon sellers get better financial visibility, as well as access to Quickbooks Capital directly from Seller Central.
This follows a decision earlier this year for Amazon to stop underwriting loans to sellers. For Amazon, it was likely a subscale business, and it allows them to continue offering a service and likely get paid by Intuit a healthy commission on referred business.
For Amazon and Intuit, this is a continuation of a partnership that began in 2020, when Intuit Quickbooks integrated with Amazon Business for purchases.
But why now? The simple explanation is probably the correct one.
Amazon truly believes its sellers need financial tools, and Amazon views this as a market that is not important enough for them to tackle.
Of the two parties, it seems to me that Intuit needed this deal more than Amazon. There are so many large ecosystems out there. Intuit partnered with Etsy in 2016. With eBay in 2022. Now with Amazon in 2024.
Seems like a smart strategy to me for Intuit.
Could this be related to Shopify at all?
Personally, I think not.
It might be tempting to try and draw any parallels to Shopify in this case (we've seen increasing focus by the company on Shopify Balance, Credit, Capital, Tax, etc... all things offered by Intuit also), it does seem like this is not directly related to any moves there. Still, you might say Shopify Finance is a nice little side quest... err... hustle for Shopify at the moment.
Kidding aside, Shopify seems to view its financial tools as part of its main quest because every seller needs to have bookkeeping. However, every seller must also have logistics too, and we see how that turned out. Still, financial tools have the upside of a low capital expenditure profile, even if the margins are not incredibly high. The continued focus by Shopify on financial tools does put them on a collision course with both Paypal and Intuit in the long-term.
Do I expect Shopify to build its own accounting suite?
I do not. Even Microsoft couldn't deliver a relevant competitor to Intuit after many years and I would not expect Shopify to attempt this.
[References:]
https://www.linkedin.com/posts/ecommercestrategyconsulting_quickbooks-integration-with-amazon-seller-activity-7274419717010780161-LqvQ/?utm_source=share&utm_medium=member_desktop
It’s That Time Friends, for our Investor Minute. We have 5 items on the menu today.
First
HubSpot to Acquire Frame AI, Unlocking the Power of Conversational Data with AI
Hubspot, a customer engagement platform, has acquired Frame AI, a conversation intelligence platform leveraging AI to transform unstructured customer data for an undisclosed amount. This acquisition will enable Hubspot to utilize unstructured data to create real-time analytics
Second
Mantis Robotics Secures $5M to Redefine Robotics through Physical AI
Mantis Robotics develops robotics arms that are fenceless and utilize proprietary built-in sensors to enable robots to work safely alongside humans without the need for external safeguards.The new funding will scale its operations, enhance its product portfolio, and expand its presence in the industrial robotics sector.
Link: https://www.mantis-robotics.com/mantis-robotics-secures-5m-to-redefine-robotics-through-physical-ai/
Third
Account-to-Account Payments Platform Volume Raises $6M in Seed Capital
Volume, a fintech account-to-account (A2A) solution that offers a one-click checkout, has announced its $6 million seed funding round. The new funding will be used to expand in Europe and enter the UK by obtaining approval from the Financial Conduct Authority (FCA). The account-to-account sector is growing because it can offer sellers and brands lower payment fees as it bypasses card networks that charge excessive processing fees.
Fourth
Communication Platform HappyRobot Raises $15.6M In Series A Funding
HappyRobot, an automated AI communication platform for the logistics sector, has raised $15.6 million in Series A funding. The new funding will be invested in the technology platform, which currently is focused on the logistics sector. HappyRobot aims to help freight brokers focus on meaningful tasks while automated workflows and AI agents handle tasks such as inbound and outbound calls, carrier negotiations, and data capture.
AND FINALLY …
Tulip Acquires Humankind To Form An Omnichannel Customer Experience Platform
Tulip. a point of sales and customer experience platform, has acquired Humankind, an online concierge platform, for an undisclosed amount. Tulip has focused on retail and gained an online concierge platform and its customers. The combined company will offer brands an integrated solution for person-to-person engagement across all channels. Congrats to friend of the podcast David Weissman on the exit!
Today’s final word for the week of December 23, 2024: Content
Our plans for 2025 are starting to take shape and if there is one word I will leave you with is content. More and higher quality. Stay tuned because you always hear it here first!
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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.
