E-commerce Archives - Assert Digital Ventures

Amazon is selling its no-checkout tech to other stores,…

March 10, 2020March 11, 2020
by Andy

This seems an obvious data play. If you squint hard enough, there might be a coherent strategy here:

Have physical retail for items not easily sold online (e.g. perishables w/ Whole Foods), for immediate service (e.g. prepared meals with Amazon Go) and to experiment (e.g. Amazon Go). This allows them the last mile of connecting off and online shopping to customers.
Let others bear the burden of high fixed cost, low-margin real estate

How much we want that is another discussion.

If Just Walk Out takes off, it could upend the entire brick-and-mortar retail system even without shifting ever-greater amounts of shopping online. Yet in announcing the new program, Amazon has chosen not to discuss many fundamental issues, such as how it’ll affect jobs and what it will do with all the data it collects. The company declined to answer most questions for this story, instead referring to a brief question-and-answer section on its website.
https://www.fastcompany.com/90474953/amazon-is-selling-its-no-checkout-tech-to-other-stores-and-we-have-questions

Amazon Advertising Drives Higher Returns For Retail Brands Than…

February 14, 2020February 14, 2020
by Andy

A new report shows how the Amazon machine now expands to digital advertising and is meaningfully threatening the big 2 (Google and Facebook). I have to say, in running multiple small businesses that utilize all three platforms, this is consistent with what I’m seeing. Amazon has greater RoAS and thus gets 95% of my ad spend. Although the returns are under pressure as the flood of people now forced to advertise on Amazon has driven up rates notably in the past two quarters.

A new report from Feedvisor of more than 1,000 U.S. brands shows an increased uptake of Amazon advertising amongst the cohort: 73% of respondents now advertise on Amazon, up from 57% last year. It also confirmed why Amazon is more widely considered a challenger to the incumbent digital advertising platforms, Google and Facebook, particularly for brands selling physical products. Here are three reasons why brands are flocking to Amazon’s advertising platform.
https://www.forbes.com/sites/kirimasters/2020/02/12/amazon-advertising-drives-higher-returns-for-brands-than-facebook-or-google/#36225a8932e1

All Your Favorite Brands, From BSTOEM to ZGGCD

February 12, 2020February 12, 2020
by Andy

Article on the “halo” brand that Amazon has created opening up massive new opportunities for digital small businesses. Amazon is the brand and the brand of the seller doesn’t matter as much. This is a real quandary for traditional brands and why many new D-to-C digital brands have struggled to move beyond core audience and address the Amazon gorilla in the room. Why spend all the time and money to build a brand in retail any more?

Mostly, you’ll notice gloves from brands that, unless you’ve spent a lot of time searching for gloves on Amazon, you’ve never heard of. Brands that evoke nothing in particular, but which do so in capital letters. Brands that are neither translated nor Romanized nor transliterated from another language, and which may contain words, or names, that do not seem to refer to the products they sell. Brands like Pvendor, RIVMOUNT, FRETREE and MAJCF. Gloves emblazoned with names like Nertpow, SHSTFD, Joyoldelf, VBIGER and Bizzliz. Gloves with hundreds or even thousands of apparently positive reviews, available for very low prices, shipped quickly, for free, with Amazon Prime.
https://www.nytimes.com/2020/02/11/style/amazon-trademark-copyright.html

The merging of payments with “shopping”: Paypal + Honey…

January 19, 2020January 23, 2020
by Andy

An couple of interesting salvos were recently sent in the online payments and shopping space. First, Paypal bought Honey for $4b to move up the consideration funnel to see user shopping interests not just at payment time. Honey has moved from a rebates browser plug-in to become a kind of pan-site shopping cart facilitating not only coupons but comparison shopping, identity and an interest graph. Paypal sees this as a way to immediately move up the ecommerce funnel not only to leverage their identity but also to engage the customer earlier in the consideration cycle. A potentially lucrative and deeper lock-in that has not often been the purview of payments providers.

Queue Amazon for the reactive move. In the most Amazon predatory way, they warned their customers that Honey was a security risk and should be uninstalled:

“Honey tracks your private shopping behavior, collects data like your order history and items saved, and can read or change any of your data on any website you visit,” Amazon said. “To keep your data private and secure, uninstall this extension immediately.”
https://www.pymnts.com/amazon/2020/amazon-warns-paypal-honey-security-issue/

I can’t say what is under the hood with Honey but it hardly seems a security threat nor, given people opted in via downloading a browser plug-in, have serious privacy issues. Amazon had to know of Honey before and seemed content to co-exist with them. However, the Paypal acquisition changes the equation here.

Theoretically, Paypal has the potential to create a “meta shopping and payment layer” driven by their broad identity capabilities and (non-Amazon) merchant relationships. You can think of it as a shopping cart across all e-commerce sites (Amazon included…unless they can get Google to ban the plug-in…doubtful) where Paypal then guides the customer on where to buy and how to pay. Many non-Amazon merchants already integrate with Paypal and, post acquisition, many will integrate with Honey. This is one of the few real threats to Amazon’s e-commerce power. Imagine browsing Amazon for a new Fitbit. Honey pops up and says you can get it with a 10% coupon at BestBuy and, with one click, checks you out there.

Dan Schulman (Paypal CEO) certainly knows the value of a closed loop, vertically integrated network from his days at Amex. Paypal is now positioned to go much deeper. This will be interesting to watch play out over the coming 18 months.

Prime Power: How Amazon Squeezes the Businesses Behind Its…

December 20, 2019December 20, 2019
by Andy

This article sadly articulates the reality of how Amazon treats sellers. I could provide anecdotes point by point but the article and its stories speak for itself. The revelation that Bezos sees the marketplace as his cash cow for expensive side projects makes sense and shows how he has lost his vision.

The only one I’ll mention is that I don’t know of anyone selling on Amazon who only has them take 27 points of margin. Try more like 38. And consumers should know there is no way Amazon is the lowest price as sellers are forced to pass these costs on. They need to be regulated as there is no avoiding them nor control any seller has which is the definition of monopoly power.

But to make it all work, Amazon runs a machine that squeezes ever more money out of the hundreds of thousands of companies, from tiny start-ups to giant brands, that put the everything into Amazon’s Everything Store.
https://www.nytimes.com/2019/12/19/technology/amazon-sellers.html

Big Brands, Online Startups Find Success Rests on Store…

December 10, 2019
by Andy

This article points out a few interesting elements of what is going on with direct to consumer (D2C) online only brands: they’re needing traditional retail to scale. With VC economics behind them, they’re being forced quickly beyond their early adopter (and presumably profitable) customers into adjacencies which are expensive to acquire online and beyond the reach of their branding and viral efforts.

That reality is hitting some of the world’s biggest consumer-products companies, which collectively have invested billions of dollars in startups in recent years that sold directly to consumers. Meanwhile, upstart brands are finding they must move into stores to compete outside of niche territory—for at least two reasons, executives and analysts say. Big retailers can give brands critical visibility, and consumers generally prefer buying household staples in a single shopping trip to enrolling in many subscription services.
https://www.wsj.com/articles/big-brands-online-startups-find-success-rests-on-store-shelves-11575895927

I think there are a few things to learn from here:

1. Going it alone D2C with a new product can be expensive in building a new brand and marketing it. The world of PPC is not friendly to this especially in an established category. Even with creative use of social media and some viral help, that gets you to the early adopters but to cross the chasm to scale with profitability, that’s more difficult as most of these guys are finding out.

2. The nature of the product matters here. I agree with the sentiment that if its a “no thought, throw it into the basket” (which can include impulse buys) that works well with traditional brick & mortar merchandising. Ironically, its where B&M has an advantage over e-commerce as B&M has an inventory constraint issue but less of a display to customers “end cap” issue. It’s always been challenging to up sell in e-commerce (especially on Amazon).

3. Most of these brands (and many other similar ones we talked about) have a “no Amazon” approach. That makes sense at one level especially when you see the economics associated with Amazon and if you believe you have significant marketing prowess. They can build early adopter traction with creative marketing/branding efforts but Amazon is scale in e-commerce. And, if you haven’t planned that in your financial model, its looks (and likely is) unsustainable to try and go there and, ironically, traditional retail suddenly looks attractive.

The last point is particularly important. Amazon is its own beast. It’s a definite challenge especially if you’re a marketer seeing your brand is pushed to the side by the Amazon “halo” brand. However, D2C gets expensive when you need to scale to adjacent customer segments. Every product has an optimal reach with profitability. There might be another maxima above that with adjacent segments but seeking that is expensive and often doesn’t materialize.

My appearance on Reuters CCTV talking about next day…

December 3, 2019
by Andy

I was recently interviewed by Reuters CCTV for their segment on Ohi, a startup building micro-warehouses in urban centers to provide non-Amazon ecommerce with next and same day delivery.

Reuters CCTV

THE EVERYTHING TOWN IN THE MIDDLE OF NOWHERE

November 19, 2019
by Andy

Arbitrage situations are often exploiting inefficiencies as noted here between brick-and-mortar retailers and Amazon. Per the quote below, its difficult to not wince at the negative impact shipping goods around as much as these do. The bigger insight is how much slack the Amazon seller model has vs. traditional retail. Storage limitations aside, I have a lot more inventory exposure running a few stores regionally than with Amazon’s global reach and their ability to optimize logistics. Yet another way the traditional small retailer struggles to compete. However, opens up many new “small business” opportunities as noted below.

I’m not a believer in the zero-sum automation/digital story that some put forward. Each industrial revolution has been disruptive to large swaths of jobs but created many new ones. The important part is providing the training, low-interest loans and other support to transition people…or, as noted in the article, they’ll do it themselves. SBA is important here.

“I’m basically moving inventory from one warehouse, to my fulfillment center, and then to Amazon to a third fulfillment center, and then to finally being sold to some customer at the end point,” says Chris Grant, a seller based in Orlando who just contracted with a prep center in Montana. “Which when you kind of take a 50,000 foot view of it, it kind of seems really inefficient.”
https://www.theverge.com/2019/11/14/20961523/amazon-walmart-target-package-delivery-sales-tax-montana-roundup

‘Brands don’t need Amazon.’ Nike’s departure could prompt others…

November 18, 2019
by Andy

“Brands don’t need Amazon,” Jefferies analyst Randy Konik said. “Amazon had a delivery speed advantage, but that advantage has compressed. With Nike leaving the Amazon platform … it strengthens our view that retailers/brands won’t be displaced by Amazon.”
https://www.cnbc.com/2019/11/13/brands-dont-need-amazon-nikes-departure-could-prompt-others-to-go.html

To a degree, I agree with the sentiment that “brands don’t need Amazon”. However, I think the framing is along the traditional lines of the brand-retailer (e.g. brick-and-mortar) relationship. Digital and e-commerce are different.

First, Amazon provides a “halo” brand that, to a degree, traditional retailers could not. While one knew the types of shoe selection they were to find in a K-Mart store vs. Nordstroms, the retail brand did not provide much else in regard to the customer experience for that product. Amazon is notably different: the reviews alone completely change the customer experience and thus brand relationship. The Amazon “brand” and experience here becomes an important factor in the way no retailer ever did.

That said, Amazon does not allow brands to exercise other “experience” elements which they use to differentiate themselves. Its a limited palette to paint upon and Amazon has not deviated much from this where brands could buy space and co-promotions as in traditional retail.

However, there’s a simple economic factor that Nike was likely experimenting with here — and helps reinforce Google’s shopping approach (e.g. ads only) — in is the 15% fee Amazon takes on the sale plus whatever marketing spend needed to promote products out strip buying ads on Google Shopping (and social media et al)? If its even (or roughly close), brands will choose non-Amazon as they retain far greater control of the experience that they’ve always tried to differentiate on.

Nike is a bellwether here so look out for how this influences others. And, at the end of the day, this was a growth option for Amazon and they have other avenues for this including the myriad on Amazon-only brands that now exist due to the “halo” effect.