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#32 – Amazon boards the BNPL train, Warby Parker prepares for IPO, and Walmart launches DaaS

by | Aug 30, 2021 | Recent Newsletters

I'm back at it this week talking about BNPL. A big player has entered the scene. Any guesses? With Shopify, BigCommerce, and even Apple onboard the BNPL train, it was only a matter of time. 

Should I offer a BNPL option for Shopifreaks? Would you benefit from 4 months of interest free payments on my newsletter? Oh wait, it's free! In that case, please share the newsletter with your friends and drop me a Google Review if you've been enjoying it.

Thanks Robert, Andrew, Doug, Sayde, and Kim for your kind reviews last week!

And now, it's my pleasure to present you with the 32nd edition of the Shopifreaks newsletter…

1. Amazon partners with Affirm to offer BNPL to US customers

Amazon has partnered with Affirm to offer buy now, pay later payment options to customers in the US starting this Friday with a broader rollout in the coming months. The partnership will let Amazon customers split purchases of $50 or more into smaller monthly installments.

This will be Amazon's first partnership with a BNPL company, however, it's not Affirm's first major win. Affirm is already the exclusive BNPL provider of Shopify's Shop Pay service, a deal which granted Shopify up to 20.3 million shares of Affirm. The company also has deals and integrations with Walmart, BigCommerce, WooCommerce, Salesforce, Magento, and other e-commerce platforms. 

News of the Amazon partnership sent AFRM skyrocketing over 40% during after-hours trading on Friday and so far the price is holding today. (Which is great for me because I'm in at an average cost of $50.61/share!) AMZN is also up a few points. 

If you read my 29th Edition of Shopifreaks, you know that I'm bearish on the BNPL industry as a whole, however, I do think there will be some winners amidst the chaos, and I luckily bet right on Affirm. As an investor, the question will be — when to get out before either the model implodes or everyone else (Apple, Amazon, Walmart, Visa, MasterCard, AMEX) gets in and takes over BNPL financing in-house?

It's surprising to me that Shopify was able to negotiate stake in Affirm in exchange for making it their exclusive BNPL provider in July 2020, but that Amazon did not. I'm only led to speculate that Amazon has no intention of making Affirm (or any other company) their exclusive provider of BNPL payment options, and is merely testing the waters with Affirm in a risk-free playground that takes no liability for customer default. And if all goes well, customers will soon see a “BNPL with Amazon” button enter the mix.

It wouldn't be a far stretch to directly offer BNPL as a payment option given that Amazon already offers credit services through consumer credit cards and business lines of credit. It's also not a stretch that Amazon would utilize vendors and partners to obtain data and test ground on industries before they enter themselves.

However maybe Amazon is brighter than the rest and would rather not take on consumer debt from customers with low credit and disposable income (who BNPL seems to mostly attract). Perhaps, unlike Apple, Amazon doesn't want to be in the collections business when consumers BNBDPL (“Buy Now But Don’t Pay Later”) — a position that would be in sharp contrast to their historically consumer-siding stance. 

What are your predictions? Will Amazon directly offer BNPL in the future? Or will they merely ride the BNPL wave as a retail partner?

Hit reply and let me know your thoughts on this partnership or tweet at me. 

2. Warby Parker prepares for an IPO

Warby Parker, the eyeglass retailer that famously got its start online by sending customers up to 5 pairs of glasses to try before they buy, is preparing to debut on Wall Street. However the company's IPO filing revealed growing sales but widening losses over the past three years, causing some investors to shy away from the IPO.

In the previous years, Warby Parker reports. 

  • 2018: Sales $272.9M, Losses $22.9M
  • 2019: Sales $370.5M, Breakeven
  • 2020: Sales $393.7M, Losses $55.9M

Since their humble beginnings online, the company has grown their offline footprint to 145 stores. Between online and brick and mortar revenue — 95% comes from the sale of glasses and 2% from contact lenses.

Warby Parker feels that they've been losing money because the company has been in rapid expansion mode and have not previously operated at scale, however, they feel that they're positioned well with as a retailer with a large fan following. Their stats boast that customers acquired between 2015 and 2019 had an approximately 50% sales retention rate within the first two years of their first purchase and a nearly 100% sales retention rate over four years.

If that's the case, I must be in that small “nearly” percentage of customers that didn't return. I bought my first pair of Warby Parkers in 2019, swayed by their startup story which I've been following for years and their positive reputation. However I would not return as a customer. I found their glasses to be cheap and not hold up against the test of time through normal usage. (No wonder so many customers come back within two years. LOL)

I give them points though for their excellent customer service. My in-store shopping experience was enjoyable and the company did replace my scratched lenses as promised within the first year. However I still prefer the comfort and feel of higher end glasses. And there lies the reason why I wouldn't invest in Warby Parker. 

As far as I know, the company's UVP can be paraphrased as “pretty good glasses for the money.” But where's the tipping point? Their prescription glasses average around $100, and customers can feel good about purchasing inexpensive renditions of popular frame styles at that price point.

However after evolving into brick and mortar retail, the margins that made the company successful online don't seem to be working offline where the overhead stakes are higher. So where Warby Parker thinks that managing their expenses better moving forward is a solution to their widening losses — is that going to be possible given the rising cost of retail labor and prime real estate locations (where they seem to want to be)?

Or will their only option be to increase prices? And if that's the case, will their glasses still be considered pretty good for the money at $129 or $149? 

In my opinion, Warby Parker fits into the disposable retail segment with the likes of H&M and Forever 21. (Or is that called “fast fashion”?) They produce inexpensive versions of trendy style frames and their lineup changes quickly with the times. And while I believe that there is obviously room for that model in the eyeglasses market, I think that Warby Parker would have better served themselves by sticking to their online model and partnering with other offline retailers to offer try before you buy product displays within their stores — a much more cost effective and scalable offline sales channel than opening their own retail locations (albeit one that they don't have complete control of the customer experience). 

I wish them luck because I respect what Warby Parker has built, but I'm staying away from the IPO. You can screenshot this and throw it back in my face in 5 years when y'all have 20xed your investment.

3. Walmart launches delivery as a service for other retailers

Walmart has launched GoLocal as part of their strategy to build alternative revenue streams working with independent retail partners. The delivery-as-a-service program will offer businesses in the USA nationwide delivery coverage at competitive pricing.

Walmart launched delivery and express delivery for its customers three years ago and have since scaled the services through the use of drones, autonomous vehicles, and local fulfillment centers. And now the company will be using its newly built infrastructure and large geographic footprint to create new revenue streams servicing independent businesses. 

Walmart said that it has already established a number of contractual agreements with retail partners.

As I reported earlier this month, Walmart has also begun to sell its e-commerce tech to other retailers including offering their online and in-store fulfillment and pickup technologies through the Adobe Commerce and Magento platforms.

These announcements, following Walmart opening their marketplace to more US and international sellers earlier this year, are a clear indicator that Walmart has big plans to cast a wider net in retail operations and logistics beyond their own direct retail operation. Love it!

4. I bought WIX last week and here's why…

I bought WIX on Friday at $225.27. I should have bought earlier, but I still feel good about entering at this price point. 

I'm a long time critic of Wix's jack of all trades, master of none model — it's not what I would do — but that doesn't mean I don't think there's room in the market for it, and now feels like a decent entry point. Analyses on Motley Fool and Seeking Alpha can speak more to the numbers, while I'm going to talk about recent Wix happenings as indicators of a promising future.

As I reported last week, they just made a huge partnership with Vistaprint to power their website builder and e-commerce services. And this year I've reported that Wix launched a food delivery app, a point of sale terminal for brick and mortar retailers, a no-code app builder, partnered with Fiverr on a web accessibility project, and acquired a dropshipping company called Modalyst which has its hands in a lot of the other major platforms including Shopify and BigCommerce.

Wix has also established a precedent of supporting an open Internet after reversing their position on the removal of a Hong Kong pro-democracy site on their platform. 

They've got wide margins on their services, high retention rate, and while other companies are furiously moving in the direction of decentralization, Wix is tightening ship on its focus of offering a one-stop centralized product offering for small business merchants — of which I think there's huge room in the market for that approach in the long term.

I love Shopify, but after having worked with hundreds of Shopify merchants over the years, I can testify that their 3rd party app based approach to storefront development is a big learning curve for your average local business owner, restaurateur, or independent retailer — whereas Wix offers a more streamlined and centralized product offering that business owners have an easier time managing because there's less to integrate. 

Forgive the comparison to Amazon, but where Shopify offers a lot of freedom to merchants via an Amazon-sized selection of thousands of 3rd party apps, merchants have to either read the reviews to determine which ones are best for their needs or rely on a developer's experience to help them choose. It's a big learning curve.

Whereas Wix, with their curated selection of just over 300 apps, is like the Trader Joe's of DIY website development services. They don't offer a full shelf with 30 peanut butter options like a bigger retailer, but the peanut butter they do offer is good and affordable. And this approach has value to a certain demographic of business owners and retailers. 

If Wix can make some moves into the social space like Shopify has with their TikTok and Facebook integrations, then I think Wix has a bright future, which is why I entered into a long position. 

What are your thoughts on Wix? Hit reply and let me know or tweet at me. 

5. TikTok announces new Shopify Shop Tab for approved merchants

Speaking of Shopify's moves into the social realm, TikTok announced a new shop tab expansion for Shopify merchant profiles, which will add a new product display showcase to creators' in-app presence. Creators will be able to sync their Shopify product catalogues to create mini-storefronts that link directly to their online store for checkout.

For the moment, customers will be redirected back to the merchant's Shopify store for purchase, but in the future, they may adopt the “headless approach” and handle the entire transaction within the TikTok app with the checkout process being powered by Shopify. (That's total speculation, but I feel like the handwriting is on the wall for that scenario to become a reality.)

Note that this week TikTok also announced that the platform is increasing their maximum video duration to 5 minutes. If you recall, it was previously increased from 60 second to 3 minutes this past July. These announcements parallel as TikTok expands quickly into e-commerce, because Creators on their platform will require longer videos to create product reviews and tutorials. 

6. India's new e-commerce rules may exclude logistics suppliers

Nothing is written in stone yet, however, it's rumored that India's new e-commerce rules may keep logistics suppliers outside the definition of “related parties”, conceding a major demand of online retailers who had opposed such classification.

Companies have been seeking clarity on the new definition of e-commerce that's proposed in India's new Consumer Protection laws. (If you're out of the loop about India's new e-commerce legislation, check out Shopifreaks Editions 2327, 30, and 31 for a recap.)

The Internet and Mobile Association of India (IAMAI) wrote in a letter to the government last week, “Merely being a related party of an e-commerce entity cannot automatically be construed that such entity be also classified as ‘e-commerce entity’, especially since such a related party may not have any online business at all.”

According to the proposed terms, even companies engaged by e-commerce entities to fulfill orders or store inventory would be construed as e-commerce entities — which would inhibit their right to access the market through e-commerce.

A senior commerce and industry ministry official reportedly said that these requests could be easily accommodated. 

7. Rights to FedEx Ground rates have soared 50% in three years

There's an unusual asset class that not many folks know about — contracts that give owners the right to operate FedEx Ground routes in specified areas.

The owners of these routes collect a fee for each package that their fleet drops off, but they are the ones who are responsible for hiring drivers, buying and servicing trucks, and all the other responsibilities involved with running a delivery route — a very different approach than UPS or USPS employ.

These contracts can be bought and sold, and during the past three years, prices for these routes have increased 50% due to the surge in e-commerce deliveries, and it's predicted that most contractors will see their sales double over the next three years.

Bloomberg Business shares the story of a man named Spencer Patton, who has acquired 250 FedEx Ground routes across the USA and consults for other FedEx Ground route operators. It's an interesting read if you've got a few minutes to learn more about this ancillary industry that has benefited from the recent boom in e-commerce sales. 

8. This week in seed rounds & acquisitions….

  • Givz, an API-powered platform that converts discounts into donations, raised $3M in a round co-led by Enian and Accomplice. The company aims to drive “full price purchasing behavior” by giving customers the ability to convert their discount code savings into charity donations.
  • Snyder, an accounting platform for e-commerce businesses, raised $2M from TMT Investments. The company will use the funding to attract more clients.
  • Tuna, an payment processor optimization service, raised $3M in a round led by Canary and Atlantico. The company will use the new funding to build out its teama nd grow outbound customer sales and R&D.
  • Jane Technologies, dubbed the “Shopify of weed” because it builds the backends for dispensaries to take their cannabis offerings online, raised $100M in a Series C financing round led by Honor Ventures. The company will use the funding to grow its digital footprint and its operations teams.
  • Point Pickup, a last mile delivery service, acquired GrocerKey, a white-label e-commerce platform, for $42 million. The acquisition will allow Point Pickup retailers to offer same-day delivery under their own brand name rather than under third parties like Instacart.
  • Datamilk, an AI tool that autonomously optimizes e-commerce websites to improve customer experience, raised $1.7M in a pre-seed round led by big_bets, RTP Global, and Angel Invest. The company will use the funding to expand internationally. 
  • #paid, a creator marketing platform that connects brand with content creators, raised $15M in a Series B round led by Sands Capital. The company will use the funds for market expansion.
  • Gap, the popular apparel brand, acquired Drapr, an e-commerce startup that enables customers to create 3D avatars and virtually try on clothing. Gap plans to leverage Drapr to help them improve the fit experience for their customers and accelerate their ongoing digital transformation.

What'd I miss?

Shopifreaks is a community effort and I appreciate your contributions to help keep the rest of our readers in the know with the latest happenings in e-commerce. Whenever you have news to share, you can e-mail [email protected] or hit reply to any of my newsletters.

You can also mention @shopifreaks on Twitter or submit posts to r/Shopifreaks on Reddit, and I'll curate the best submissions each week for inclusion in the newsletter. 

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See you next Monday!


Paul E. Drecksler
[email protected]

PS: What characteristic is most important to running a successful software startup? … You've got to be Saasy!  

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