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#34 – Amazon POS, Yotpo Deal, & Holiday Shipping

by | Sep 13, 2021 | Recent Newsletters

How would you define a “marketplace”? What should or shouldn't a marketplace be able to do different than a typical retailer? Where do a marketplace's fiduciary and ethical responsibilities lie between their consumers, merchants, and their own bottom line?

Can marketplaces pick winners and losers? Can they offer those winners premium placement and early access to new features? What if they own those winners?

Should marketplaces offer incentives to install apps or use payment processors that they own while taxing those who don't?

This week's Shopifreaks newsletter explores some recent happenings in the world of marketplaces and how their partnerships and acquisitions could be giving them an unfair advantage. 

It's my pleasure to present you with the 34th edition of the Shopifreaks newsletter…

1. Amazon is launching a Point of Sale (POS) system

Amazon is developing a new type of POS system that can handle both online and offline transactions and link to other Amazon services including Prime membership, Amazon One hand-scanning biometric payment solutions, and Flex delivery, according to an internal document. 

The new Amazon POS system was developed under an internal Amazon team called Project Santos which is tasked with going after Shopify’s core audience of small business merchants.

The move will position Amazon to compete with Shopify, Lightspeed, PayPal, Square, Toast, Clover, and other POS systems that cater to small businesses. The global POS software market was worth $9.26 billion in 2020, and is predicted to reach $19.56 billion by 2028.

An estimated 29% of the 31.7 million small businesses in USA operate entirely in-person, and Amazon could attract these sellers into their ecosystem through offline sales tools such as their POS. In 2018, Amazon only had about 1 million small business sellers on its marketplace, so the company has a large addressable market to work with. 

Amazon declined to comment about the internal document, so at the moment we can only speculate what their POS system could entail. I'll give it a go…

Cashier-less checkout technologies… the ability to pay with Amazon Pay… in-store BNPL payment options…. 24 hour fulfillment on items that the merchants don't have inventory in the store… local last mile delivery… access to business capital… and ultimately a larger physical geographic footprint that could offer Amazon more in-store pickup and locker locations. 

Amazon could potentially consolidate offline sales – the way that it did online sales – through direct access to brick and mortar sales data and inventory analytics. Imagine this on a product listing… 

  • “Available for in-store pickup today at Andrea's Hair Salon.” 
  • “Available from 31 Sellers Online & 14 Sellers In Your Area”

The scary part of that equation for small business sellers is what's on the other end of those benefits. Amazon has historically been ruthless when it comes to using merchant sales data to form direct relationships with wholesalers and manufacturers, as well as create their own line of products. A widely adopted POS system would give Amazon access to small business offline sales data that would in turn allow them to discover which products sell best in particular geographic areas and micro-scale their local operations to compete with the small business merchants they service. 

In a few years, will we be hearing stories about how Amazon's 4 Star and Go stores are undercutting a mom and pop's best selling items at a price unobtainable by the small local retailer, after using their sales data to determine which items to sell in that local market?

Hit reply or tweet at me and let me know your thoughts about where Amazon POS could lead small businesses. 

2. Shopify & Yotpo enter into a multi-year platform partnership

Yotpo is an Israeli-based software company that offers Shopify merchants various apps to power their review systems, SMS marketing, loyalty programs, referral programs, and visual marketing strategies. 

Shopify has reportedly invested $30 million into Yotpo, bringing the total amount raised by Yotpo to $436 million since it was founded in 2011. The two companies have also entered into a strategic partnership that will position Yotpo as one of the early launch partners for new Shopify development features. The companies will align product development roadmaps moving forward to create connected shopping experiences between their overlapping customers. 

My questions are — how does this fare with other app developers on Shopify's marketplace who offer competing apps? Investing in Yotpo and offering early access to development features gives Yotpo an advantage in the app marketplace by being able to develop and release features before anyone else. Does that violate any fiduciary or ethical responsibilities that Shopify has towards their developer partners?

Shopify's app-based ecosystem has its benefits to the platform and their merchants, but it's a double edged sword because it creates a fiduciary and ethical responsibility to a community of developers that could at times be at odds with the best interest of their bottom line and/or their merchants.

One of those times is when Shopify chooses to either pick a winner, as is the case with Yotpo, or compete with their developers directly by adding core features to Shopify's platform that were previously only available to merchants via 3rd party apps — recently such as Shopify Mail & Shopify Chat.

Shopify investing or acquiring apps and positioning them with early access development advantages is comparable to Amazon launching a private label version of their merchants best selling items. It unfavorably benefits the company's vested interests over that of their development partners in Shopify's case or merchant partners in Amazon's case. 

This isn't to say that Shopify shouldn't invest in their best performing app makers, as they also have a responsibility to their merchants and investors to offer the best platform possible. However it's a gray area between being a marketplace and a product or service provider that many companies in Big Tech are finding themselves in. Which leads us to our next story….

What are your thoughts about the Shopify + Yotpo deal? Hit reply or tweet at me and let me know.

3. Apple isn't a monopoly, but it must allow 3rd party in-app payment in their iOS apps

By now you've read the news about a federal court's decision to let app developers direct users to other payment systems — a tentative outcome in the Apple vs Epic Games battle. It was big news this past week covered in Variety, The Hustle, NPR, and other major outlets. 

If you're out of the loop, here's a quick recap: 

  • A federal judge declared that Apple must allow developers to promote other forms of in-app payment in their iOS apps (a win for Epic Games).
  • However, the court did not find evidence that Apple's App Store is a monopoly (a win for Apple).
  • The judge denied Epic's request that Apple reinstate Fornite to the App Store (a loss for Epic).
  • Epic Games was ordered to pay $12.2M in damages to Apple to account for the time it sold direct in-app purchases through Fornite without paying the App Store's 30% fee (a win for Apple that doesn't affect their balance sheet one bit). 

So does this mean that Apple has lost control of its app marketplace — an ecosystem that brought in $643 billion in 2020? Not quite…

Apple may have lost their ability to deny other forms of payments, but the company still has broad legal authority to write its own rules for the App Store, including requiring commissions on sales instead of payments.

I'm reminded of Shopify's pricing structure, which offers 0% transaction fee on sales when the merchant uses Shopify Payments as their payment processor, but charges a 2.0% transaction fee when using another payment processor (on the Basic plan). In other words — Shopify gets their cut one way or another.

And that's one possibility of what we could see with Apple if too many app developers decide to steer customers away from Apple's in-app payment system — a transaction fee placed on the sales themselves instead of the payments. A move that would probably land them right back in court.

As I've reported in previous Shopifreaks editions, right now India is in the process of determining what “marketplaces” can or cannot do (such as sell items that they manufacture or promote brands that they have ownership in above others). USA might be finding themselves answering similar questions sooner than later depending on Apple's next moves.

Today it's a free-for-all, and marketplaces can blur the lines between marketplace, merchant, and payment processor to the point that the lines don't even exist. But as those worlds continue to collide and consolidate, the accelerated advantage that the “marketplace” has to sell their own wares and tax competitors may tip the needle towards anticompetitive practices. No doubt, companies like Epic will continue to make that argument.

4. What to expect this holiday season with shipping

The world should prepare itself for an epicly large never-before-seen holiday season this year in terms of e-commerce sales, and delivery companies are getting ready for the surge. 

DHL disclosed peak season surcharges that will range between 20 cents and $5 per package depending on various factors such as the parcel's size, length of haul, and delivery time. The surcharges will begin on Oct. 3 and end on Christmas Day. 

FedEx announced similar peak season surcharges a few weeks ago. 

The United States Postmaster General, Louis DeJoy, has been busy recruiting shipping help for the holidays. DeJoy has recently visited Dallas, Chicago, New Castle, New Orleans, Norman, and Philadelphia where he promoted hiring efforts and investments in preparation for the 2021 holiday season. 

UPS also announced that they aim to hire over 100k seasonal workers this year to support the anticipated annual increase in package volume that will begin in October 2021 and continue through January 2022.

Nando Cesarone, UPS President of U.S. Operations said, “We’re preparing for another safe, record peak holiday season. We plan to hire more than 100,000 people for seasonal jobs, many of whom will have an offer in hand within 30 minutes of applying.”

Treat your delivery people right this holiday season! They're in for a busy one. 

5. Emerging e-commerce markets

Consumers are finding themselves with increasing disposable income across the world in markets including Latin America, Central and Eastern Europe, Africa, India, and Southeast Asia.

A recent report by PayU entitled The Next Frontier explored online consumer spending across 19 high growth and emerging markets. Multichannel Merchant offered a summary, which I will in turn abridge even further below: 

  • Poland – 20.3 million Internet users shop online, of which 59% (12 million) do so from their mobile phones
  • India – More than 500 million smartphone users are triggering a movement from traditional payments to e-payments
  • Latin America – By 2025 is it estimated that there will be 424 million mobile Internet users, and the challenge now is to offer them confidence in the security of digital payments.
  • Turkey – The average person in Turkey is online for 7.5 hours per day and more than 92% of its 83 million residents use a mobile device.
  • South Africa – 85% of online transactions were completed on a mobile device in 2020, up from 50% in 2019.
  • Colombia – During the quarantine, 1.6 million adults obtained a financial product for the first time, while 2.3 million reactivated an existing one.
  • Brazil – The Central Bank launched a QR-code based instant payment solution called Pix which is expected to account for 25% of all online payments within three years.
  • Mexico – 66% of Mexico's citizens (84 million) are aged 15-64, and 80% (102 million) live in cities.
  • Nigeria – Africa's largest B2C e-commerce market, both in terms of number of shoppers and overall revenue.

If you found that list above interesting, you might also enjoy this infographic by Visual Capitalist which showcases The World’s Fastest Growing eCommerce Markets.

6. Wix completes $200M share repurchase

Wix has completed the $200M share repurchase program authorized by the Board of Directors in May 2021, repurchasing 895,136 outstanding Wix ordinary shares (or about 1.6% of its total shares outhandling), at an average price per share of $223.41.

Lior Shemesh, CFO of Wix said, “Today's announcement reflects our confidence in the continued strength of our business and our ability to successfully execute on our long-term strategy. Given our ample liquidity and Wix shares currently trading below what we believe to be our intrinsic valuation, we are able to return value to shareholders while simultaneously investing for growth.”

7. Shopify launches a QR Code campaign

Shopify's new campaign, Reimagine Retail, aims to celebrate Australian brands that have “disrupted retail with innovative products and cutting-edge e-commerce strategies” on the Shopify platform.

The campaign features QR code functionality on all assets, enabling shoppers to scan advertisements from Australian brands and shop their stores. The campaign was originally designed for a pre-locked down Australia, where Shopify powers more than 100k retail businesses.

8. This week in seed rounds & acquisitions….

  • PayPal is buying Paidy, a Japanese BNPL startup, in a mostly cash deal worth about $2.7B. PayPal says that the acquisition was to extend its capabilities, distribution, and relevance in Japan, the third largest e-commerce market in the world.
  • Dukaan, a one year old Bangalore-based smartphone-centric no-code e-commerce platform, raised $11M in a pre-Series A round led by 640 Oxford Ventures and included existing investors Lightspeed Partners and Snow Leopard Ventures. The startup has raised over $17M to date and is now valued at $71M.
  • Aurelia, a financial automation platform dubbed the “IFTTT for finance”, raised $3M in seed funding led by Blossom Capital. The company's beta platform is going live in Estonia, Romania, Germany, and the U.K.
  • Neokred, an open banking stack platform, extended its seed round to raise an additional $500k in funding from Virenxia Group, Rajesh Jain, and Nitin Agarwal. The company will use the funding for hiring and product development.
  •  Ourpass, a Nigerian mobile app that enables consumers to shop with one click, raised $1M in a pre-seed round led by Tekedia Capital. The company will use the funds to develop its technology and grow its team to up to 200 people before the end of 2022. 
  • Rainforest, a Singapore-based e-commerce aggregator, raised $20M in a pre-Series A round led by Monk's Hill Ventures. Between their latest round and this past May's $6.5M equity and $30M debt round, the company now has more than $50M to spend on acquiring e-commerce brands. 
  • SIRCLO, dubbed the “Shopify of Indonesia”, raised $36M in a Series B round led by East Ventures' growth fund and Saratoga. The company will use the funds to develop its technology infrastructure and expand the services it offers to business owners including real-time data analytics and internal financing solutions for small businesses.
  • GoKwik, an e-commerce optimization company, raised $5.5M in a pre-Series A round led by Matrix Partners India. The funds will be used to scale up and establish a footprint in West Asia, North Africa, and Southeast Asia, as well as hire talent across tech, data, and product engineering.
  • Mastercard has entered into an agreement to buy CipherTrace, a blockchain analytics startup that help businesses and law enforcement root out illicit digital currency transactions, for an undisclosed amount. The deal will help Mastercard's customers protect themselves and comply with regulations as they build out their own digital currency offerings. 
  • Quicken, a personal financing software company, is being acquired by Aquiline Capital Partners, a private equity firm in Menlo Park, California. This acquisition is coming five years after an affiliate of H.I.G. Capital acquired Quicken from Intuit Inc for an undisclosed amount. Quicken did not reveal hard revenue figures, but shared that the company is profitable and has seen a 50% increase in annual sales volume over the five-year period. 
  • Creative Layer, a global personalized print-on-demand platform, raised $3M from Tobi Lütke, CEO of Shopify, Celtic House Venture Partners, and Cody Fauser, former CTO of Shopify, and Leonard Teo, founder of Art Station. The company will use the funding to further build out their product personalization platform. 
  • Immerss, a B2C platform that connects salespeople with customers via live video, raised $1.1M in seed funding in a round led by Oak Stream Investors III, Ltd. and Muse Family Enterprises Ltd. The company will use the funding to invest in marketing and sales initiatives. 
  • Varo Bank, a fintech startup and fully regulated bank, raised $510M in a Series E round led by hedge fund Lone Pine Capital, raising the firm's valuation to $2.5B from $700M after its previous fundraising. Varo is weighing options for eventually going public as well as overseas expansion

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 did baby corn say to mama corn? … Where's pop corn?  

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