One Kings Lane raises money (almost a billion dollar valuation), Gilt offers logistics to a competitor, PayPal pitching Apple on Payments, Walmart trying to gain ground from Amazon, Amazon posts results, JD.com to IPO, leaked Twitter commerce screenshots and much more.
Phew – what a week of ecommerce news with lots of permutations for the rest of the year. The big story was clearly Amazon’s Q4 report and it was a bumper festive season for the US’s biggest ecommerce business. “Net sales increased 20% to $25.59 billion in the fourth quarter, compared with $21.27 billion in fourth quarter 2012. Excluding the $258 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 22% compared with fourth quarter 2012.” The problem is that the company only made $238 million in profit or 51 cents per share on revenue of $25.59 billion. Amazon continues to make razor thin profits. Interestingly, the company mentioned that they will be increasing the price of Amazon Prime by either $20 – $40 per year for users. The increase in Prime pricing will not be a difficult value proposition for users in the US.
JD.com has filed for an IPO in the US and aims to raise $1.5 billion from the IPO. The irony in this is quite priceless as JD.com (360buy.com) has been playing second fiddle to Alibaba in China yet will be IPO’ing before the commerce behemoth. It will be interesting to see the appetite for shares from JD.com.
The stories that caught my attention this past week:
- Apple and Physical Commerce (not Payments) – Part 4 – Apple is the ONLY COMPANY in the world where Retailers will CHANGE THEIR BUSINESS to create a unique APPLE EXPERIENCE . Why? Apple’s biggest asset is their ability to change consumer behavior.. It is the only company in the world that can move: Retailers AND Consumers AND Manufacturers. Tom Noyes – wrote this before the news broke that PayPal is pitching Apple to be part of their payments play. I agree with Tom, I cant see Apple doing Payments with a partner as PayPal does not bring anything to the table. Apple has locations (their physical stores) and customers ( the iTunes accounts that contains credit card details), so what would PayPal bring to the partnership?
- Inside Zalando: the little online fashion retail engine that could – Five years later, the company sells home accessories, sports gear, shoes and fashion for men, women and kids from over 1,500 international brands, ranging rom popular high-street brands to designer labels and even a collection of its own. The company also runs a flash sales site for designer clothing dubbed Zalando Lounge, and is slated to experiment with other service offerings in the near future. A great look at Zalando, one of the most secretive companies (their total funding and shareholders is in a Pandora’s box) in Europe yet they are on the road to an IPO.
- Why Amazon’s Data Store Doesn’t Scare People — But Facebook’s Does – “Companies like Amazon have so far navigated this environment successfully, serving as a role model in creating strong relationships with their customers. But as consumers continue to demand more in return for their data, Amazon will need to evolve its strategy to match those expectations.” This is one of the core strengths that Amazon has over its competitors and that is their customers trust them regarding what they do with all of your data..
- New click-and-collect service allowing “try before you buy” for online purchases to launch at Westfield West London – A new click-and-collect service that allows shoppers to try on online purchases before they take them home is to be launched at Westfield’s west London shopping centre. Westfield has created a click-and-collect point at its Westfield London centre that will allow shoppers to pick-up orders from more than 260 retailers, including Topshop, House of Fraser and River Island, as well as online retailers Amazon, Asos and Very. This is a very clever move by the shopping centre as they are ensuring that they can become a point where users can collect their bought items and potentially leverage their presence for some retail therapy.
- The World Bank Group’s IFC invests in Rocket Internet startups – “Rocket Internet has secured a new, rather unusual investor for its Zalando clones in Russia and Latin American: the International Finance Corporation, a member of the Wold Bank Group. The amounts of funding are surprisingly small for a Rocket Internet company – Russia-based Lamoda received €10m, while Latin American Dafiti secured €15m.” This investor raises some interesting questions for the Samwers and how they continue to attract investors to their businesses.
- Russia’s new rules might scare eBay and Alibaba away – “The authorities in Russia have recently made some changes in the customs procedures which will impact shipments sent to private individuals in Russia. The new rules require formal entry on all dutiable import shipments intended for personal use, regardless of the shipment value. Because of this, online stores from abroad might sell less in Russia than before.” Is this a mechanism to protect the local ecommerce companies or is this aimed at better tax collection from international ecommerce businesses – I am undecided.
- dealsDirect: First Pureplay to Go Public – “One of Australia’s first successful online only businesses, DealsDirect is set to be reverse-listed on the ASX, making it the first local business of its kind to go public locally.”
- Walmart Begins Testing Online Grocery Shopping With Local Store Pickup Option In Denver – “Walmart To Go, the retailer’s on-demand shopping service offering home delivery of general merchandise, including in some cases, groceries, is expanding its test in the Denver market today to also include a local pick-up option. Denver area customers will now be able to order their groceries online, then pick up at a nearby store – without having to set foot inside the store.” The grocery industry is clearly being disrupted by the impact of ecommerce but it feels to me that at the moment we are in a testing phase for all the ecommerce businesses to find a solution that is viable.
- New Post: Why the Top Ecommerce Brands Are Moving Into Physical Retail (And What You Can Learn From Them) – “Regardless of how long you’ve been around, how big or how small you are, you can take a page from Indochino’s book and give your customers a pop-up store experience they’ll never forget. Think bigger than just selling offline, think of it more like creating the hottest party in town like these guys have and get people excited about what you have to offer.” The jury is still out for me on this move to having offline retail as part of the ecommerce mix.
- Warby Parker has one big weakness, and this competitor is exploiting it – “Made Eyewear has a huge advantage over the entrenched incumbent, one that allows it to beat Warby both on price and personalization. Customers can engrave whatever words they choose into their eyeglass stems and swap out various colors for frames and stems.Even better, customers can test out three pairs for free through Made’s Home Try-On program, and all three pairs come with the a prescription lens. In other words, you immediately get to keep the one you like because it’s ready to go. If you don’t like any of them, you send them all back and it costs you nothing.” Made is clearly a business to keep an eye on as they will in time compete with Warby Parker..
- China E-commerce Growth Was Torrid in 2013, But Can it be Sustained? [Charts] – The turbocharged growth of China’s e-commerce market continued last year but the rate of expansion is expected to begin to moderate, according to a new report from Beijing-based market research firm iResearch. The rate of growth in Chinese ecommerce will slow down but China will always be a market that is different simply due to its massive size, huge population and the fact that Western business cant compete with their companies.
- eBay is using Google in its war against Amazon — while Amazon sits on the sidelines – “eBay appears to be heavily using a new type of Google ad — the “product listing ad” (PLA) — in its fight with Amazon, according to analysts at Jefferies Equity Research. But Amazon, for some reason, is sitting on the sidelines and has declined to use the new tool. Amazon is known to be sensitive about PLAs, in part because they push down Amazon’s “organic” or unpaid search results”. Always keep in mind that Google benefits when companies compete with one another for certain keywords etc.
- Amazon reportedly building a Kindle-based POS – “Amazon is building a point-of-sale system based on the Kindle Fire that it will offer to merchants, according to a new report. The Wall Street Journal reports that the Kindle checkout system, which could be available as early as this summer, will let brick-and-mortar retailers ring up customers’ purchases using a Kindle in conjunction with a credit-card reader.” The question is here is – how does Amazon sell this to small and medium sized retailers whom are being disrupted by the ecommerce companies retail business?
- India’s Flipkart In Merger Talks With Fashion Retailer Myntra, As Common Investors Push For Consolidation – “Two of India’s biggest e-commerce retailers — Flipkart and Myntra — are apparently in talks to merge, a proposal being pushed by their common investors Accel Partners and Tiger Global. The Times of India reported this morning that Flipkart has already approached Myntra, and a decision on whether to go with the merger would be taken in two weeks.” Consolidation is a logical step when VC’s are spending money to compete with themselves in a market such as India. Does Myntra do the clever thing and sell now or wait until they have more traction?
- PayPal Wants Role In Apple’s Mobile Payments Dreams – “Three payments industry executives tell Re/code that eBay-owned PayPal has been pitching Apple on helping the consumer electronics maker bring its long-rumored payments initiative to fruition. These people, who have spoken to contacts at both Apple and PayPal, say that PayPal is essentially willing to white-label parts of its payment service to be used in an Apple mobile payments system — anything from fraud detection to back-end infrastructure, even possibly down to the processing of payments.” Why would Apple entertain this? Paypal needs to be a part of this as if not Apple could become a serious competitor for them.
- Amazon Inc wants to invest a lot in India and very fast – “The difference between China and India is that China was an acquisition. In India, it was an operation started from scratch with thousands of employees. A lot of people we work with in India have worked with Amazon.com for many years before. So India is a new operations handled by some really experienced Amazonians. Amit (Agarwal, the Country Manager) is an example of that. Someone, who has known the culture of Amazon for many years. One of the main things we learnt from China is that the amount of investment needed is huge. That is the reason we started in India in a much more aggressive way in terms of investments than we did in China several years ago. And of course, we are a much larger company today.” Amazon is going to be a big player in Indian ecommerce and I am convinced that they will acquire a competitor in the next 18 months and also invest millions of dollars into one of the biggest geographic markets for ecommerce.
- One Kings Lane Raises $112 Million at a Nearly $1 Billion Valuation – “Right now, we are completely focused in North America, because the U.S. home decor market is huge,” said Mack, noting that dollars are moving from traditional retailers like Pottery Barn and Williams Sonoma to sites like One Kings Lane. “The spending shift is from offline to online and many consumers still don’t know our brand in the way they will.” I think this was a defensive move to counter the investment made by Alibaba into 1stdibs. Secondly, I suspect a large amount of this money will be going into Hunters Alley..
- At UC Davis, Amazon Demonstrates A Novel Way To Bypass College Bookstores – “Students are awash with discretionary spending, which they normally spend in shops around the campus. Amazon sells most of these items and more, from dorm decorations to official t-shirts. So, it makes sense that the University wants to take a cut that they never took before with the surrounding shops.” This is a very clever concept from Amazon for a variety of reasons but they are entering yet another market in which there are new growth opportunities.
- During the Bangkok Shutdown, motorcycle delivery is a major selling point for online shoppers – “One of Thailand’s leading e-commerce portals, Rakuten’s Tarad.com, recently resorted to a hand delivery service within Bangkok, including inside protest areas. Coordinated with Alpha Performance Group, the e-commerce site started a new service called ‘Hotline Express Messenger Post,’ which was initiated to serve people who live or spend time in the protest and face major inconveniences when shopping offline. The new service will allow the company to deliver the products the day after they are ordered.” Very clever and responsive moves made by ecommerce businesses in Thailand.
- Flash-sale e-retailer Gilt Groupe sells fulfillment services to another flash-seller – “In handling fulfillment for TheClymb.com from its distribution hub in Kentucky, package volume from Gilt’s shipping hub rises 20% and provides Gilt with better shipping rates from carriers.” I believe that most ecommerce businesses that have warehousing will be looking at providing fulfillment services as a part of their business.
- UPS admits it was unprepared for the late surge in online holiday shopping – “United Parcel Service of America Inc. admitted today that it wasn’t prepared for the large increase in online orders placed during the holidays. This lack of preparation hurt its bottom line during the fourth quarter, as the company had to deploy last-minute resources to keep up with demand and issue refunds when it failed to do so.” I wonder what the total financial impact of their struggle was as they had to issue refunds and I would be surprised if they did not have to pay fees to partners of the fiasco that occurred during the festive season.
- Is This What Twitter Commerce Will Look Like – “the Twitter Commerce tweets will appear inside of Twitter users streams, much like the company’s Promoted Tweet advertising products. Some Commerce tweets will also show up inside Twitter’s Discover section, which shows off a mix of activity from a user’s network of people they follow (including, interestingly enough, products that people you follow have purchased, according to the screenshots). Expand the tweet, and you’ll see photos of the product for sale, along with a description of the item and a section for related products for purchase.’ A great scoop by Mike Isaacs and Jason Del Rey of Recode – I can see this happening alongside the payments handled by Stripe. Whether twitter commerce will be adopted by the masses – now that is another question.
- Walmart Less amazing than Amazon – “Walmart has stepped up its counterattack on Amazon. Walmart.com, where independent merchants sell alongside Walmart’s own offering, more than doubled the number of items for sale, to 5m, in the past year. WalmartLabs in California produces apps that let customers scan items while they shop, and beam the information to automatic tills. There are plans to build five to ten new warehouses to handle online orders. Walmart recently named a chief of e-commerce logistics, a new job. The aim, says Neil Ashe, boss of its online operations, is to match Amazon’s range and its speed of delivery within two years. But it is chasing a fast-moving target.”