Hi Shopifreaks!
For those of you attending, I hope you're having a great time at Shoptalk this week! I had plans to attend, but I accidentally overlapped the dates with hosting friends in Ecuador. So while you're talking shop with our industry's finest this week, I'll be trekking through the Amazon jungle and rafting down the Misahualli river. I hope to catch you at the next one though!
Please note: I'm still in the process of choosing a new e-mail marketing service (moving away from MailChimp due to deliverability issues). Temporarily for the next couple weeks, I'll not be including source links in the e-mail editions.
However you can check out the full edition archive on my website and LinkedIn for the sources. Sorry about these temporary changes while I find a better EMS.
In this week's edition I cover:
- Amazon using your website to build product listings
- The “new” marketing funnel for Gen Z customers
- Amazon selling ads to people who can't buy the product
- An update on the TikTok ban
- The DSA's investigation into AliExpress
- Block's timely crypto hardware wallet
- Kohl's getting baby fever
- Amazon's first ever Big Spring Sale
- Michael's new “Respect the Handmade” campaign
- The Seven Dollar Tree
All this and more in this week's 165th Edition of Shopifreaks. Thanks for subscribing and sharing!
Stat of the Week
1 in 5 parcels shipped by air freight originated as an e-commerce order. That number is expected to grow to 1 in 3 within five years. The volume is already four times higher than it was in 2014. — According to the International Air Transport Association.
1. Amazon's first big spring sale
Prime Day officially came to life on July 15, 2015 as a way to reward Prime members with exclusive deals on Amazon's 20th birthday. The mid-summer shopping event had such a big impact on consumers that it wasn't long before other large retailers started running their own “Prime Day” events at the same time.
Then in October 2022, Amazon, for the first time ever, launched a second-Prime Day event in the same year called “Prime Early Access Sale”, which ran for 48 hours. It wasn't as successful as the annual Prime Day event that summer, but to be fair, it was their first time running two discount shopping events in the same year.
In 2023, they decided to give it another shot, and ran another shopping event in October called “Prime Big Deal Days” to get another jump start on the holiday shopping season.
Well just when you thought two discount shopping events per year was enough, Amazon is now launching its first Big Spring Sale — its third event in the past 12 months, and first sales event ever where being a Prime member is not a requirement to shop.
The six-day promotion will run from Wednesday through March 25 with many sales available to everyone, and only some deals exclusive to Prime members. New deals will drop daily during the event which will include up to 50% off beauty, sports, and outdoors equipment, and 40% off electronics, home products, and spring apparel. Other discounts will be offered on lawn and garden, cleaning, and Amazon Echo and Kindle devices.
When asked if the Big Spring Sale would become an annual event, an Amazon spokesperson said that it didn’t want to speculate on future plans.
I have four thoughts about this news:
- Amazon is feeling the pressure from Walmart, Temu, and other Chinese retailers who are able to offer “Prime Day every day” with their pricing.
- Hosting three Prime Day events each year is inevitable going to dilute the effectiveness of the primary summer event. “I'll just wait until the next one” is easier to do when multiple events happen throughout the year (as opposed to only in July).
- Why just three events? Why not quarterly or monthly events? Where does it end? With “Everyday Low Prices”? LOL
- Amazon's desperation will have the worst impact on 3rd party sellers, who now are feeling pressure to offer rock bottom prices multiple times per year for Amazon's exclusive shopping events (which are already on top of Black Friday, Cyber Monday, holiday shopping deals, etc).
Maybe Amazon knows something the rest of us don't — that this is about to be a tough year for retail — so they're trying to squeeze out as much GMV as they can early into the year before the storm hits.
2. Gen Z broke the marketing funnel
Vogue Business ran an interesting piece about how the old marketing rules no longer apply to Gen Z. Here were the main takeaways:
- The marketing funnel used to be linear: Awareness, Interest, Desire, Action
- The top of the funnel involved reaching as many people as possible
- Gen Z is different because their primary marketplace — social media — is also their entertainment center, social hub, learning platform, and news source, making shopping a “medley of influences and mindsets.”
- Consumption today is an infinite loop of inspiration, exploration, community, and loyalty.
- 51% of Gen Zs believe influencers create new trends (versus 36% of Millennials).
- Only 15% of either group believed that brands start trends.
- 74% of Gen Zs think real life experiences are more important than digital ones.
- Platforms like TikTok and Instagram launched social commerce features so users could instantly purchase a product they like, however, Gen Z consumers aren't buying products impulsively at the point of inspiration as much as previous generations. They like to use social media as a search engine to research products they've seen online or in real life first.
- 70% of Gen Zs only trust a brand after carrying out their own research.
- Gen Zs are still very driven by price, which means tangible rewards, discounts, and exclusive access via loyalty programs are very effective.
- The secret sauce for brands today is making Gen Zs feel that they're part of a community — and inviting them to explore a whole universe of relevant touchpoints.
- Gen Z is the loneliest generation. Connection brands provide can help young consumers feel a sense of belonging.
- Kristina Karassoulis of TikTok says that because there's no start or end point to the purchasing path today, Gen Zs can inspire others whether they're at the beginning of the journey, in the research phase, or at the review (post purchase) phase. “It's about entertainment. It's about participation. And most importantly, it's about connection.”
Is it just me — or does the media talk about Gen Zs as if they're studying life on another planet?
3. Amazon will build your entire product listing with AI
Amazon sellers will soon be able to create entire product pages just by copying and pasting a product link from their website.
The new generative AI feature takes information from a seller's external website and then generates an Amazon product page for the item, complete with a written description and images.
Amazon wrote in a blog post, “This will further enhance and streamline the process of creating product listings, saving our selling partners more time and effort while developing listings for Amazon’s store that appeal to customers and help drive sales.”
It'll also let Amazon know EXACTLY where else you sell your product online so that they can bully you into offering the lowest price on their marketplace. Oops, oh wait, they don't do that…
Amazon warned sellers that they must be the owner, rights holder, or have the license to use the link’s contents if they use this feature, otherwise the company says it may take legal action. (I'm sure it'll be a top priority in their legal department.)
The feature is rolling out now and will be available to US sellers in the coming weeks.
4. What happened with the TikTok ban?
Last week I reported (story #4) that The House Energy and Commerce Committee voted 50-0 to pass a bill that would force ByteDance to divest TikTok into a US-owned company. If passed, ByteDance would be required to sell the app within five months or face removal from U.S. app stores.
Since then, The House voted 352 to 65 in favor of the legislation. Support came from 197 Republicans and 155 Democrats, with only 15 Republicans and 50 Democrats voting against the bill.
Our healthcare system in the US is horrific, women are being stripped of their rights to basic reproductive healthcare, school shootings in America were at a record high in 2023, our Supreme Court Justices are on the take, the federal minimum wage hasn't increased in 15 years, inflation is still high and our dollar is weakening internationally — yet THIS is the issue that Democrats and Republicans can agree on???
Good lord, how much is Meta and Alphabet paying these guys? ($20M and $15M a year respectively is the actual answer to my rhetorical question.)
The bill now goes to the Democratic-controlled Senate, where it faces a decidedly less-certain future. However if passed, President Biden has already vowed to sign the bill.
Republica Senator Kevin Cramer said he would vote for the legislation but predicted that the Senate is unlikely to take action soon. “It's hard for me to imagine that it'll be real fast. We don't do things fast. We're designed not to do things fast, so I would think months.”
A spokesperson for Beijing's commerce ministry responded to the news by saying, “The U.S. should truly respect the principles of a market economy and fair competition (and) stop unjustly suppressing foreign companies.”
In the meantime, TikTok Creators are already starting to look for other places to post their content as the threat of a ban looms. However even if the legislation doesn't pass, the threat of a ban alone may be enough to boost Facebook, Instagram, and YouTube's numbers.
5. Amazon sells ads for products people can't buy
Some Amazon sellers are being charged hundreds of thousands of dollars to run ads to customers who can't buy their products.
One seller reported that he was charged between $200k and $300k for ads served to California residents, where he can't sell his advanced gaming computer items. He had stopped shipping to California due to the state's personal computer power consumption regulations, which would require him to get costly lab reports for his products, but Amazon's automated system continued advertising his products there and denied that there was an issue when he flagged the problem and followed up for several weeks.
Amazon has since acknowledged the issue after it received media attention, and reported that after an investigation, the company found that it only affected “a tiny fraction” of sellers. Amazon said it already apologized to the seller and that the company is in the process of refunding him $15,000.
While only a tiny fraction of the hundreds of thousands the seller said he'd lost, Amazon said it only served “a very small portion” of his listings to California residents, and effectively “take it or leave it.”
The bigger issue: Amazon's advertising system can't geo-target customers by state or ensure that the products being advertised comply with state regulations. (Yes, you read that correctly.) At some point, I imagine Amazon will pay a meaningless fine and enhance their system to enable that type of geo-targeting functionality, but until then, advertiser beware.
6. AliExpress is first online marketplace to face DSA investigation
The European Union opened its third formal investigation of a very large platform under the Digital Services Act, with AliExpress earning itself the honor of being the first online marketplace to face a formal investigation by the Commission.
X and TikTok were the first VLOPs to face DSA investigations in December and February respectively, but those investigations are still ongoing.
The Commission says it suspects AliExpress of breaching DSA rules in areas linked to:
- The management and mitigation of risks.
- Content moderation and its internal complaint handling mechanism.
- The transparency of advertising and recommender systems.
- The traceability of traders and to data access for researchers.
- Concerns cover areas such as non-compliant medicines, foods, and child safety risks.
- They will also look into transparency and safety concerns related to influencers' use of AliExpress through its affiliate program.
The first proceeding does not confirm any violations of the DSA as of yet. It only means that the Commission will now carry out an in-depth investigation, which it offered no fixed timeline for.
AliExpress responded with a statement, “We respect all applicable rules and regulations in the markets where we operate. As a VLOP, we have been working with, and will continue to work with, the relevant authorities on making sure we comply with applicable standards and will continue to ensure that we will be able to meet the requirements of the DSA. AliExpress is committed to creating a safe and compliant marketplace for all consumers.”
7. Block finally released its crypto hardware wallet
Block has finally started shipping its long-in-the-works Bitcoin hardware wallet, Bitkey, after four months of taking pre-orders. Jack Dorsey first announced in June 2021 that Block was in the process of creating a cryptocurrency wallet, and the company unveiled Bitkey for pre-order in 95 countries last December.
Wow guys, only three years to build and ship a crypto wallet? You're really on the cutting edge of technology.
In addition to its wallet function of storing cryptocurrency, Bitkey will connect to Block's payments platform Cash App as well as Coinbase to allow buying and selling BTC within its app, which is now available on iOS and Android.
Bitkey uses a 2-of-3 multi-signature mechanism for wallet recovery. Rather than rely on seed phrases like traditional wallets, Bitkey prompts a user to provide a combination of one key from the mobile app, another stored on the hardware device, and a third held by Bitkey itself.
However they've tried to make the device as idiot-proof as possible. Even if customers lose both their phone and their Bitkey hardware, Block offers recovery tools like Trusted Contacts, which allows customers to recover their funds by relying on the people they know to help verify their recovery request.
Recovering your wallet via Trusted Contacts would look something like this:
“Hi is this Debi Drecksler — Paul's mom?”
“Why, yes it is? To whom do I have the pleasure of speaking with this evening?”
“This is Jack Dorsey calling from Block. You're one of Paul's trusted contacts and we just need help recovering his cryptocurrency wallet, so if you could please provide his secret recovery seed phrase, which we'll then ask you to verify via Google Authenticator on your phone, and then lastly connect your own wallet to the blockchain for 2FA authorization.”
“Am I on the radio? Is Paul playing a prank on me?”
The Verge noted that BitKey is ironically only available to purchase via credit card or Google Pay on Block's website, which means you can't pay for it using Bitcoin. I guess you need the Bitkey wallet first.
8. Kohl's partners up with Babies R Us
Kohl's is partnering with Babies R Us to bring baby gear, furniture, and toys to their department stores. The first shop-in-shops will open in August, with plans to expand to 200 stores in the fall.
Compared to pre-pandemic 2019, Kohl's sales were down 12.7% last year, while the wider retail market for non-food merchandise grew by 24%, which is why the retailer has been making a concerted effort to entice new customers to its stores by adding things like Amazon returns and Sephora beauty shops.
CEO Tom Kingsbury said, “We see significant opportunity in the baby gear category, and partnering with Babies R Us is another example of how we are finding new ways to optimize our assortment and further establish Kohl’s as the go-to brand for families.”
The company is also looking to improve its apparel offer by adding 700 dedicated dress shops and expanding juniors, men's footwear, accessories, and handbags.
Personally I think it's a great move to partner with other established brands, and Kohl's should 10x down this path.
How about a partnership with Shopify where Kohl's creates pop-up storefronts at the front of their 1,000+ retail locations in the US, featuring products from popular regional D2C brands that sell on the platform? Why not park Teslas and other electric vehicles in the store as an EV showroom? Stick some Meta Quest 3 and Ray-Ban Story devices in there too while they're at it? Warby Parker anyone?
Kohl's could become the de facto brick-and-mortar retailer for brands without showrooms (or brands with small offline footprints). What are your thoughts? How can Kohl's turn things around? Hit reply and let me know.
9. Other e-commerce news of interest
The Associated Press is launching an e-commerce site called AP Buyline, powered by Taboola, as part of a broader effort to diversify its business model by adding more consumer revenue. The company has historically made most of its money from licensing its content to other media organizations, but now hopes to expand into new avenues beginning with credit cards, investments, insurance, and retirement savings.
Michaels launched a new campaign called “Respect the Handmade” to promote its new MakerPlace marketplace, in which it showcases handmade goods like a bag, earrings and flower pots coming to life. The campaign is meant to celebrate the company's ongoing support of independent artists and the customers who buy their products.
Shein is set to face stricter online rules in the EU, now considered a Very Large Online Platform after reporting an average of 108M monthly active users across EU member states. The European Commission said it was aware of Shein's number of users and are in contact with the company to reclassify it in the future.
Wix launched a website called “Buying from South to North” to assist the hundreds of businesses that have shut down or are struggling to operate due to the war. The project aims to pave the way for those businesses to renew their activities and provide owners with an incentive to rebuild their stores, restaurants, or studios when the war ends.
Amazon launched a Chinese language version of its Japanese marketplace and is now offering reduce shipping rates to mainland China as part of its goal to cash in on the more than $22.5B that Chinese consumers spend on Japanese e-commerce products. Amazon Japan's shopping portal offers listings in simplified Chinese and promises authentic brands and quality products.
ReturnLogic, a provider of intelligent return management and warranty solutions, partnered with Happy Returns, a UPS-owned company that offers in-person return bars (formerly owned by PayPal). The collaboration introduces Happy Returns' network of nearly 10k locations to offer a box-free, label-free return experience for customers of merchants who use ReturnLogic.
Meta is suing Dipinder Singh Khurana, a former VP of infrastructure, for allegedly violating his contracts by taking a “trove of proprietary, highly sensitive, confidential, and non-public documents” about the company's business and employees. The lawsuit claims that Khurana uploaded internal documents, including the company's Top Talent dossier, to his personal Google Drive and Dropbox just before departing, which gave him an inside view into how Meta makes compensation decisions and provided key information about Meta employees, their levels, performance, and skills. Apparently Meta values their privacy.
The Dollar Tree will begin selling items (mostly food) up to $7, which is higher than the $5 it announced in June. The company is also closing 1,000 of its Family Dollar stores (same owners as Dollar Tree), representing around 12% of it stores. Read my LinkedIn post about how Dollar Tree should rebrand.
Brevo, a CRM that offers e-mail and SMS marketing, launched a new commerce suite that provides retailers and e-commerce companies with a full view of their customer data. Through the platform, merchants can analyze their customers' purchasing habits across all channels, allowing them to send more personalized recommendations. Brevo is trying to get some of that Klaviyo money!
The Body Shop filed for bankruptcy in the US and Canada and is struggling to pay suppliers in Australia as the company deals with cash shortages after its UK parent's collapse last month. The company ceased selling at its 50 outlets in the US and at 33 of its 105 shops in Canada after filing for Chapter 7 insolvency, under which its assets are sold off to clear debts.
Klarna received a $733k fine by a Swedish court for failing to adhere to the EU's GDPR rules, specifically for not providing adequate information to its users regarding the storage of their personal data, which the court stated was unclear or difficult to access. The case pertained to privacy notes used by Klarna between March and June 2020, which have since been updated by the company.
TipTop, the startup that offers cash for electronics, is launching TipTop Shop, which lets customers buy new, open-box, and refurbished devices through cash and trade-ins. Previously getting cash for old devices and purchasing new ones had to take place as separate transactions, but now the platform is unifying the buy / sell / trade experience.
France's Parliament voted to tax sales and ban advertising by fast fashion companies like Shein in an attempt to slow down their growth within the country. The bill still needs to be approved by the French upper house, but would require a penalty of up to 10 euros for each item sold in France by 2030.
Stripe is now incorporating Apple Pay Later by default for its merchants, which is available for US users on purchases from $75 to $1000. Stripe has supported Apple Pay Later for most merchants since last March, but the feature officially rolled out to everyone last week.
A new bill in California could ban self-checkout lanes at large grocery stores and other retailers, as part of a package of bills aimed at “empowering vulnerable populations” by helping workers and promoting economic growth in underserved communities. However the bill verbiage is not finalized, and a spokesperson said that the word “ban” would be changed to “regulate”. Meanwhile Walmart and Target are like, “Who cares? We're getting rid of self-checkout anyway. Too much theft.”
The National Labor Relations Board issued a complaint against Amazon last week for illegally attempting to curtail efforts to unionize by workers at a Kentucky air hub. The employees have been demanding higher pay, more flexible schedules, and safer working conditions since 2022. Amazon is scheduled to appear at a hearing before labor regulators in April.
Federal prosecutors are investigating whether Meta facilitates and profits from the illicit sale of drugs on its platforms. U.S. prosecutors in Virginia have been sending subpoenas and asking questions as part of a criminal grand jury probe. So does this mean Facebook Marketplace is the new Silk Road?
Ulta Beauty CEO Dave Kimbell said that e-commerce marketplaces are contributing to organized retail crime and that more can be done to deter the sale of stolen goods. Without mentioning Amazon or any specific platform, he said, “We shouldn’t have an environment where it’s possible to steal from one retailer and [have it] end up on any other platform, any other large-scale, mainstream platform.”
E-commerce grocery sales plummeted 10.5% YoY in February to $7.9B, with delivery gaining market share (39%) and pickup sales declining (43%). Traditional supermarkets recorded a significantly larger decline than Walmart in the average order value.
Macy's named Michael Krans as the new VP of its Media Network, where he will oversee the company's in-house media publisher dedicated to connecting advertising partners with Macy's and Bloomingdale's. Krans previously led the fashion team at Walmart Connect and held roles at major publishers including Hearst and Conde Nast.
10. Seed rounds, IPOs, & acquisitions
Threecolts, a platform that aids Amazon sellers in managing their sales, acquired Marketplace Pulse, an e-commerce industry publication founded by Juozas Kaziukėnas in 2015 that I regularly feature in this newsletter. Post acquisition, Marketplace Pulse says it plans to reach more audiences, cover more topics, and double down on its core goal of looking for stories in data.
Big Sur AI, an e-commerce sales company that develops AI tools to help merchants deliver personalized customer experience, raised $6.9M in a round led by Lightspeed Venture Partners. The company recently launched an AI Sales Agent for Shopify merchants, designed to help online shoppers discover products more easily, with the sales agent tailored to each merchant.
Bear Robotics, a Silicon Valley-based manufacturer of service robots and AI solutions, raised $60M in a Series C round led by LG Electronics. The company will use the funds and the strategic partnership with LG to expand their technology to meet the demands of smart warehousing and supply chain automation.
Kevel, a platform that offers infrastructure APIs to quickly build custom ad platforms for sponsored listings, internal promotions, and native ads, raised $23M in a Series C round led by Fulcrum Equity Partners. The new funds will be used to deepen its focus into retail media and further innovate its platform.
Fermat, a platform that enables retailers to dynamically create personalized stores or landing pages off of social ads, raised $17M in a Series A round led by Bain Capital Ventures, bringing its total amount raised to $30M. The platform can also give retailers information about the customers such as products they like or discounts they've seen, without obtaining their personal data.
Prescient AI, a startup that uses machine learning to measure and predict the impact of advertisement campaigns for D2C brands and Amazon sellers, raised $10M in a Series A round led by Headline and CEAS Investments. The company reports that its platform has increased ROAS by an average of 20% for the brands it works with and will use the funds to further develop its models to work across more media and sales channels.
Mercado Libre announced that it will invest $2.5B in Mexico this year, up from the $1.6B it spent in 2023. The investment will be distributed across various areas including warehouse expansion, logistics network enhancement, loan increases, salary payments, and marketing investments.
Bazaa, a marketplace focusing on antique furniture and vintage home decor that went live a few weeks ago, raised $650k from undisclosed “high net-worth individuals”. Every item listed on the site is from a trusted and already-established seller who has been vetted by the business, and each item has been checked by the Bazaa team.
Frontnow, a Berlin-based startup that provides AI growth tools for B2B e-commerce companies, raised €3.8M in a round led by Peak. The company will use the funds to enhance its technology platform which offers plug and play tools like virtual shopping assistance, personalized recommendations, and AI chat bots.
Packfleet, a UK-based fully electric parcel courier, raised $10M in a Series A round co-led by General Catalyst and Voyager Ventures. The company will use the funds to bolster its presence in London and grow its roster of merchants.
PublicSquare, a right-wing marketplace that connects merchants with customers who share their values (and that has Tucker Carlson's face plastered all over its website), acquired Credova, a POS financing platform that provides BNPL solutions catered to the firearms industry. The platform boasts over 75k businesses and 1.6M customers.
ShopMy, a marketing platform for content creators to connect with brands and monetize their content, raised $18.5M in a round led by Inspired Capital. Currently the platform only works with beauty, lifestyle, and fashion influencers, but plans to accept creators from other niches such as maternity, fitness, wellness, and travel in the near future.
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See you next Monday,
PAUL
Paul E. Drecksler
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PS: Who was the widest knight at King Arthur's round table? Sir Cumference, he ate too much pi.