January 13th, 2025: Shopify 2025: The Entrepreneur, Rulemaker and Bridge-Builder, Mastercard Holiday numbers show roses for eCommerce, Is 2025 year of niche down? Amazon still king of warehouse growth
Today’s episode of The Watson Weekly Podcast is sponsored by Mirakl
Mirakl is 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 January 13, 2025 and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Shopify 2025: The Entrepeneur, the Rulemaker and the Bridge-Builder
Mastercard Holiday Numbers Show Roses for eCommerce
Is 2025 The Year of the Niche Down?
Amazon Still the King of Warehouse Growth
- and finally, The Investor Minute which contains 5 items this week from the world of venture capital, acquisitions, and IPOs.
==
To hear new episodes of the show every Monday morning, subscribe now at rmwcommerce.com/watsonweekly and wherever you get your podcasts.
==
[PAUSE]
BUT FIRST in our shopping cart full of news….
Shopify 2025: The Entrepeneur, the Rulemaker and the Bridge-Builder
On a podcast a few months back, Tobi called Shopify a genetically diverse island which does not want to build bridges to the "mainland" lest it become contaminated. Despite this seeming protest, that doesn't appear to be the approach.
In the past, Shopify has described itself as the rebel alliance fighting the evil empires, helping the little guys succeed against the big guys. This vision has evolved as well.
Finally, Tobi has in the past also called process itself something like a defect in a company. Now that Shopify is so large, however, processes and rules have sprung up everywhere to manage the business, and are evolving all the time.
So what is Shopify then? I see Shopify as being governed by three forces.
1 - The Rulemakers.
2 - The Enterpreneurs.
3 - The Bridge-builders.
The rulemakers are governed by the office of the CFO - ultimately, the company has to be a certain shape and size, have a certain amount of controls and compliance to achieve results. It also has certain masters, namely financial investors which demand tribute. When Shopify overservices the rulemakers, things like Deliverr and 6 River Systems happen. Tobi called it something like “ZIRP flu.”
The entrepreneurs are the traditional heart of Shopify, governed by Tobi and Harley. If Shopify overservices the entrepreneur, the company churns off its best customers as they expand.
The bridge-builders are the next generation of GTM team being built out by Bobby Morrison and the gang. After all, despite not wanting to understand Enterprises, if you don't speak their language then your sales team doesn't hit many quota. Which seems to offend those pesky rule-builders.
If Shopify builds too many bridges to old-school Enterprises, it could also lose that innovative spirit which defines it -- seeking to replicate requirements for old-school companies.
See how these forces keep each other in balance?
Now for the Risks. The risks to Shopify aren't the typical company risks, given the company's "Founder Mode" bias. However, risks do indeed exist:
1 - 3 Forces Imbalance. If any of these forces becomes too powerful, then Shopify itself becomes a different place or can get off track, as you can see above.
2 - Business model. Shopify's relationship with Stripe is currently a defining characteristic of the firm and a primary monetization avenue. Which necessitates a percentage of sales model. Similar to Demandware before it, there is an entire low-margin segment of B2C and B2B eCommerce (below 25% gross margin) which is a challenge for this model.
3 - Hubris. Getting too self-satisfied, resting on their laurels, raising prices too high, all these things could happen to any of these forces which govern Shopify.
Hubris is probably the biggest and most important risk and is a natural challenge for any successful company. 2025 will test Shopify yet again
[References:]
Our Second Story
Mastercard Holiday Numbers Roses for eCommerce, In-Store Accelerated Too
Consumers respond to discounts. More consumers respond to deeper discounts, and will wait for said discounts to appear.
According to Mastercard SpendingPulse:
* 2024 Nov 1 - Dec 4 sales increased by 3.8% y/y. Online retail sales grew 6.7% year-over-year, while in-store sales rose by 2.9%.
How did this compare to what happened in 2023-> 2022 y/y?
* 2023 sales increased by 3.1% during the same 2023 holiday season (November 1 through December 24). Online retail sales grew by 6.3% year-over-year, while in-store sales rose by 2.2%.
In short, in-store sales growth accelerated faster this holiday season, much more than history would tell us. Some analysts I trusted reported that in-store sales might bump due to the short holiday season. Those predictions turned out to be correct.
When faced with short time, you either go online to the place with fast shipping, or you are motivated to go closer to you.
What the hell happened? A few theories:
* Faced with short time, consumers seemed to follow the selection and the discounts.
* I expect you will start to hear that some stores had trouble keeping items in stock. I'm going to go out on a limb and say that Target will likely be on this list.
* Fast shipping counts during the holidays, particularly in a compressed period. Supply chain counts.
* Did I mention supply chain? Accurate inventory on your website showing what's in store also counts during the holiday period. Something to continue to work on for many in 2025.
Lastly, I predict that Amazon, Walmart and Shopify are going to roll this Q4 earnings report. Get ready.
[References:]
Our Third Story
Is 2025 The Year of the Niche Down?
2025, you are shaping up to be a crazy year.
It's never been cheaper to start your own business.
However, it's never been harder to look for a job.
It's never been easier to build a technology company.
However, the cost of entry to build your own custom AI silicon to compete as a true "AI Platform" includes nuclear reactors and north of $25B/year. In 2025 we could have as many as 5 companies attempt this (not counting Nvidia): Microsoft, Google, Amazon, OpenAI, and.. Elon.
SaaS valuations seem to have stabilized.
Yet, big exits are almost all in the private markets, not the public ones.
A new administration always makes consumers a bit more hopeful.
Yet true relief needs to come in housing, groceries, daycare and education which seem notoriously sticky. Did I mention many prices could go up due to tariffs?
We may record 2024 as peak "World is Flat". When I read this book by Thomas Friedman in 2005, it was a watershed. Due to digital technology, work could be conducted by anywhere to anyone. The flattening of the world has had an effect on it. In 2005, the top 3 manufacturers used to be: 1 - US, 2 - Japan, 3 - China. Now, it's 1 - China, 2 - US, 3 - Japan.
The difference is that Japan was a close ally of the US, and China is not. As a result, global trade has become a national security concern. The implications of which we are barely beginning to uncover, and the results could play out for the next decade. Call it "de-Chinafication".
In short, Thomas Friedman couldn't have been more right, and in some sense many of the trends above are part of this.
As a result:
1 - To find your margin, niching down to the right consumer is essential. Consumers will pay more for brands that speak directly to their needs. Generic messaging is dead.
2 - Supply chain diversification which entered the lexicon during COVID is due to experience some continued shocks. Where you manufacture and land products needs to consider not just the consumer, speed, and efficiency, but global trade risk.
[References:]
https://www.linkedin.com/posts/ecommercestrategyconsulting_is-2025-the-year-of-the-niche-down-2025-activity-7282014299609264128-NGVU?utm_source=share&utm_medium=member_desktop
[PAUSE]
And Our Last Story
Amazon, the King of Warehouses, Intent on Staying the King
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:]
https://www.linkedin.com/posts/ecommercestrategyconsulting_amazon-the-king-of-warehouses-intent-on-activity-7275491324051480576-UGiL?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
Emma Watson’s Renais Gin Raises $6M Investment
Premium Gin brand Renais, owned by celebrity Emma Watson and her brother, has announced that it has raised $6 million that will be used to hire talent to further expand in the US market after launching in New York and California and expand international markets such as France, Spain, Dubai, and Canada. Renais is a disruptive brand that uses premiumization to enter the spirits sector that established incumbents own.
Link: https://www.bevnet.com/spirits/2025/emma-watsons-renais-gin-conjures-6m-investment
Second
Marketing Compliance Platform Dataships Secures $7M In Series A Funding
Dataships, a marketing compliance platform focused on Shopify, has announced that it has raised $7 million in Series A funding. The new funding will be invested in its technology, hire talent, and market expansion. Compliance is a painful process for developers, marketers, and customers, so Dataships targeting Shopify-based sellers should provide a more efficient solution. Still, the question is, how big is this opportunity?
Third
Marquee Brands Acquires Heritage Lifestyle Brand Laura Ashley
Marquee Brands has acquired home, lifestyle, and fashion company Laura Ashley from Gordon Brothers for an undisclosed amount. A legacy heritage British brand that was insolvent in 2020 turned around through licensing, cross-border retail, and e-commerce has been acquired by a private investment-backed multi-brand owner. We are going to see this storyline repeated in 2025.
Link: https://www.retaildive.com/news/marquee-brands-acquires-laura-ashley/736434/
Fourth
RetailNext Acquired By Battery Ventures Shows VC-to-PE Path
RetailNext, a seventeen-year-old retail smart analytics platform, has been acquired by Battery Ventures' private equity arm for between $100 million and $200 million. The company did not reach a high enough price to enable all investors to receive their capital back, as RetailNext raised over $200 million in venture funding. The company has also received growth capital to acquire complementary assets and invest in its technology. Sound familiar? Hello, private equity.
Link: https://www.theinformation.com/articles/a-battery-ventures-buyout-shows-vc-to-pe-path?rc=olevx7
AND FINALLY …
Virtual Try-On Platform Perfect Corp Expands Into Luxury Fashion With Wannaby Acquisition
Wannaby, which offers augmented reality and virtual try-on technology, has been acquired by Perfect Corp from Farfetch for an undisclosed amount. The acquisition will allow Perfect Corp. to expand its virtual try-on solutions into luxury fashion categories, including shoes, bags, and apparel. Farfetch will continue to utilize Wannaby's technology as this acquisition marks the beginning of a partnership between Perfect Corp and Farfetch.
Link: https://www.retaildive.com/news/perfect-corp-acquires-wannaby-farfetch-virtual-try-on-tech/736230/
Today’s final word for the week of January 12th, 2025 is “NRF”:
If you are in the audience, hit me up on LinkedIn. I would love to meet listeners in person if you are in New York City. Talk soon!
[PAUSE]
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.....
[PAUSE]
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.
