Etsy buys Grand St, Amazon test logistics network

Target sees product subscriptions as a big push to counter the ‘Amazon Effect’, Birchbox announces $60M Series B investment, Wal-Mart will turn the electronic receipt into a sales tool, Russians flocking to Taobao, Etsy buys Grand St, Amazon test it’s own logistics network and much more

This past week is one that influences ecommerce greatly. Amazon posted its Q1 results and has in the process finally come clean about one of their great challenges. Shipping/ logistics costs are becoming increasingly seen as a large balance sheet problem. Let me be clear – for any ecommerce business – the costs for shipping items to customers is a large challenge. From a business point of view – businesses can either put the shipping costs into the profit margins on products or pass the shipping costs on to the customers. Amazon has for years taken the costs through its Amazon Prime business but clearly the Seattle based business is looking for a way in which they can distribute some of that costs to other sellers (marketplace) or platforms (owning the last mile).

The stories that caught my attention this past week:

Target sees product subscriptions as a big push to counter the ‘Amazon Effect’ (Engadget) – “In September, the retailer introduced an online subscriptions pilot as an answer to Amazon’s “Subscribe and Save” service, offering 200 or so items available for shipping in installments of four to 12 weeks. Now, Target’s improving two of the major weaknesses of that program, increasing the number of products eligible for subscriptions to 1,500 and adding in the incentive of discounts.” I am still not convinced that a subscription offering will conquer Amazon. The biggest issue with this Target product is that it is unavailable on mobile. Time will tell whether this product helped Target to battle against Amazon.
Birchbox announces $60M Series B to fortify mobile, expand globally (GigaOM) – “Ecommerce startup Birchbox, which specializes in subscriptions to monthly beauty kits, announced Monday that it raised a $60 million Series B round, led by Viking Global Investors and including existing investors such as First Round Capital and Accel Partners. The company said that it would use the funds “to continue to tell its story through marketing initiatives, refine its mobile application, fortify Birchbox Man and develop its team worldwide.” How do you scale a monthly subscription ecommerce business over many countries? I am still not convinced that this vertical can grow to a place in which the vertical leader has a billion dollar valuation.
Sneaking Duck CEO: Touch is Online Retail’s Final Frontier (PowerRetail) – ” We asked people to rate what they thought of our collection on various dimensions. People who had not touched our product had very consistent views – they were unsure about the practical concerns of Fit, Quality and then Size. They were less worried about Style, Colour or Price. But when you looked at people who had touched our glasses, these practical concerns evaporated. And it wasn’t just buyer’s confirmation; even those who had tried-on glasses at home and not purchased felt the same way.” I found the survey results very interesting. Clearly being able to touch the products to buy it is an issue. I still wonder whether this will ever be solved.
Wal-Mart will turn the electronic receipt into a sales tool (Internet Retailer) – “The world’s largest retailer plans a national rollout of electronic receipts that it will text to shoppers. That will allow Wal-Mart to collect data about consumer purchases and send shoppers offers for products they like.” This is a pretty big deal. One of the biggest competitive advantages that Amazon has over retailers is data. Walnart has always been at a disadvantage but by refactoring receipts into a way of communicating to customers but also then creates a data list that can be seen to drive users into buying products etc. This is a pretty big deal..
How Tencent Uses WeChat to Target Alibaba (Techonomy) – “Alibaba founder Jack Ma’s worries about the rapid rise of mobile instant messaging service WeChat appear to be well founded, with word that Tencent’s wildly popular platform will create an exclusive shopping channel for Alibaba’s chief rival JD.com. This kind of deal must certainly be Ma’s biggest nightmare, as it will instantly link JD, China’s second largest e-commerce company, with the hundreds of millions of young Chinese who regularly use WeChat to communicate.” Messaging in China is a big industry so JD and Tencent’s partnership is potentially a big problem for Alibaba. In Asian ecommerce messaging is a massive platform that I dont believe moves to other markets in terms of scale and importance.
How two Argentines’ humble barcode scanning app helped fight inflation and got them labelled as leftists (Pando) -“Torrado and Fraiman didn’t set out to cause controversy. These two students at the University of Buenos Aires just wanted to get the best deal when they went to the grocery store. They realized that the best way to do that was to buy goods that were price-controlled by the government — but that the vast majority of Argentines didn’t know where to find them. Beyond that, they wanted to make sure that businesses were adhering to the price controls. They developed the app, called Precios OK, to help consumers and hold businesses accountable. Today it has been downloaded over half a million times.” Fascinating article over the impact that an app has had in a country in which economic challenges have been seen. This is the kind of story that highlights the impact an app has on a country.
Study: Sales tax cuts into Amazon’s sales, as consumers look to other online retailers (Geekwire) – “Laws that require online retailers to collect local sales tax are hitting Amazon particularly hard, according to a new study by researchers at Ohio State University. Amazon’s sales in states where it collected sales tax decreased about 10 percent, compared to states that don’t require tax collection.” The research from Ohio State University is very interesting and potentially concerning for Amazon. However, the part of the Amazon business that succeeds due to the sales tax issue is the marketplace sellers on Amazons platform. This is very reason that Amazon is always going to be a factor – it scales and operations will benefit in some or other way.
Russians flocking to Taobao (China GlobalTimes) -“However, another public relations manager at the company, Xiao Haikun, earlier told the Xinhua News Agency that Taobao data showed about $2 million worth of goods were sent to Russia in February last year, and the figure doubled in May. According to Xiao, Russians, especially young people, have increasingly been buying goods from China.” This is another reason why Taobao is not to be underestimated. Being able to move into non-Chinese markets without great marketing costs is indicative of a global business that can make an impact.
Amazon is capable of sales of $1B by 2016, making it the 1st online retailer in India to do so within 3 yrs of launch (Economic Times) – “Industry estimates peg Amazon India’s sales at over $200 million (Rs 1,200 crore) although the company declined to share sales numbers. At current growth rates, Amazon is capable of clocking sales of $1 billion (Rs 6,000 crore) by the end of March 2016.” Some very interesting information about the growth of Amazon in India.
Amazon’s exclusive HBO deal brings Sopranos, The Wire and other big shows to Prime (Geekwire) – “Amazon Prime members will have access to a slate of iconic HBO shows — including The Sopranos, Six Feet Under, The Wire, True Blood and others — under an exclusive deal announced by the Seattle company this morning. It’s the first time that HBO has licensed content to an online-only subscription streaming service, according to the company.” Amazon getting HBO content before Netflix is a big deal. The HBO content is for old series but getting this is another benefit for Amazon Prime users.
E-commerce bucks slow economy in Thailand (Bangkok Post) – “”Our growth of sales transactions via mobile phones in Thailand outpaced those in Singapore, Malaysia and Indonesia,” said Mr Pawoot, adding that Rakuten’s head office has allocated an additional marketing budget for the local operating unit after the company recorded satisfactory results.” This is very interesting for the simple reason that mobile commerce in Thailand is growing at an advanced rate.
How eBay Regained Its Edge By Predicting The Future (Fast Company) – “n 2010, eBay acquired Critical Path Software, a mobile app developer, and RedLaser, a barcode-scanning app used for comparison shopping and product information. Yankovich also worked on perfecting eBay’s mobile site. For example, his team moved the “Buy It Now” button on mobile web and increased conversation by 30%.” Fascinating article on the future that eBay created but as with most of these articles I wonder if all of this technology is creating return on investment for eBay.
Etsy Just Bought Boutique Electronics Startup Grand St (Business Insider) – “Etsy, the online marketplace for handmade goods, just bought Grand St. Grand St. is the New York-based startup that sells indie electronics.” This was and is a brilliant move by Etsy. Protect their business by acquiring a small indie competitor that was gaining momentum.
Amazon targets Walmart and Costco with new ‘Prime Pantry’ box deliveries (Geekwire) – “Amazon launched a new Prime Pantry service today, letting customers in the lower 48 states order household products they might otherwise get from a grocery store. Prime subscribers can fill a 4-cubic-foot box with up to 45 pounds of selected items, then get it shipped to their home for $5.99, plus the price of the items included.” This is a very clever move by Amazon, they have created another reason for customers to use their business for groceries. More importantly they have created another level of shipping that is above normal shipping but is below Prime shipping.
Online Grocery: The Five Retailers That Do it Best (RIS News) – “The “Online Grocery: Is Anyone Doing it Right?” report examined the top eight players in the online grocery and ranked them based on user experience, personalization, content and features, selection, delivery and pick-up options and mobile site/app. Grocers were ranking on scale of 1 to 5 in each category and results averaged to provide an overall score.” The comparison of the 4 biggest grocery businesses online – Fresh Direct, Google Shopping Express, Safeway and Amazon Fresh. Very interesting and clearly a battleground at the moment.
State of the Union for Ecommerce Web Performance Spring 2014 (Radware) – “Every quarter, we measure the load times for the home pages of the top 500 ecommerce websites (as ranked by Alexa.com) with our eye on a number of performance metrics, including load time, time to interact (aka TTI — the moment when a page’s primary content loads and becomes interactive), page size and composition, and adoption of performance best practices.” If you are an ecommerce executive, this is a must read and something that needs to be considered as a non-negotiable factor.
Amazon Tests Its Own Delivery Network (WSJ) – “Adjacent to recently closed Candlestick Park, Amazon is testing its own delivery network for the “last mile,” the final leg of a package’s journey to consumers’ doorsteps. Trucks loaded with Amazon packages and driven by Amazon-supervised contractors leave for addresses around San Francisco. Similar efforts are under way in Los Angeles and New York.” This is not surprising at all. Amazon wants to own the entire journey from order – the point in which the customer signs for a delivery. Being able to be less reliant on UPS and USPS will ensure that Amazon can regain some of the profit margin that it passes to logistics partners in terms of costs.
Lenddo’s Credit Card Will Enable E-commerce in Emerging Market (Techonomy) – “In emerging markets, even a steady reliable income and good education are generally no guarantee of access to credit for members of the middle class. The Lenddo-Scotiabank Visa card will thus enable many to make e-commerce transactions for the first time. Lenddo relies on data taken from consumers’ social graphs to minimize its own risk of fraud and default.” This is a very interesting concept and one that could potentially be seen in more emerging markets. What is of particular interest is how Lenddo does the credit checks -“the first time ever, anywhere, that approval for a credit card is based on applicants’ reputations on Facebook, Google, LinkedIn, and Twitter.”
5 Things to Know About Alibaba’s IPO (WSJ) – “When Chinese e-commerce juggernaut Alibaba Group Holding Ltd. files its paperwork with the Securities and Exchange Commission for what is expected to be one of the biggest initial public offerings in history, investors will finally get a look under the under the hood of this massive and fast-growing company.” Fascinating look at a big moment in ecommerce that will change everything.
Cross-border ecommerce flourishes in Europe (Ecommerce news EU) – “Partly as a result of lawmakers wanting to create a single online retail infrastructure and regulation, cross-border ecommerce is thriving in Europe. As a matter of fact, more than a quarter of online shoppers in the European Union have made purchases from other EU countries.” Cross-border ecommerce is a global phenomenon that is seen globally. What is interesting to see is the impact of this in developed ecoomerce markets like the UK and Germany.
Tmall Reposition To Target Tier One Cities (China Internet Watch) – “Tmall used to brand itself as a big B2C platform for authentic products. However, several years later, almost all Chinese B2C platforms sell authentic products. Tmall’s position and advantages became vague. As the emergence of vertical B2C platforms such as Vipshop and Jumei, Tmall underwent huge pressure to change.” Clearly there are alot of things going on in Chinese ecommerce. What is interesting to note is that Tmall is a dominant platform but clearly the focus is on customers in tier one and tier two cities.

Till next week. Onwards.