First off… Merry Christmas!
Today marks the 153rd consecutive weekly edition of Shopifreaks. In almost three years, I've never missed an edition — including on holidays like today.
Even though I hope you're enjoying a day off with your loved ones, there's still e-commerce news to catch up on from the week before, which is why I stick to a strict weekly publishing schedule.
So later today, once the kids pass out from a sugar high and the adults retire their separate quarters, you can pop back over to this e-mail and see what you missed in e-commerce last week.
All I want for Christmas this year is — your Google review!
If you've gotten value from subscribing to my newsletter this past year, I kindly ask that you give me the gift of leaving a review on Google.
Your reviews go a long way in helping me reach new readers, and they keep me motivated to continue delivering high quality e-commerce recaps week after week.
In case you missed it….
Our 2024 E-Commerce Predictions report is live!
This is without a doubt the most comprehensive predictions round-up on the web that curates 50+ of the best and most insightful e-commerce predictions from reader submissions, LinkedIn experts, and industry publications.
I hope that these predictions help shed light on where e-commerce is trending in the near future so that you can stay ahead of the curve for your e-commerce business, clients, or career.
And now onto this week's top stories…
This week I cover:
- Amazon's tone-deaf holiday incentive for workers
- Credit card & BNPL delinquencies on the rise
- Walmart adding BNPL to self-checkout
- Michaels new Etsy competitor
- Bigtime leadership changes at Alibaba
- Holiday returns hitting record highs
- A return address policy change at USPS
- Zelle and Klarna's overly difficult arbitration clauses
- Martin Scorsese's Super Bowl commercial
All this and more in this week's 153rd Edition of Shopifreaks. Thanks for subscribing and sharing.
Stat of the Week 📈
Shein and Temu pushed global air cargo demand up 5% YoY in November. The two e-commerce companies supposedly account for 80% of airfreight volume on some days.
Niall van de Wouw, chief airfreight officer at Xeneta, told Supply Chain Dive, “E-commerce produces big volumes but how can you, in a sustainable manner, deliver an $8 t-shirt to someone’s doorstep from China to the US and make money across the entire supply chain? Even the vendors delivering these goods question its long-term viability.”
Share this week's stat on X & LinkedIn.
1. Amazon's mascot is pissing off workers
Amazon asked workers experiencing hardship to write a letter to its company mascot so that “some of their holiday wishes can come true.”
If right now you're thinking, “Amazon has a mascot??” — you wouldn't be alone.
His name is Peccy. He's a little bright orange pencil eraser looking blob with nubs for arms and legs and an Amazon swoosh for a smile, who's never quite looking directly at you.
Amazon HR chief (at the time) Beth Galetti told Fast Company a few years ago, “He’s called Peccy because he represents our peculiar ways. We call ourselves at Amazon very peculiar. You’ll see him with a variety of different accessories, depending on what country you’re in, depending on what workplace you’re in. Sometimes he’ll have glasses, a keyboard, a hat. He’s really a master of disguise.”
Well now Peccy is apparently playing the role of Santa Clause, or God, depending on how you view things, and making Amazon employees' prayers wishes come true.
A flyer from the Amazon warehouse SWF1 in Rock Tavern, NY, states:
“Are you or someone you know facing financial hardship this holiday season? Peccy wants to help! Write a letter to Peccy. If the Peccy team selects you, some of your holiday wishes could come true!”
Keith Williams, a worker at the location, criticized the obtuse promotion:
“It’s startling to see them shell out all this money to promote Amazon, get us excited about Amazon, but not actually give us what would endear us to Amazon, which would be a living wage.”
He went on to say:
“We want wages. Not trinkets. They have raffles for us. If they see us working real hard, they’ll give us three tickets and out of all the people here putting tickets in, we might get something, or they’ll put a Peccy pin on our desk so everyone knows we’re doing great instead of just giving us the safety and security of a living wage.”
What went wrong?
I think the whole “financial hardship” part is what may have turned this from, what could've been a fun promotion where employees share their holiday gift wishes and Amazon delivers on a few, to a tone-deaf corporate circle-jerk that caused workers to focus on, well, their financial hardships, stemmed from difficult working conditions and not enough pay.
Here's a re-write on-the-house for next year's promotion:
“Peccy wants to make your holiday wishes come true! Write a letter to Peccy (but not while you're on the clock) and let him know what you wish for the holidays this year (under $10 for full time workers, under $8 for part-time). If the Peccy team, which is paid more than you, pities you enough, some of your lowest-priced holiday wishes could come true!”
LOL – or just scrap the whole Peccy team and this Dollar Store Make-A-Wish idea altogether.Â
2. Credit card delinquencies on the rise, BNPL coming soon
According to the latest data from credit card giants, disclosed in SEC filings last week, credit card delinquencies were on the rise headed into the holiday shopping season, specifically into Black Friday / Cyber Monday.
PYMNTS shared some of the data, which I'll highlight below:
- Discover Financial Services reported that 81% of credit card loans were made to borrowers with FICO scores 660 or above.
- That means 19% of loans would have been made to borrowers with subprime credit.
- The delinquency rate rose to 3.8% in November from 2.4% last year.
- Capital One revealed that 69% of card borrowers were above the 660 threshold.
- That means almost 1/3 of borrowers had subprime credit.
- Their 30-day delinquency rate was 3.7% at the end of Q3 2023, up from 2.8% last year.
- American Express’ delinquency rate rose from 1.3% in October to 1.4% at the end of November.
In other debt news, Brits are expected to owe £4B to BNPL companies in the new year after using companies like Klarna, Laybuy, and Clearpay to purchase gifts during the holiday season, marking an 8.8% increase from 2022.
Researchers from Adobe Analytics found that British shoppers spent over £17B in 2023 through BNPL payment options, which are not currently regulated by the Financial Conduct Authority.
3. Walmart adds BNPL to self-checkout
Walmart is now offering BNPL loans for the first time at self-checkout kiosks at more than 4,500 locations in the U.S.
This is in sharp contrast to the “hide it under your cart and leave without paying” loans that customers have historically taken upon themselves in the self-checkout line.
Walmart shoppers who spend at least $144, but less than $4,000, in a single transaction, excluding groceries, can divide payments over 3 to 24 months through Affirm, who powers the BNPL payment option for Walmart.
After scanning their items at a self-checkout kiosk, shoppers can log onto Affirm's app or website and enter purchase details.
- Approved shoppers will receive a barcode to finalize payment on the spot.
- Unapproved shoppers will exit the store and leave their items in the cart for the single self-checkout cashier to put back on the shelves.
Affirm has been available on Walmart's website and at 4,000 Walmart Supercenters since 2019, but employee assistance was always required to take out a BNPL loan. Now the option has become self-serve.
4. Michaels launches MakerPlace Marketplace
Here's a story I missed from November that I”ll be following into the new year:
The craft retailer Michaels is now offering sellers of handmade goods an alternative to Etsy with the launch of its new online marketplace called MakerPlace, which caters to handmade goods, classes, and crafting supplies. Not to be confused with its existing third-party marketplace for non-craft goods, which is a separate platform than the new MakerPlace.
Michaels has been beta testing the platform since July. Its goal is to address concerns by crafters and artisans about high commission fees, upfront costs, and poor seller policies on other platforms like Etsy and Amazon Handmade, while avoiding become flooded with the high-volume, mass-produced products that have plagued Etsy in recent years.
MakerPlace also hopes to rival Etsy by leveraging its 1,290 physical stores, where online sellers will potentially be able to sell in-person, and where buyers can drop off returns.
MakerPlace will have two fee plans:
- Basic plan has no upfront costs, but sellers pay a 4% commission on sales and a transaction fee of 3% + 20 cents.
- Professional plan costs sellers $9.98/month or $110/year, but the commission is only 2%, with the same transaction fee.
- There are no listing fees for either plan.
The full circle marketplace makes complete sense.
As a craft retailer, Michaels can sell creators the materials they need to produce more products to sell on MakerPlace, where both buyers and sellers are eligible for Michael's loyalty rewards program.
Creating a marketplace for creators was part of CEO Ashley Buchanan’s initial three-year plan for Michaels when he joined the company in 2020.
5. Alibaba Group CEO takes over e-commerce
Alibaba Group CEO Eddie Wu, one of Alibaba's founding members, is taking over leadership of Taobao and Tmall Group, the company's two e-commerce platforms, to implement a new strategy for the retailer, which has been losing ground to cheaper Chinese competitors like Temu and Shein.
Wu is replacing Trudy Dai, a longtime Alibaba executive who was also one of the founding employees of the company, who will be moving on to setup an asset management company aimed at improving returns on capital.
Wu also became CEO of Alibaba’s cloud computing division in September, so he now has direct responsibility for the company’s two major revenue drivers.
Alibaba chairman Joe Tsai wrote in an internal letter, “We are embarking on a journey to rediscover our entrepreneurial spirit together. Eddie’s leadership of both Alibaba Cloud and the Taobao and Tmall Group will ensure total focus on, and significant and sustained investment in our two core businesses of cloud computing and e-commerce.”
Alibaba Group restructured its businesses in March, splitting them into six units that would eventually raise their own capital and go public, beginning with its cloud unit, but Alibaba later scrapped spin-off plans, citing uncertainties over U.S. export curbs on advanced chips used for AI.
Last week I reported (story #2) that both Alibaba and JD.com were becoming worried over Shein and Temu's unprecedentedly quick rise to Chinese market share dominance, particularly in the U.S.
PDD Holdings (parent company of Temu) reported 94% YoY revenue growth in the most recent quarter, and its shares have surged by over 75% this year, compared with an 18% decline for Alibaba over the same period. While Shein’s revenue surged more than 40% to $24B between January and September from a year earlier.
6. Amazon reminds shoppers how to return gifts
Amazon published a blog post that recapped its return options, while taking the time to plug its customer service and philanthropic endeavors.
The company needs to be proactive with returns this year, given that:
- 57% of consumers did all or most of their holiday shopping online this year
- 43% made Amazon their top online shopping destination
- Holiday returns are poised to hit $82.1B in the United States this year (across the board, not just at Amazon).
Amazon summarized its returns process as:
- Step 1: Free product and customer support – which includes helping with product setup, product use, or troubleshooting issues.
- Step 2: Return dropped off – at one of Amazon's more than 8,000 drop-off locations in the U.S.
- Step 3: Returned items sent to Amazon facilities – dedicated sites to process different types of products, such as clothing, electronics, or furniture and appliances.
- Step 4: Amazon inspects returned items – to determine if it can be relisted for sale, returned to sellers, liquidated, or donated.
- Step 5: Items find a second life through donations – given to families and individuals in need through Amazon's nonprofit partner Good360.
Amazon isn't quite as generous as it used to be with customer returns, now charging fees to drop items off at certain locations.
They've also shortened the holiday return period. This holiday season, Amazon sellers are required to accept returns through January 31, 2024 for items purchased as early as November 1st, as opposed to previous years where they required sellers to accept returns for orders placed as early as October 1st.
7. No more foreign return addresses
The USPS announced it will no longer allow companies to ship packages domestically using a foreign return address. They wrote in an announcement:
- Effective December 14, 2023, the Postal Service will no longer accept a foreign return address on an item being shipped domestically; domestic shipments can only have a domestic return address.
- A foreign address can only be used when shipping an item internationally, along with the appropriate customs form.
- If a domestic item is undeliverable, and includes a foreign return address, USPS will handle the mail in accordance with the current USPS dead mail procedures (DMM section 507.1.9).
The change may help buyers avoid unscrupulous return practices by foreign companies.
For example, if a shopper buys something that is shipped domestically, but the company requires them to ship the item back internationally, effectively making the item unreturnable due to the high cost of international shipping.
8. Zelle and Klarna adding extra arbitration hurdles
A new report from the American Association for Justice (AAJ) identifies Zelle and Klarna as two firms that are adding extra hurdles for consumers to navigate.
The AAJ is staunchly opposed to “forced arbitration”, a required system for consumers to resolve disputes, which trial lawyers say is a system stacked against individuals.
The report says that some companies have made the already corrupt system even worse by developing “new tactics to make the chances of winning a claim through forced arbitration lower than ever.”
Julia Duncan, senior director of government affairs at AAJ said, “The process is so rigged that most consumers can't ever figure out how to file a case of forced arbitration, and for the very few who do, the outcome is almost always bad for them.”
The report calls out two companies in particular for making the arbitration process excruciating:
- Zelle – for a provision dealing with customers who are part of a “mass arbitration” claim, which says that customers “agree to advance half of all arbitration fees” in those instances.
- Klarna – for a pre-arbitration dispute clause, which says customers must enter into a 60-day period where both sides try to resolve complaints informally before entering arbitration. LOL, I thought that's what arbitration was for?
Klarna lends money to consumers who aren't the wealthiest bunch, so the weeks of delay in getting to enter arbitration may be especially difficult for them.
And in the case of Zelle, since the platform is co-owned by seven of the US's biggest banks, consumers incorrectly assume they have certain protections, which are not the case. Most wouldn't expect that their “bank” (which is how they access the Zelle feature) would require them to pay for half of the arbitration fees in advance in a complaint that involves said bank.
The AAJ and other consumer advocacy groups have asked the Consumer Financial Protection Bureau to take another crack at regulating arbitration rules.
Rather than banning forced arbitration, which the CFPB rejected in the past, the groups want the CFPB to give consumers a choice to opt out of the process once they get into a dispute.
9. Other e-commerce news of interest
Martin Scorsese is making his directorial debut at the Super Bowl this year, directing Squarespace's 10th commercial for the game. Squarespace's Chief Creative Office, David Lee, called the collaboration with Scorsese a “surreal experience”, but did not yet reveal any creative teasers about the ad.
Worldcoin is pulling its Orb-verification service in India, Brazil, and France, just months after expanding to those markets, which the startup told TechCrunch was temporary. Last week I reported (story #5) that Worldcoin began offering integrations with Shopify, Mercado Libre, Reddit, Minecraft, and Telegram to authenticate users via their World ID profile.
Intel is laying off another 235 employees, following the 549 cuts it made earlier this year at its Folsom office campus. Nike is also cutting hundreds of jobs, spending $450M on payoffs for employees, as part of its attempt to save $2B in costs over the next three years amid poor sales.
Google has agreed to pay $700M and change the policies of how it operates its Google Play Store to settle an antitrust lawsuit with U.S. states and consumers. The lawsuit successfully claimed that forcing developers to go through Google's payment method was anticompetitive because there were competing payment systems that charged lower commissions, and that Google entered into exclusive contracts with mobile services and Android phone makers to ensure other app stores were not preloaded onto their phones. Tough month for Google, as this loss follows its loss against Epic Games earlier this month.
Some might actually say “tough year” for Google. Business Insider reports that, “Google's 2023 was defined by layoffs, Gemini, and finding new momentum in the AI race,” and that staff say it was the year Google finally caved to Wall Street and changed the culture forever.
Wayfair's CEO Niraj Shah had a holiday message for employees: “Working long hours, being responsive, blending work and life, is not anything to shy away from. There is not a lot of history of laziness being rewarded with success.” In a company memo, Shah also encouraged Wayfair's 15,000 employees to think of the company money they spend as their own and negotiate prices.
USPTO launched a new pre-application review program called the Pre-Prosecution Pilot, designed to support first-time inventors by providing assistance in assessing the strengths and weaknesses of a potential patent application. Examiners will help first-time prospective patent applicants assess if their invention is novel in the art by providing search assistance using public patent tools, which it says may help applicants avoid common mistakes that slow down or invalidate the patent review process.
Europol joined law enforcement agencies from 17 countries including the U.S., U.K., Germany, Colombia, Spain, and others, in warning 443 online sellers that the payment card data of their customers had been compromised. To execute the attacks, hackers embedded tools or malware onto e-commerce sites that allowed them to siphon credit card information from stores during the checkout process.
Meta is facing a potential tax bill of around $954M in Italy after Milan prosecutors launched an investigation into the company on the basis of a tax police audit, which has now been escalated to the EU Commission's VAT committee for evaluation. The case claims that Meta user registrations could be seen as a taxable transaction, as they implied the non-monetary exchange of a membership account for the user's personal data. This case could put the nail in the coffin on the whole “us being the product” controversy.
Alternative Payments, a B2B payments and checkout infrastructure company, launched a new Collection Assist solution, designed to streamline the accounts receivable collections process for companies operating in the U.S. The company claims that its solution can increase the traditionally 40% success rate that businesses experience collecting delinquent receivables.
Threads, the Meta-owned Twitter-clone that launched six months ago in the U.S. and recently in the E.U., became the most popular app in Apple's U.S. app store, showing that the app is gaining traction against X. In the Google Play Store, it is the fifth most downloaded free app.
Meta partnered with India's ONDC to enable and educate small businesses in building conversational buyer and seller experiences on WhatsApp. Through the collaboration, ONDC will help the businesses become seller apps, and Meta will support the ONDC's WhatsApp chatbot to become the single point of seller and customer communication on the network.
10. Seed rounds, IPOs, & acquisitions
Flipkart's biggest shareholder Walmart is set to infuse $600M in a new fundraise for the company, which is seeking to raise $1B in total. New investors are also in talks to join the round, which is likely to value the company at a premium of 5-10% to its current $33B valuation, which is still shy of the $38B valuation it hit in 2021.
Bizay, a Lisbon-based e-commerce platform for business merch, raised €18M in a Series “C2” round led by Indico Capital Partners, bringing its total amount raised to €72M. The company, which focuses on its supply chain to be able to scale up quickly for orders of tens of thousands of products, will use the funds to help push into the U.S. market.
FirstCry, an India-based e-commerce retailer that specializes in products for children and mothers, is set to submit its draft IPO papers by the end of the year after having postponed its public listing last year due to volatile market conditions. The company's target for the IPO is to raise $500-$600M, at around a $4B valuation.
Soum, a Saudi Arabia-based re-commerce marketplace that focuses on electronics, raised $18M in a Series A round led by Jahez Group, bringing its total amount raised to $22M. The company will use the funds to expand to other MENA countries, beginning with the United Arabs Emirates, and increase the categories it covers by including products like automobiles and collectibles.
Peach Worlds, a London-based developer of no-code builders for 3D immersive websites, raised $540k in a pre-seed funding round led by Blockchain Founders Fund and ID345 fund. The company has previously released its builder in private beta to designers, and will use the fresh funds to public launch in February 2024.
MaxAB, an Egyptian B2B e-commerce startup, and Wasoko, a Kenya-based e-commerce platform, are in talks to merge operations, according to TechCrunch, who could not establish the terms of the deal. Wasoko recently conducted a round of layoffs, while MaxAB has encountered financial challenges and has been actively seeking a survival strategy as its cash reserves depleted, so now the two ships want to anchor to one another and sink together.
Coupang, an e-commerce goliath that operates food delivery, video streaming, and payment services in South Korea, Taiwan, Singapore, China, and India, is planning to buy Farfetch Holdings, an e-commerce company that helps luxury brands sell online, providing it with $500M in capital to stay in operation. Coupang said it would combine its logistics expertise with Fartech's experience selling high-end brands to expand in South Korea, a fast-growing luxury goods market.
Spare, a Middle Eastern open banking services provider that operates in Saudi Arabia, Kuwait, and Bahrain, raised $3M in a round led by Vision Ventures. The funds will primarily be allocated for talent acquisition, marketing, and operations in Saudi Arabia.
GreyOrange, an Atlanta-based warehouse robotics company that offers automated warehouse systems, raised $135M in a Series D round led by Anthelion Capital. The company will use the funds to accelerate its product development and continue its global expansion, as well as further support its fulfillment orchestration platform in warehouses, distribution centers, and retail stores.
Tabby, a Middle Eastern BNPL fintech, secured a $700M debt facility from JP Morgan ahead of its planned IPO. The deal comes just one month after Tabby raised $200M in a Series D equity round, and is the largest asset-backed facility received by a fintech firm in the region.
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See you next Monday,
PAUL
Paul E. Drecksler
www.shopifreaks.com
[email protected]
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PS:Â Which of Santa's reindeer are dinosaurs afraid of? Comet.