A blog on eCommerce, Social Commerce, Comparative Shopping Engines & Business

By Hendrik Laubscher

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Feed.fm – Music for brands to connect with customers

Music has been used for decades in retail to create a connection with customers however music is not widely used in ecommerce. Music is part of consumer science to create an environment in which the customer wants to spend time in the shop and then based on the emotional connection it will then lead the consumer spend money in that specific shop. When I worked for an ecommerce business one of the most important beliefs that must be made known to team members is the importance of a conversion. Whether it be the putting the item in the cart, clicking on a button to create revenue – nothing must stop that from occurring. A San Francisco based startup, Feed.fm is using music to help brands connect with their customers via emotional connections.

Why music has not been seen inside ecommerce

When researching for my conversation with Jeff Yasuda, the CEO of Feed.fm, the impact that music has on conversions was consistently on my thoughts. Needless to say it was immediately dispelled and described as a myth.

Music has been a part of advertising (TV and radio ads)  and retail for decades, yet when I look at ecommerce it is not widely seen. The movement to ecommerce and digital retail has been blocked by 3 factors according to Jeff:

  1. Licensing costs for music is high.
  2. Legal complexity – it takes a long time to legally be able to use music in a commercial environment. Lawyers who specialise in music rights are expensive and difficult to find.
  3. Finding the right music – everyone thinks they are a DJ and thus finding music can be emotive and not based on any relevant data.

Businesses also have a challenge in that they have to be able to connect with millennials and Generation Z who are interacting with brands mostly on mobile devices.
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Why Amazon Prime Now Is Another Trojan Horse

Amazon has entered Singapore in a new fashion that should put new countries on alerts. As I wrote in my newsletter last night that this is potentially a very big future indicator. By using Prime Now Amazon is leveraging local assets (local logistics, staff) to enter Singapore.

This past week Amazon entered Singapore via their on demand mobile app, Prime Now.  Amazon has used this country as its market entry into South East Asia. Singapore is not large and thus quicker market entry has been possible. Amazon has used 2 Singapore born staff to go run this new market. By appearing in Appstores instead of via a website Amazon has shown their secretive nature but also how they are going to go into new markets in Asia. This past week should provide more than enough evidence of the future battle that is going to appear more and more, Alibaba vs Amazon. Both have significant capital and desire to enlarge their businesses.

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Happy Returns Takes Returns Personally

LOS ANGELES – When David Sobie and Mark Geller worked at Hautelook they created the returns program that ensured that customers could return Hautelook purchases at Nordstrom Rack locations. This was prior to the omnichannel retail existing yet it lay the the groundwork for their future. Little did they know that they would create Happy Returns that would leverage their domain experience regarding returns.

I spoke with David Sobie, CEO and Co-Founder of Happy Returns and our conversation made me realize that retails future will contain a moment for returns. Returns is one of the remaining elements in retail that has not seen significant investment, yet it is a line item which provides retail Chief Financial Officers with sleepless nights.

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Direct to customer startups partnering with Target, Nordstrom and Amazon?

When I compiled my newsletter over the weekend – I added a new section to it. Direct to customer ecommerce is something that stumbled across and have over the last few months looked at in depth. However these direct to customer businesses are now using Target, Nordstrom and Amazon as a channel to reach new customers. This is a double sided agreement as the startups involved (Harry’s, Bevel and now Casper) are providing these older businesses with the opportunity to access a new customer base.

Ecommerce is at a cross roads

If your business is not called Amazon, ecommerce is increasingly becoming more complex as customers demand Amazon like experiences (shipping and customer service) and that requires investment both in people and capital. Investors are also more looking at these direct to customer startups as they are ultimately margin businesses at scale. Instead of spending X on a product and selling it via multiple channels that take their own commissions these business are going straight to the customer and passing on that savings directly to the customer.

After Dollar Shave Club was acquired by Unilever for a billion dollars the signs were clear – niche specific startups with founders that have deep domain experience creating great products are reasonable prices are the future. There is only one giant that can slow down Amazon and that is Walmart due to its scale and potential to invest in providing customers with pricing similar to that seen on Amazon.

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9 Thoughts about ecommerce from 2016

Every year at this time I write a summary of the ecommerce year that has gone by. I can summarise the 9 thoughts in one word – unexpected. Globally the year saw a lot of unexpected mergers and acquisitions, new developments and businesses selling for way below their valuations.

The 9 thoughts in no particular order:

  1. Walmart spending $3.3 billion Dollars to acquire Jet.com. Walmart gained a new demographic (millennials) and most importantly Marc Lore is now the President & CEO of Walmart eCommerce and Founder & CEO of Jet. It is increasingly clear that Walmart has an ecommerce problem. The growth rate is slowing and Amazon is growing at a steady rate. This is something that could be a story line in 2017 as battling Amazon in the US will be long term battle.
  2. Alibaba acquiring Lazada in South East Asia. The latter part of 2016 indicated tough market conditions for investment into ecommerce. Increasingly it looks like sovereign funds and Chinese internet businesses are buying ecommerce businesses at below valuation rates.  Lazada was running out of funding and Alibaba acquiring it for a Billion Dollars makes all the sense in the world. Lazada has become the dominant marketplace in South East Asia through logistics and providing sellers access to the growing part of Asian ecommerce.  Alibaba through Lazada has also acquired Redmart to provide customers in South East Asia with the opportunity to purchase groceries. I suspect that this is a pre-emptive measure on the expected arrival of Amazon.
  3. eBay selling a large part of their MercadoLibre shares. In direct contrast to the entire ecommerce industry eBay made selling a large chunk of their MercadoLibre at a time in which the large ecommerce businesses have added assets to their businesses.  eBay is fighting for its future – that is clear to me. The sale of the shares in MercadoLibre is primarily to provide them with capital for investment into other more important verticals.
  4. 2016 will be remembered as the year in which Amazon made their logistics desires known. It is clear that currently they are in an investment mode. They have via their Chinese subsidiary acquired a shipping license to ensure that they can operate as a freight forwarder. In the US they have rented airplanes to ensure that they can move products between distribution centres. Amazon is also slowly rolling out their Flex programme to ensure that they can provide on demand employment for those wishing to deliver items for them on an hourly rate. As Amazon is famous for re-purposing capital expenditure I believe that in  late 2017 will be providing logistics services to their top tier sellers. If I was a shareholder in UPS, Fedex or any logistics firm I would be concerned.
  5.  Alibaba had a nightmare of a year. Yes, their global shopping festival smashed records but their counterfeit problem and quarterly reporting became issues. Barron’s wrote a hard hitting post regarding concerns over Alibaba’s reporting which was quickly rebuked by Alibaba management. By end of 2016 Taobao was placed back of the US trade representative list for counterfeit sales. Most of the product marketplaces had their issues with this in 2016 but Alibaba’s got way more coverage as the scale of it is larger.
  6. The fashion ecommerce space witnessed one of the largest mergers when Net-a-Porter and Yoox joined to form a new Italian based behemoth. The merger was a story line for me since middle of 2015. The combined business has not shown the same level of innovation but I believe that this merger has still to come full circle. Between Carmen Busquets and Natalie Massenets unhappy departure and the departure of some of the top staff of Net-a-Porter I believe that the fashion ecommerce space is still very much open for serious innovation.
  7. Zalando, a giant in European fashion ecommerce has been making the right noises in the last 9 months. Better margins, better financial performance has seen them become a more vocal part of a vertical looking for a market leader. Zalando has made their intentions clear – they want to become the largest fashion based marketplace and provide brands a place to sell to customers in which they can get more of the transaction. By allowing brands to ship directly to customers they can get products to customers faster and so defend their turf from Amazon.
  8. 2016 will be remembered as the year in which Rocket Internet’s growth stagnated and finding investment for their larger businesses was extremely tough. None of their largest ecommerce businesses are close to profitable, some their investments are holding of going public and their share price is down.
  9. Naspers, Tiger Global, eBay and most venture capital investors used 2016 as a way to ensure that their investments become more capital efficient. Whether it be by way of closure, merging or selling assets the amount of ecommerce startups with high valuations became less as investors became more concerned by burn rates, Amazon and valuations that were way too high.

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