Hendrik's ecommerce Newsletter

This is a weekly newsletter of what I've seen in ecommerce and thought was interesting and have business impact.

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B2C (Business to customer) news

Buzzfeed seems to be building an aggressive affiliate network with partner Shopify. The agressive nature is down to the high revenue percentages that they are willing to pay partners for conversions / sales. Shopify provides their sellers with yet another channel for sales but one has to wonder if this is a sustainable long term strategy? Affiliate links for me is the most powerful channel for ecommerce after email yet I wonder how Buzzfeed will handle fraud and other negative behaviour seen in the affiliate marketing world? Recode

Amazon used their quarterly results press release to provide Indian rivals with a clear idea about how important the region is. Lots of investment into " technology and infrastructure while working hard to invent on behalf of our customers and small and medium businesses in India". Quartz

Rocket Internet announced their full year 2016 results. Rocket Internet Group’s FY 2016 revenue of EUR 50.4 million and the consolidated loss of EUR 741.5 million. The majority of the companies have decreases their losses but group performance overall was improved but losses have significantly accelerated. One company achieved break even (Namshi) but FY 2016 results were the same that Rocket Internet has had since inception. Tech In Asia, Rocket Internet

Carvana is trying to change the way secondhand cars are sold and bought. However. their model does not take into consideration how car dealers will feel about their direct to customer model. (Remember Tesla was sued in a variety of states). I battle to see how this business will scale. IPO Candy

Expedia reported $2.2 billion in revenue for the first quarter of 2017, a 15 percent increase over the same period last year, with earnings of 5 cents per share. Expedia narrowly missed analysts’ expectations, which predicted earnings of 6 cents per share on revenue of $2.1 billion. GeekWire

2 New companies have tried their hand at providing brands with tools for commerce on social channels (Instagram and Snapchat). While MikMak and Bustle may solve the issue, I believe that social commerce will be driven by the platforms. Instagram might be Facebook's answer for visual / social commerce. AdWeek

BestBuy has come back from the brink of irrelevance. Fascinating interview in GeekWire on what they have done: We give the customer the choice to get it 15 minutes from now — because every Best Buy store is 15 minutes from a customer, 70% of the population is 15 minutes. So you can go and buy the product right away, maybe 15 minutes if you need it right away. GeekWire

Goodbye Amazon...And Good Riddance. The story of how Princeton-Audio left Amazon after a one sided relationship. There are many stories like this but this is the reason why Amazon is both a mercenary and a missionary. Missionary for providing Princeton-Audio with the opportunity to list their items and mercenary for how they treated them. Princeton-Audio

Subscriber Cooper Smith highlights that Amazon Prime is Becoming Walmart and Target's Worst Nightmare. Amazon Prime is a loyalty programme but it's behaviour that goes unnoticed is recurring purchases via replenishment of FMCG items. LinkedIn

Boxed has found a way to bring in automation and not make humans redundant. A limited selection allows for it to compete against Amazon and a human centred approach ensures that the business and staff can grow. Bloomberg Technology, Business Insider

Marketplace news

Amazon announced their Q1 results this past week and continued to show profitability. I strongly believe that Amazon will continue to be profitable for the foreseeable fortune due to AWS and then logistics investment will start to return investment. Operating margins tell an interesting story: Year on Year - US market is slowing, international is in investment mode and AWS is growing their margins. Recode, Bloomberg Technology

Ticket Monster (South Korea) raised more funding in their battle with Coupang. Most telling is that the investment was lead by a non traditional ecommerce investor (Simone Investment Managers). TechCrunch

Amazon launching new furniture seller program which could put Wayfair in its radar. Under the plan, furniture sellers, such as stores, won’t be required to sell nationwide. The retailers will set their own pricing that can change with the services an Amazon customer chooses. Furniture Today

Amazon has unveiled another attempt at creating recurring purchases - subscriptions. Subscribe with Amazon should scare any competitor as that is recurring revenue going straight to Amazon and not directly to the respective brand / startup. Now, the retailer is looking to expand its subscription footprint with a new program called Subscribe with Amazon, which aims to make Amazon the place to discover, subscribe to and manage a range of digital subscriptions — from streaming services to subscription-based apps, from meal planning services to online fitness classes, and much more. TechCrunch

Chinese B2C e-commerce provider JD.com and German tire brand Continental announced a strategic deal to sell tires to e-commerce consumers. With the cooperation, Continental will directly supply to JD, instead of via a multi-level resale model. At the same time, the two parties will establish an exclusive supply channel which will provide more exclusive products and new products to JD consumers. ChinaTechNews

Etsy will have a new competitor slowly, LoveCrafts which provides a community and a marketplace around certain crafts. I wonder if Etsy would consider buying this startup to bolster their international business? Business Insider UK

Flipkart has made changes to their returns policy after consumer outcry and Amazon's claims of market growth. Flipkart made changes to the text of a returns policy that had appeared to restrict refunds on a swathe of popular items, clarifying ambiguities and restoring a more customer friendly system. The Economic Times

Fashion ecommerce news

Zalando is feeling increasing pressure from Farfetch, Matchesfashion to provide city based delivery via retail locations. Online fashion retailer Zalando is pondering opening stores in major cities such as London, Paris or Berlin, the company's co-chief executive told Germany's Manager Magazin. Reuters

Amazon has turned to their roots to solve their fashion growth problem. Data via their new Alexa device called the Echo Look surely is yet another sign how serious they are about fashion. The rating of customer looks is secondary as this is about trying to understand customer needs and purchase behaviour to create new private fashion labels. Recode, TechCrunch, BackChannel

Posh Dressing Room is Poshmark's new one-on-one styling experience between a consumer and a stylist via mobile phone. Poshmark, the largest social media marketplace for fashion, wanted to bring the essence of shopping in a physical boutique to the online world. FierceRetail

Zara Just Launched An Online Shopping Tool That's A Total Game-Changer. Sizing is a challenge for customers and Zara has a very interesting solution that could solve this. Harper's Bazaar

Mobile commerce

A fascinating interview with the CFO of Instacart that provides insight into how they have been able to scale delivering groceries. "We have 135 grocery partners from small local favorites like Bi-Rite or Molly Stone’s here in San Francisco to Whole Foods and Costco. Eighty percent of the groceries have a revenue share arrangement with us." TechCrunch

Amazon is closing down its “Underground Actually Free” program that gives away free Android apps. After finding new ways to provide revenue to developers - Amazon Coins, Merchandise (via Amazon Merch) Amazon is closing this experiment. There are 2 App Stores and Amazon have now created enough traction to provide developers with other ways to monetise their Amazon mobile app clients. TechCrunch

Stats and other interesting news

Dash button for fashion, with the addition of Calvin Klein. It’s for underpants. What a world. TechCrunch

Amazon continues to grow its employee base as the tech giant added another 9,600 workers over the past quarter. As part of its Q1 earnings report, Amazon noted that its worldwide employee count — which does not include seasonal or temporary workers — now sits at 351,000, which is up 43 percent from last year. GeekWire

China's online retail sales posted robust growth in the first quarter of the year, reflecting a changing consumption pattern, official data showed. Online retail volumes reached over 1.4 trillion yuan ($203 billion) in the first three months, up 32.1 percent year-on-year and more than double the pace of total retail sales, the Ministry of Commerce said on Wednesday. ChinaDaily

Amazon keeps acting like Amazon -- a company that plows about 97 cents of every dollar in sales back into fueling its endless ambitions. Bloomberg Gadfly

Thoughts on the news from this past week

This past week made me realise that horizontal marketplaces are very difficult to battle for marketshare. Amazon is using it's platform and services to offer a new programme to furniture sellers. Lets be clear that furniture is something of a challenge as logistics and how the products are shown to customers. For as long as i can remember, Wayfair has made it known that it believes it is Amazon proof. Wayfairs stock price told a different story this week.

Secondly, the deal between JD.com and Continental in China changes the way that tires are sold in China by going direct to customers via a popular marketplace. The marketplace model is capital intensive but creates loyal customers who shop nowhere else just ask eBay and others about that. I am a firm believer that horizontal marketplaces which hold stock is an almost impossible market share taker - but it requires seller costs to be reasonable and not a primary revenue driver.

Carvana has me rather baffled. After reading their S1 and at looking at how IPO Candy took it apart, I must wonder how they are able to go public? Scaling is not really clear as second hand car sales is still very much based on selection which they don't have. Certainly the markets did speak about their doubts on their first day of trading.

This is issue 116, sent 30 April 2017.

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