June 26th, 2023: Shop Pay launches for enterprise retailers, FedEx reports its quarterly earnings, new retail sales data from the Commerce Department, and Amazon seller-fulfilled Prime coming back
Today’s episode of the Watson Weekly podcast is sponsored by Commercetools.
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It’s June 26, 2023, and this is the Watson Weekly - your essential eCommerce Digest!
Today on our show:
Shop Pay Launches for Enterprise Retailers
FedEx Reports its Quarterly Earnings
New Retail Sales Data from the Commerce Department
Amazon Seller-Fulfilled Prime Coming Back
- and finally, The Investor Minute which contains 7 items this week from the world of venture capital, acquisitions, and IPOs.
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To hear new episodes of the show every Monday morning, subscribe now at rmwcommerce.com/watsonweekly and wherever you get your podcasts.
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BUT FIRST in our shopping cart full of news….
Shop Pay Launches for Enterprise Retailers
While you have been able to use different payment processors for Shopify for some time, certain elements have been locked down, including their Shop Pay accelerated checkout experience - long seen as one of the crown jewels of Shopify. In the US to my knowledge, Shop Pay was exclusively using Stripe for its credit card payment processor.
As Shopify signaled its intention earlier this year to go up-market with Commerce Components, the worry was simple. How to penetrate if you can't support the payment processors used in-market?
Today, Shopify has released a few new updates:
> One, Enterprises now can use its Shop Pay accelerated checkout solution as a component, even if the rest of the business is not on Shopify. This is made possible by all the re-architecture / refactoring Shopify has done in the past couple of years. (I guess I thought this was already coming, but this makes it more official for me)
> Two, Adyen is partnering with Shopify to pursue more Enterprise customers.
* In my opinion, you need payment processor flexibility in the mid-market and certainly in Enterprise segments. Why?
-- Rates are paramount. Enterprises have volume-based negotiated rates for payment processors and associated fraud services. Switching is a non-starter.
-- Contracts prevent switching. Payment processors like to sign up long-term clients. Unless Shopify adds more flexibility to Shop Pay, it would blunt its adoption.
— Finally, retail POS systems have been in place for years and most people are not going to switch their retail payment processor based on their eCommerce platform choice. It’s an omnichannel world and Shopify needs to be more flexible here.
There is still no word on how flexible Shopify will be ownership of the payment token vault, and its use in omnichannel payments scenarios — particularly in situations where you are not using Shopify’s POS solution — which is you know, all Enterprise customers.
What advantages will Shopify have in this space?
* Shop Pay is seen by players not on Shopify as a big advantage for the company, particularly when you consider the alternative of building your own checkout solution from the ground up in a headless fashion.
Where will the market land?
* Custom checkout solutions will always be possible with raw payment gateway APIs, combined with tax, fraud, address validation, identity verification, BNPL, and other solutions. However, for most companies this is the hardest thing a technology organization will ever do -- not only initially, but ongoing.
* Accelerated checkout solutions from platforms, of which Shop Pay is one, will allow merchants to perform more of a configuration-like experience.
* Third-party checkout solutions and accelerators (Bolt, Bold, Checkout, etc.) will still exist, particularly in eCommerce solutions that don't lock down the checkout flow like Shopify has traditionally done.
Here are my remaining questions about the program:
* How will Shop Pay combine with the international merchant of record solutions? Is everything fair game now?
* The release says that Shopify is releasing its support for Adyen later this year, if you want others can merchants configure Shop Pay to add another processor themselves?
* Will Shopify look to accelerate its payment processor integration by acquiring more talent in this area? Or will it leave this to consulting partners? What pace is it trying to hit here?
There is somewhat of a broader question of what this means for Stripe as it heads towards its IPO:
In the short-term, probably it doesnot mean much. The press release explains that this kind of Shop Pay payments flexibility is only allowed for Enterprise merchants. This means Stripe's partnership in the lower tier of Shopify and Shopify Plus seem intact for the moment.
[References:]
Our Second Story
FedEx Reports Its Quarterly Earnings
Last week, FedEx released its Quarterly Earnings report and while the company had a rough year by any account, the future is looking slightly better than before, especially on a relative basis.
Here are a few of the highlights from the report:
* Compared to Fiscal Year 2022, all Fiscal Year 2023 FedEx metrics were down: revenue, operating income, and operating margin all declined year over year. In particular, revenue was down 10% year over year to $90 billion.
* In the last quarter, FedEx continued to see demand weakness across the business, particularly in the Express business.
In the next 12 months, FedEx is forecasting:
* A flat to low single-digit revenue growth,
* Permanent cost reductions of almost $2 billion, and
* Capital expenditures of $5.7 billion with a focus on modernization and automation
I find it very interesting that the company is forecasting revenue growth but is not providing any guidance on operating margin, which is kind of the opposite of what Wall Street wants companies to do right now.
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Our Third Story
New Retail Sales Data from the Commerce Department
The US Department of Commerce and Census Bureau recently released its May data, and I thought I would cover a few of the interesting points here as covered by Daphne Howland at RetailDive.
First, retail sales data trended up by 4.2% year over year, and eCommerce rose 8.7% according to the report. Of course, it’s not lost on me that inflation is running at 4% across the economy, despite dampening in some categories.
Second, while broadly there was expansion, not all categories participated. In particular home goods and electronics fell approximately 4% year over year, and sporting goods sales rose only 2.5%.
Third, clothing sales were flat year over year, dragged down by a sluggish performance by department store decline of 3%.
It’s pretty clear at this point the segment that is raising clothing sales if off-price, which is the format that many consumers are migrating to given inflationary pressures combined with a relatively cautious economic household outlook.
The one sector which has not yet gotten the memo is Wall Street which is like the Alfred E. Neumann of the economy: “What Me Worry?”
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And Our Last Story
Amazon Seller-Fulfilled Prime Looks to Make a Comeback
In surprising news, Amazon has announced that it's reopening its Seller-Fulfilled Prime (SFP) program. This program allowed sellers to use their own or third-party facilities to keep their Prime badge while not using Amazon's Fulfillment by Amazon (FBA) warehouses.
Many sellers were able to do this successfully and sometimes more affordably than Amazon itself (perhaps because the warehouse/infrastructure is already a sunk cost to the brand).
The central issue with SFP is compliance, and there have been previous reports that "most" sellers in the program were not compliant with Amazon standards.
I suspect that if Amazon is considering reopening SFP, it will need to ensure compliance is more strict than it was previously; the monitoring and enforcement infrastructure needs to be swift and robust if this will work.
Communication and data reporting are essential parts of this -- it takes work to act as a node on Amazon's fulfillment network.
A few more thoughts:
* When Amazon stopped SFP a few years back, they didn't turn it off entirely. They just stopped issuing new approvals. This made "SFP licenses" somewhat of a commodity in the seller community -- in the same way that Amazon Vendor Central accounts sometimes are.
* All this reads like another way Amazon is creating "relief valves" in its fulfillment network so that Prime can keep expanding
* It is a coincidence that there has been significant Amazon leadership turnover, and now SFP is returning? The timing must be more than coincidental, right?
* While I understand why it's the seller that is certified for SFP if they ship independently ... if they are using a third-party logistics provider, it makes less sense.
I always thought there would be 3PLs who want to dropship on behalf of Amazon customers who should be able to be "SFP-certified" -- this would allow the certification to pass to the fulfillment provider itself (i.e., the one doing the hard work) as compared to the brand (i.e., the one who is paying the bill).
Think of it like the "DSP" program but instead of drivers, it's for independent fulfillment centers.
Certifying the providers and ensuring their compliance would also be easier than certifying each seller and could create a larger cottage industry focused on Prime standards.
>> closer
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Hey, Watsonians, this is Rick. If you haven’t joined our podcast, community now’s your chance. The RMW Commerce Community contains members from all around the world who meet every day to discuss topics we cover on this podcast. Just last week, there was a discussion about generative AI and discovery in eCommerce.
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It’s That Time Friends, for our Investor Minute. We have 7 items on the menu today.
First
AI-based Inventory Optimization Provider Onebeat Secures a $10 million Series B
The funding was led by Magenta Venture Partners among others, and the company originated in Israel. The origin story of the company is interesting as the solution spun out of Goldratt Consulting. For those that have not heard of Eli Goldratt, he is the author of the management philosophy called the Theory of Constraints which aims to optimize a system by identifying its most important limiting factor. In this case, using AI to optimize inventory availability, assortment, and freshness across locations is a perfect use case for artificial intelligence given the costs and customer experience impact of having the wrong product in the wrong place at the wrong time based on demand patterns. All of Goldratt’s books like The Goal and Theory Constraints are great if you haven’t read them by the way.
Link: https://www.calcalistech.com/ctechnews/article/hjkfeoh82
Second
Supply Chain Transparency Solution Sourcemap Raises a $20M Series B
SourceMap provides supply chain mapping, traceability, visualization, and monitoring solutions for brands like Mars, Hershey’s and Williams Sonoma. With increasing regulatory concerns for things like conflict minerals, responsible sourcing, and other concerns, it’s no surprise that large Enterprise need help with this kind of supply chain certification. The funding was led by Energize Ventures.
Link: https://www.finsmes.com/2023/06/sourcemap-raises-20m-in-series-b-funding.html
Third
eBay Launches Techstars Future of eCommerce Accelerator Program
TechStars has been an accelerator program in the startup space for some time now, and It appears that the eBay TechStars program will focus on pre-seed companies. This is similar to startup accelerators that Amazon and Walmart have contributed to. Applications will be accepted through July 5th 2023, but I am sure there will be more cohorts if you miss the batch.
Fourth
Cross Border Payments Provider Keeta Raises $17 Million from Investors Including Eric Schmidt
Clearly the connection to Silicon Valley executive and former Google CEO Eric Schmidt makes this interesting. Keeta has aspirations to make cross-border payments as easy as Venmo, which can’t make Paypal too happy to hear about.
Keeta claims that its solution is based on a proprietary payments ledger, which I took to mean not blockchain? My how far crypto has fallen when Silicon Valley is avoiding all terms related to it.
Link: https://techcrunch.com/2023/06/06/eric-schmidt-keeta-cross-border-payments-fintech/
Fifth
Singapore-based Cross-border payments company Thune Raises $60 Million
Thune recently completed its Series C funding in order to scale its capabilities and launch new solutions, and the CEO noted that in the past few years the company has expanded its mobile wallet network to 3 billion accounts. The funding was led by alternative investment solution provider Marshall Wace.
Sixth
Digital Marketing Agency AO2 Management Acquires Amazon Service Provider Seller Labs
Service provider AO2 Management has traditionally been in the eCommerce digital marketing agency and branding space. The new acquisition of Seller Labs Services aims to bridge the gap between digital marketing services for eCommerce merchants and those sellers who are on online marketplace.
Link: https://www.ao2management.com/article/ao2-management-acquires-seller-labs-services
AND FINALLY …
Shipping Provider Auctane Acquires Return Rabbit
The acquisition of Return Rabbit by Auctane is definitely fills a hole in the Auctane offering. If the name Auctane is not familiar to you, it’s the holding company for some of the most popular shipping solutions in the world like Shipstation, Shipworks, Stamps.com, and ShippingEasy.
It will be interesting to see how Auctane plans to integrate this solution. In the past, Auctane has acquired shipping platforms that allowed it to generate more label volume. However, Return Rabbit is early in its development so the solution choice is curious. It’s likely the established returns players were more expensive or not available.
Link: https://finance.yahoo.com/news/auctane-expands-portfolio-acquisition-return-100000122.html
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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.