Thoughts on ecommerce scaling from a VC, Flipkart to allow advertising ala Amazon, Amazon to add advertising into mobile search results, Souq raises $75M, a United eBay, Birchbox to open physical store, The death of flash sales and much more

Revenue generation for ecommerce businesses is currently a hot topic as business models are being re-looked as venture capital is flowing into ecommerce. Amazon and Flipkart announces new channels to make revenue from merchants (advertisements inside mobile search results and adding advertising from merchants on the website of the marketplace) in the same week cant be seen as a coincidence. Why is there this current topic making its way thorough the industry? Clearly this is a topic that needs a long post but to summarise, I believe that investors are looking at strategies to protect themselves against market forces such as the impending Alibaba IPO, global economic changes and most importantly more efficient usage of capital.

Clearly Amazon is a force that will not be ever redone but lessons from them are slowly being seen in the ecommerce market. Are we in a bubble? Marc Andreessen, Fred Wilson and other VC’s are not willing to say “yes we are” or “no we are not”. Simple question is ridiculous  valuations of ecommerce businesses such as Zalando, and others not a sign that the market is in a critical phase?

Suchurita Mulpuru from Forrester wrote a great post on the need for a United eBay (one that contains PayPal) and I must say I agree. eBay has gone thorough one of the most interesting business re-organisations seen in the Internet space but the ecommerce industry needs a company that can compete against Amazon in the US market. PayPal outside the US in developing markets like Russia and Brazil ensure that customers can purchase products cross border. John Donahoe and his management needs to be commended for getting Skype off the books of eBay. This is a developing story and one which I think will be getting quite a bit of coverage in the month of April.

  1. Why Alibaba has Jeff Bezos looking over his shoulder – “It is not only the size, but also the company’s profitability and its growth rate that set investors’ pulses racing. The company made $US 3.1 billion in operating profits — which implies a 46 per cent margin — in the 12 months to September, according to Yahoo, which is the second largest shareholder in the company.” Alibaba’s IPO will be one of the those events that we will remember for a long time. However are we not assuming too much for this Chinese ecommerce company?
  2. Collaborative Commerce: 7 Ways to Play in the Sharing Economy – “In the collaborative economy, consumers either get what they need from each other, or they pay for access to goods and services rather than own them. And increasingly, consumers are the makers and influencers of goods in the marketplace. Ecommerce professionals need to understand if and how peer-to-peer commerce and access vs. ownership impacts their business – and how they can capitalize on it, as well as the opportunity for co-creation. There are plenty of examples of established retailers, brands and start-ups that have caught the wave.”
  3. Zalando no longer interested in “home” – ” Dutch country manager Myrna Walsarie confirmed the news at the opening of a new fulfilment centre for the Dutch market in Mönchengladbach. “We are good at clothing and that is what we want to focus on”, she told Twinkle. Products for the home environment had only been present on Zalando’s site for the past two years, mainly from brands it also sells as clothing. Zalando says it remains active in 5 different branches: clothing, accessories, sports, shoes and premium, with the latter containing the more expensive items out of the previous 4 branches.” Hmm, what is going at Zalando? Reorganization and focus on revenue generating verticals? They will IPO before the end of 2014.
  4. The African Version of Amazon Will Emerge From Nigeria – “But Amazon isn’t the only company ramping up digital business, nor is the U.S. the only region in the game. In fact, Africa may have already stolen a march on personal delivery from the air, and Nigeria — specifically the rapidly growing city of Lagos — may produce the next great ecommerce company.” Fascinating article by Monty Munford who understands Africa and African startups but are we not getting to conclusions to quickly? Drones delivering products in Africa?
  5. Can eBay’s failure in China teach us something in Europe? – “The U.S.’s status as a large market with the highest volume of early-adopters will wane. Already, we see leading Chinese firms preparing to compete with the American counterparts in almost every sector of tech. European firms, with the capacity of spanning cultural differences built into their DNA, should be well-placed to capitalize on these shifts, in theory.” I am not convinced that European startups will capitalise in the same light as Alibaba or any Chinese Internet business? Why? Any Chinese Internet business has a 300million user base advantage to any competition…
  6. Amazon-Owned Quidsi Debuts VineMarket․com, An Online Grocery Store Catering To Food Allergy Sufferers – “They both have food allergies and wanted “an easier, less complicated way to shop for groceries that meet their requirements,” Zhang says. But currently, shopping for specific allergen-free or healthy products at grocery stores can be difficult, and often involves careful label-reading. instead lets users filter the inventory in just a few clicks.” Amazon launching into a niche? This seems like a test from
  7. A case for venture capitalists to be bullish on ecommerce – “Judging by data from venture research firm CB Insights (CBI), VCs should be giving ecommerce meaningful attention. According to a recent CBI report, of the 450 venture-backed tech company exits (M&A or IPO) in 2013, 16 percent occurred in the ecommerce sector, the most of any category.” Ecommerce is hard, in terms of retail is a margin based game why are VC’s so keen now on ecommerce?
  8. Can New York ecommerce startup Grand St do for indie hardware designers what Etsy did for indie crafters? – “Even a novice ecommerce analyst would concur that if an ecommerce startup manages to achieve a repeat-buyer rate of 40 percent and crosses the $1 million mark in revenues after just six months of trading, it’s onto a pretty hot business idea.” Grand St is a fanastic concept but one has to wonder whether they will be around in 12 months time? I hope so as they are providing hardware start-ups a distribution channel.
  9. ‘Latin eBay’ has a problem: Venezuela – “In a March filing, MercadoLibre provided a “sensitivity analysis” showing how much a devaluation would potentially erode profits. As reported last year under an exchange rate of 6.3 bolivars per dollar, Venezuela generated so-called segment profit of $55 million. But if the exchange rate had been, say, 18.72 bolivars per dollar, the segment profit would have been just $14.7 million. That indicates the entire company’s operating income would have fallen to $113 million in 2013 from $130 million in 2012.” MercadoLibre has some serious issues potentially in Venezuela due to currency valuation concerns and in Argentina inflation could negatively affect the business. How does this end for MercadoLibre?
  10. Alibaba valued at up to $250 billion in grey market bids – “The hype surrounding the float of Chinese e-commerce giant Alibaba climbed one notch higher on Thursday, with one London-based spread better revealing expectations of an initial valuation reaching as much as $250 billion. A “grey market” for its shares has sprung up after the company announced on Sunday that it had decided to begin the process of an initial public offering (IPO) in the United States, ending months of speculation. This unofficial pre-market enables traders to place bets as to what level its market capitalization will close at after the first day of official trading.'” The valuation of the Alibaba is a question that I am sure is on a lot of ecommerce executives minds – $250B – read it again $250 billion. My guess is that Alibaba is going to be valued at between $175 – $200B..
  11. Poshmark and USPS Fashion an Exclusive Shipping Deal – “The fashionable arrangement was virtually tailor-made for a deal with USPS. “In the case of Poshmark the overwhelming majority of shipped packages were less than 5 lbs. and the sheer volumes being shipped lent itself perfectly to a one-size-fits-all label,” said USPS spokesperson Darleen Reid-DeMeo.” USPS is clearly becoming an ecommerce service solution; first Amazon and now Poshmark.
  12. ShopBuilder hopes to boost e-commerce trend in Lebanon – “After realizing the huge opportunity for e-commerce in Lebanon, Emile Boustani, a Lebanese entrepreneur who spent 20 years in the U.S. and Africa, and Lebanese-French Julien Fayad, who came to Lebanon from France four years ago, decided to try their hand at this growing sector and develop ShopBuilder, a website that builds online stores for merchants.” Ecommerce enablers like ShopBuilder is great for new markets especially if the entrepreneurs behind them has serious experience.
  13. NetEase Moves into U.S., Vipshop Tries Russia – “Of these two latest initiatives, I would definitely give the stronger chances for success to Vipshop, which is quickly showing that it’s quite adept in its niche area of discount e-commerce. NetEase, by comparison, has distinguished itself with its ability to develop games that are popular in China; but it has no experience in Western markets where tastes are quite different, and it will also have to compete with extremely strong local players.” Vipshop moving into Russia is interesting and they are clearly a fast moving, high ROI business. Vipshop is on the road to becoming an ecommerce powerhouse not called Alibaba or Tencent from China.
  14. How Yoox became the Amazon of the fashion world – “You can do a lot with boxes, trucks and your own algorithm. Ask Jeff Bezos, who put them together to build Amazon. Or Federico Marchetti, the most powerful man in fashion you’ve probably never heard of. Marchetti is the founder and CEO of the Yoox group, which launched in 2000, now one of fashion’s leading e-tail sites – one that actually makes money. The group has two other fashion sites, and, which also make money.” This was a great read and makes one realise that most verticals in ecommerce have these silent giants. Yoox, is a business that understands market moves and staying ahead of the product lifecycle.
  15. Online stores brace for Amazon’s arrival in Korea – “The nation’s major online stores are diversifying their stock and offering a host of promotional events to strengthen their customer base ahead of the arrival of the world’s largest online retailer, Amazon. Amazon, which recently opened a Korean office, is expected to start operating this year. Online shopping malls such as Gmarket, 11ST, as well as social commerce sites are overhauling their business strategies to develop unique and mobile commerce services.” Amazon moving into Korea is very interesting as the market has clear market leaders and entrenched local businesses that are doing ecommerce the right way. What is Amazon trying to achieve here?
  16. Birchbox, Seller of Beauty Products, Steps Out From Web With a Store – “Now the four-year-old company, which was all about making an almost exclusively offline industry work on the web, is quietly planning to open its first retail store this spring, probably in late May.” Let me be honest with this one – I am trying to understand why ecommerce startups are opening physical retail stores? (I think this may end becoming a post…)
  17. Souq raises an additional $75m from Naspers – “Now in its ninth year, is getting some real wind in its sails. Now undeniably the largest e-commerce platform in the Middle East and North Africa, the company has secured $75 million USD (AED 275.5m) from Naspers Limited, the South African multinational media and internet group that preivously invested $40 milion in Souq in 2012.” Massive news for MENA ecommerce and in all honesty this just makes the case that Souq is region leader..
  18. What a Google store means for retail – “One thing’s for sure: Google will use its stores as a central location where customers can be immersed in the Google ecosystem. The Apple store allows shoppers to experience how their products “just work.” Likewise, expect every product and experience in the Google store to take full advantage of Google’s web services. The point of the Google store is to show how indispensible Google can be to your daily life.” Another big potential market shift about to occur in the US, this will put Google in direct competition against Apple.
  19. That’s a nice little $40M ecommerce company you have there. Call me when it scales – “It will surprise a lot of entrepreneurs to learn that building an e-commerce business with $10 million to $20 million in revenues is not that hard. It also surprises many to learn that it’s not actually that valuable. This is in stark contrast to, say, a SaaS business, which is very difficult to build to that level but valuable when you do.” This is a post to bookmark and re-read. Lots of great inside knowledge but the reality is across ecommerce – re-engagement is key and the less it costs the better..
  20. E-commerce fulfillment firm Borderfree raises $80 million in a stock offering – “The company issued five million shares at $16 per share on the exchange, listing under the symbol BRDR. Borderfree announced in February a goal to raise $86.25 million in its IPO. The company says it made more than $110 million in revenue during 2013 while posting a loss of $654,000. It says it works with more than 150 e-commerce sites, accepts more than 60 currencies and delivers to more than 100 countries and territories.” I think this vertical is one that will be getting a lot more attention as the shift to emerging markets continues..
  21. Amazon Integrates Ads into Mobile Search Results – “Amazon recently launched new tablet and smart phone placements for Amazon Sponsored Products as part of its efforts to grow the program in 2014. “These new ad placements are designed to increase the visibility of your products,” the company told sellers.” Amazon is trying to ensure that no search business can make revenue from their sellers inside Amazon bar themselves. Would love to hear more about this..
  22. MTN, Naspers in e-commerce tie-up – “Naspers-owned comparison shopping site PriceCheck has inked a deal with MTN that will see the release of a co-branded version of the sites mobile application in South Africa.”
  23. Amazon to Acquire Stake in UK Delivery Firm – “The retailer has just signed a deal to buy a 4.2% stake in Yodel, a UK-based delivery firm. The deal is going to cost Amazon around £8.7 million, giving the delivery company a value of  £207 million. Yodel is primarily owned by Barclay. It’s based in Hatfield, Hertfordshire, and it is reportedly the second largest shipping service in the UK (after the recently-privatized Royal Mail).” This reads a lot like the Ciceksepati investment that Amazon did. Small interest in terms of shareholding – either they are using it as a form of intelligence gathering or want to ultimately own Yodel outright.
  24. Billionaire Usmanov aims at China after Apple, Facebook sale – “Billionaire Alisher Usmanov sold shares in Apple Inc. and Facebook Inc., focusing on technology investments in China such as Alibaba Group Holding Ltd. and may expand stakes in Russian assets, an executive said.” A sign of the shift inside global Internet investment, more money on the way into China and Russian Internet businesses.
  25. Latin American web sales grow 27% for Brazil’s largest web merchant – “B2W Inc., Brazil’s largest web merchant, continues to invest lots of time and energy in new business development that will help the company diversify even more in the years to come, B2W executives told investors last week on its 2013 year-end earnings call. B2W now wants to expand its own private-label products and provide more e-commerce technology and related services to web merchants that sell on B2W’s marketplace. “We want to be the biggest digital company in Latin America,” CEO Anna Christina Ramos Saicali told analysts.” Fascinating reading as this company seems to be a major player in Brazil..
  26. Why Alibaba could be way more valuable than everyone thinks – ” Based on YipitData, which tracks every transaction on Alibaba’s marketplaces, there’s reason to believe Alibaba could be worth substantially more. Alibaba has several business units, including (B2B marketplace), (C2C marketplace), Alyun (cloud services) – but its jewel is Tmall.” Fascinating insight into a company that is secretive and private. Alibaba is going to change everything for ecommerce.
  27. Flipkart will soon let sellers advertise on its site – “This ad program can help Flipkart create an alternate source of revenue for the website, while increasing the amount of time sellers might spend on Flipkart. It is not clear what model Flipkart will use for the program, but it is worth noting that it already displays ads on the product description pages. It had opened up its logistics service eKart to third-party sellers last month and with advertising it will have one more offering for sellers on its website.” This seems to be yet another sign that Flipkart is in need to make revenue. I cant but wonder if they have not grown too fast?
  28. Visa, MasterCard & payments drama in Russia in light of the current political situation – “Is Russia ready to cut up its plastic? After Visa and MasterCard stopped processing some Russian transactions in response to U.S. sanctions, Moscow says it could launch a homegrown payment system that could be ready in as little as six months, according to German Gref, chief of the country’s largest bank, Sberbank.” The current political situation in Russia is going to impact ecommerce, does this mean the end of the road for Visa & Mastercard?
  29. Amazon’s core [retail] ‘strength’ may actually be its biggest weakness – “Over the past year, however, there has been a growing area of vulnerability at Amazon, and it’s a big one: Its core retail operation. That’s right: The business that serves as the foundation and core of Amazon’s success is showing signs of trouble. And that could present some problems for Amazon’s investors and its management in the future.” The risk that is mentioned is covered in my mind due to third-party sellers and the marketplace business that Amazon has grown at a rate. Amazon has far bigger things to consider a threat than their retail business – Alibaba, a lack of a proper payments service, reliance on the US and Germany etc.
  30. The death of flash sales – “Armed with a fancy-free attitude towards product quality and customer attention, fashion flash sale sites have truly revealed themselves as the “mini-Marie Antoinettes” of retail. Throughout their three-year reign, “let them have their cake and eat it, too” was the relentless declaration emitted from the fashion flash sale monarchy, as they rolled out the red carpet to exclusive deals. With a poised snap of their fingers, these web sites made the hearts of runway fans and Middle American customers soar in the glow of shopping euphoria.” I still feel that the writer has not completely thought about global flash sales businesses like Ventee-privee, Vipshop and Markafoni as a counterpoint to this argument.
  31. Ghana’s Amazon Raises Seed Funding From Dubai-based Rio Partners & Savannah Fund – “Dubbed Ghana’s Amazon, offers a wide range of brand new electronics to the Ghanaian market and has partnered with suppliers all over the world to provide genuine products at reasonable prices and are also helping end the menace that is fake electronics in the country. If Ahonya expands out of Ghana, it is likely to launch in West Africa and East Africa where it both calls home, but it will have to battle Rocket Internet’s Jumia and Naspers’ Konga and some deals sites run by Ringier and some other players.” A great story for African ecommerce.
  32. eBay announces new cross border trade initiative in Europe – “This presents huge opportunities for UK businesses but there are obvious challenges to selling abroad: how are you going to handle customer service in a foreign language, and how can you ensure delivery takes place within an acceptable time frame? Over the past few years eBay has helped make international commerce accessible to sellers of all sizes. With more than 120 million customers worldwide, by opening a store on eBay, sellers can reach millions more customers outside their domestic market.” Cross border commerce for horisontal marketplaces makes sense and helps both merhants and customers.
  33. Why eCommerce Needs A United eBay – “For those of us in the eCommerce industry, there was largely a sense of head-scratching and general befuddlement as to why Mr. Icahn was targeting eBay and PayPal in the first place. Everyone in our industry knows that eBay’s purchase of PayPal back in 2002 is largely regarded as a categorical homerun and a textbook example of synergy executed right.” Suchurita Mulpuru from Forrester makes the argument that crushes Carl Icahn thoughts. eBay is in a critical phase of their lifecycle – they need Paypal as does the ecommerce industry in the US.
  34. Shyp launches app-based parcel shipping service – “Now San Francisco startup Shyp has come up with a solution to this nuisance task, creating a mobile app designed to relieve customers of these first steps in the shipping chain. Customers wishing to make use of the Shyp service just need to do a few things on their smartphones – take a photo of the item(s) to be shipped, then use the app to enter their own address and the final delivery address, and specify the service level required.” A secondary product from ecommerce that may lead the big ecommerce business to re-look at their logistics businesses.

Till later on in the week. Onwards.