I've got an interesting newsletter for you this week, jampacked with predictions and industry indicators for 2022. From social commerce explosions and BNPL regulation to robotic shops and fintech domination, get ready for an exciting year (and newsletter).
It's my pleasure to bring you the 51st edition of the Shopifreaks newsletter. If you're enjoying this newsletter, please share it with your industry friends and help me grow this year.
Stat of the Week
Share of US retail e-commerce sales:
- Amazon: 39.0%
- Shopify: 8.6%
- Walmart: 5.8%
- ebay: 4.9%
- Apple: 3.5%
- The Home Depot: 2.1%
- Best Buy: 2.0%
- Target: 1.7%
- Wayfair: 1.5%
- The Kroger Co: 1.4%
- Costco: 1.4%
- Travel is Life: .000000001% <— but hey, I'll take it. 😉
1. Social commerce expected to grow 3x faster than traditional e-commerce
A new study by Accenture found that the $492B global social commerce industry is expected to grow three times as fast as traditional ecommerce to $1.2 trillion by 2025, primarily by Gen Z and Millennial social media users.
Social commerce means a person’s entire shopping experience, from product discovery to the check-out process, takes place on a social media platform.
- Around 64% of social media users surveyed said that they made a social commerce purchase in the last year.
- Today 10% of all e-commerce spend is done via social commerce, and is predicted to reach 17% by 2025.
- 59% of social buyers surveyed said they are more likely to support small and medium-sized businesses through social commerce.
- 63% said they are more likely to buy from the same seller again, showing the benefits of social commerce in building loyalty and driving repeat purchases.
- By 2025, the highest number of social purchases globally are expected to be clothing (18%), electronics (13%), and home décor (7%).
- 8/10 social media users in China use social commerce to make purchases, while majority of users in UK and US have yet to make a purchase via social commerce.
How are you currently leveraging social commerce in your business? Alternatively, is it on your radar for 2022? Hit reply to this e-mail and let me know.
2. Google launches “Shops” section in mobile results
Google's new “Shops” section in mobile search results shows three retailers based on their organic search rankings, and the section can be expanded to show up to ten.
A Google spokesperson told Search Engine Land, “We recently launched Shops, a new module available on mobile devices for select US-English shopping-related queries. We launched this to help present more seller options to users on Search. This feature currently shows 3 shops and users can then expand to see up to 10 merchants depending on availability. The selection of results shown and their order are based on organic search ranking.”
This update following Google's new Deals section of their Shopping Results further indicates the search engine's push towards becoming consumer's first destination for product searches.
3. Washington puts BNPL industry on notice
The Consumer Financial Protection Bureau is peering into the policies of Affirm, Afterpay, Klarna, PayPal, Zip, and other buy now pay later platforms. The move comes after half a dozen lawmakers called on the agency to review BNPL services.
The CFPB is concerned that these platforms may encourage overspending while dodging existing regulations around credit and lending. It also plans to examine these company's data collection practices.
For example, a recent study by Which? has brought to light that shoppers do not fully understand the risks of choosing a ‘pay later’ option at the checkout. Many of the BNPL users interviewed did not think of the BNPL payment option as a form of credit, meaning they were unaware of the serious risks of missing repayments, such as late fees, having their credit scores negative impacted, or being sent to a debt collector.
BNPL helped drive $97B in e-commerce sales in 2020, according to research from Worldpay. The same study estimates that BNPL will grow from 2.1% of 2020 global e-commerce transactions to 4.2% by 2024.
CFPB is currently requesting data (due March 1) to better understand the benefits and downsides of the BNPL model. BNPL companies said that they are willing to work with regulators.
4. PYMNTS.com predicts 10 things that will define 2022
Karen Webster, CEO of Market Platform Dynamics and leading expert on emerging payments, predicts ten trendlines that she believes will chart the connected economy's course in 2022. I'll summarize below, but I encourage you to read the full article here.
- Proximity will no longer be a barrier or a competitive business advantage. – From restaurants, groceries, banking, and healthcare to movies, concerts, and experiences, proximity is less of a barrier for consumers. Businesses now have to one-up digital alternatives that consumers find easier and more convenient.
- Logistics will become the core competency of the connected economy winners. – Meeting consumer needs will require a single infrastructure that allows companies and ecosystems to move at the speed of the consumer.
- Luxury brands will reinvent reCommerce and use BNPL and subscription plans to do it. – 2022 will be the year that luxury brands use payment installments to help them reinvent their buying experiences. Smart luxury retailers will create their own high end resale marketplaces for their goods.
- Real-Time Payments momentum will start to create a credible threat to debit transactions. – Three times as many consumers receive instant payments in 2021 as they did in 2020, and consumers are willing to pay to receive money that way.
- Crypto strategy will shift from FOMO to focused. – Companies are starting to question whether they'd previously been hopping on the crypto-fad train without direction and if their crypto efforts lack any serious relevance to payments and financial services.
- Current proposals to regulate Big Tech will largely fail to shrink their powers. – Big Tech will stay big, but have difficulties acquiring startups as more scrutiny is put on the deals. So instead, they’ll use the money they’d spend on companies and lawyers to create their own incubators and accelerators, attracting innovators to build rather than buy.
- Traditional banks will lose their grip on small businesses to FinTechs. – Fintech platforms are raising the expectations of what SMBs now expect from their business banking relationship, and banks will need to keep up.
- Checking out in the store will move to the cloud and create new competition for traditional payment methods. – Consumers want better in-store checkout experiences and merchants will respond by moving to cloud-based POS experiences that outsource checkout to the consumer. Labor shortages may accelerate those moves.
- The integration of physical into the digital experience will become the cornerstone for how the metaverse evolves. – Virtual canvases will improve what is done today in the physical world. Shopping will be done sitting in your living room and the experience will be like as if you're there in person.
- Connected ecosystems will find their footing as embedded commerce proliferates. – Consumers desire simplicity of a single place that makes it easy and secure to manage what was once a multitude of separate apps, creating a foundation to connected ecosystems that go beyond integrating payments.
LOL is #10 saying that consumers basically want what China has had for the past decade?
What predictions would you add to Karen's list for 2022? Hit reply and let me know.
5. JD.com moves into Europe with robotic shops
JD.com, the second-largest e-commerce platform in China, has opened its first stores in Europe — but they're no boring Amazon 4 Star! JD's first stores are two robotic pick-up stores in the Netherlands, with more to come.
The stores opened under the name Ochama which combines “omnichannel” and “amazing”. Shoppers can use the Ochama app to order a range of products from food to household appliances to beauty and fashion. They then go to the store and watch a fleet of robots pick and sort orders. The shopper scans a barcode on their app at checkout and their orders are delivered to them via a conveyer belt.
Shoppers can also choose the next-day home delivery service without going to the pick-up shop, but that's less fun than watching a robot pick and pack your items.
According to Ochama, by fully tapping into automation, the new shops can bring down product price by an extra 10% to the benefit of customers.
6. Spotify rolls out clickable in-app podcast ads
Spotify is making podcast advertising more interactive with CTA cards, which launched on Spotify original and exclusive podcasts on Thursday. The new ads will feature customizable text, visuals, and call-to-actions such as “Shop Now”.
The CTA cards appear in the Spotify app as soon as an ad starts playing and also pop up again later while a listener browses the app after listening to an episode. The ads will be visible for seven days after the audio has played, unless a campaign ends sooner. Premium subscribers won’t be able to opt-out of the CTA cards (in the name of helping Creators).
The new CTA cards seem to be working. Clickable ads drove twice as many site visits as non-clickable ads, according to Spotify.
No doubt they work, but I'm curious how much of a distraction they'll become for Spotify listeners while driving. One complaint I've always had on that front with Spotify is how their current ads to get 30 minutes of interrupted listening often required clicking yes to watch a video or listen to an ad, which is a distractive incentive while driving. If Spotify continues down the path of interactive ads, I'd like to see them build voice recognition into the mix to keep listeners hands off their phones while driving.
7. Amazon is back under fire
Sometimes I think “Amazon troubles” should be a regular section of this newsletter! Here's what's new in Amazon Trouble Land this week…
Police are investigating 600 Amazon packages found tossed off the side of the road in Oklahoma City. The packages had were supposed to reach their destinations by Christmas, but tracking information indicates that the items never reached the USPS facility for delivery after departing from the Amazon warehouse.
Three more Amazon sellers pleaded guilty to price fixing. Last July, the government exposed a conspiracy among Amazon sellers to fix prices o DVDs and Blue-Ray discs. Today the Feds named three other Amazon sellers who pleaded guilty, one from New Jersey and two from New York. People still buy DVDs?
A class action lawsuit has been filed against Amazon, alleging that Amazon uses its Alexa devices to improperly capture and store consumers' biometric data, including voiceprints. Lead plaintiff April Schaeffer claims Amazon uses devices to capture and store voiceprints and create transcriptions, and claims Amazon is in violation of Illinois' Biometric Information Privacy Act (BIPA), which regulates how companies collect, store, and use citizens' biometric data.
8. Shopify patent shows its edging closer to brick-and-mortar retail
Shopify filed a patent application for a system of sensors that can measure traffic in retail store. The patent describes a system of sensors that could measure the density and behavior of shoppers in specific areas of a retail store.
The idea is that measuring traffic density could help a store owner determine what it is worth to display products on particular shelves or in specific areas of the store, where manufacturers often pay slotting fees to display their products in store.
The patent reads, “From the perspective of a merchant that is interested in purchasing (or leasing) display space in a retail store, not all regions of the retail store are equally desirable. Advantageously, traffic density can provide a quantitative, accurate and unbiased metric with which to determine a value associated with displaying products in a region.”
The patent application describes the display-space-management technology as a potential service offered to Shopify merchants.
I remember writing about Amazon's POS back in September. The global POS software market was worth $9.26 billion in 2020, and is predicted to reach $19.56 billion by 2028. The ability to direct access brick and mortar sales data and inventory analytics is a hot commodity, and it seems like we're about to see the competition for this space heat up through new proprietary in-store POS features.
9. Other e-commerce news of interest this week
- The cost of just-keep-it refunds could hit $4.4B for 2021 as retailers like Amazon and Target face record-high holiday returns.
- Yoast, the popular SEO app for WordPress, is coming to Shopify at $29/month. I see the appeal. WordPress users aren't ready to pay that much for an SEO app.
- Lululemon named former Amazon exec as new CEO of its at-home gym Mirror.
- Saks.com is launching a Wellness Shop where customers can shop for fitness, sexual wellness, health and nutrition, and rest and relaxation products. They're wasting no time in growing their spin-off e-commerce company.
10. This week in seed rounds & acquisitions….
- Pine Labs, an India-based digital payments startup, filed for IPO to raise $500M an at estimated valuation between $5.5B – $7B. The company serves over 150,000 merchants in India, the Middle East and Southeast Asia.
- Udaan, an Indian e-commerce platform, raised $250M in equity in debt by 5 new unnamed investors in a 2x oversubscribed round. The company will use the funds to scale and explore the public markets.
- Arrive, a Germany-based instant delivery startup that focuses on product categories like electronics, healthy & beauty, and apparel, raised $20M in a Series A round led by Balderton Capital. The company will use the funding to further expand across the country and into parts of Europe.
- JABU, a Namibian last-mile distribution company, raised $3.2M in a round led by Afore Capital, Y Combinator, FJ Labs, Quiet Capital, Kli Capital, Pareto Capital, and other unnamed angels. The startup will use the funding to expand into Botswana and South Africa, grow its tech and operations team, and train its field agents.
- Gahez, an Egyptian B2B e-commerce fashion startup, raised $2M in pre-seed funding led by Disruptech Ventures. The company will use the funding to build out its technology and recruit talent for future expansion.
- Rupifi, an India-based B2B payments platform, raised $25M in a round co-led by Tiger Global and Bessemer Venture Partners. BNPL is the company's main offering today, but Rupifi will be expanding its product offerings this year.
- Avataar, an AI and computer vision startup, raised $45M in a Series B round led by Tiger Global, bringing its total raised to $55.5M. Avataar's platform lets D2C brands plug into their system to offer their customers the ability to visualize products in real-life size in heir living room using their phone's camera.
- Dunzo, a Bangalore-based delivery company, raised $240M in a round led by Reliance Industries LTD. The two companies will also enter into a partnership where the former will enable hyperlocal logistics for retail stores operated by Reliance Retail.
- ThankUCash, a Nigerian-based loyalty, deals, and rewards service, raised $5.3M in a round co-led by 500 Global and Unicorn Growth Capital. The company will use the funding to expand within its home market Nigeria and outside to Ghana and Kenya.
- Shiprocket, a Mumbai-based e-commerce shipping form, has committed to acquired a 75% stake in Wigzo, a customer data platform. The acquisition will enable Shiprocket to expand its product stack for online retailers onboarding its platform.
- Whitebox, a Baltimore-based e-commerce and logistics company, raised $20M in a round in a round led by Delta-v Capital. This following an $18M round in August 2020. The company will use the funding to enhance its Omnifi technology platform and hire senior talent to meet what it called “unprecedented demand”.
- Nosto, an AI-powered commerce experience platform, acquired SearchNode, a global cloud-based e-commerce search technology company, making the second acquisition for Nosto. The acquisition will allow Nosto clients to implement site-wide personalization, merchandising, segmentation, and testing strategies natively to optimize the entire shopping journey.
What'd I miss?
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See you next Monday!
PAUL
Paul E. Drecksler
www.shopifreaks.com
[email protected]
PS: Which grocery store would make the best defensive linemen? Aldi… they're all about getting the quarterback.
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