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#72 – BNPL battles, Instagram NFTs, & Tap to Pay

by | Jun 6, 2022 | Recent Newsletters

If 2010s are remembered as the decade of social media, then 2020s will be known as the age of financial connectivity. The era when it became incredibly easy to buy things anywhere, anytime, in practically any currency (crypto and fiat alike). 

From BNPL taking over as the most popular way to amortize purchases to cardless payment apps and account-to-account payment networks, this decade is ramping up to be all about facilitating payments and purchases. 

And that's not necessarily a bad thing. As Professor Farnsworth will say, “Technology isn't intrinsically good or evil. It's how it's used. Like the Death Ray.”

On one side of the spectrum, you've got consumers in developed countries like the U.S. and U.K. with waaay too easy access to lines of credit. This can be dangerous. 

On the other side of the spectrum, you've got consumers in developing nations, who were previously unrepresented in the banking world, getting financially included and connected for the first time This is a good thing. 

But the age of financial connectivity doesn't just end with new payment apps. Companies are working right now on making it as easy possible to earn your purchase — including from the ads themselves. Social media companies are experimenting with ways to get you from discovering a product on their platforms to checkout in as few steps as possible. For the most part, buying almost anything has become just one click or tap away — and the decade is just getting started. 

In this week's 72nd Edition of the Shopifreaks newsletter, I explore new partnerships in the BNPL industry, NFTs on social media, and Apple Tap to Pay partnerships. I also break down Amazon's opposition to newly proposed legislation, as well as some reasons why Walmart may be a sleeping giant in e-commerce world who just woke up. 

All this and more in this week's edition. Thanks for being a subscriber. 

Stat of the Week

10% of millennials use BNPL every month. (The other 90% are rumored to still be paying off their previous BNPL purchases…) – According to PYMNTS. Share it on Twitter & LinkedIn

1. Affirm + Stripe

Affirm just landed a new partnership with Stripe, giving merchants the ability to integrate BNPL functionality directly into their online checkout and in-store POS systems.

Customers that qualify will have the option to use Affirm to break up the cost of purchases ranging from as little as $50 all the way up to $30,000. If using the Stripe payments system to buy their items at a retailer, the customer will have Affirm's “Adaptive Checkout” feature available to them.

The partnership is a win-win for both companies. For Affirm, they get immediate access to Stripe's millions of merchant partners and customers. And for Stripe, they will earn higher transaction fees on BNPL purchases, which typically hold higher average order values. 

Affirm is on a market share bender right now, having recently also announced partnerships with Fiserv, Shopify, WooCommerce and Verifone.

2. Klarna Card & Credit Reporting

Meanwhile on the other side of the BNPL ocean, in the U.K., Klarna started reporting its credit data to lenders in a landmark move for the BNPL industry. 

Up until now, BNPL services like Klarna only performed soft credit checks that did not affect consumers' credit scores and are not visible to lenders. However beginning June 1st, Klarna is reporting consumer purchases paid on time, late payments, and unpaid purchases.

Overall a good move for the industry, and one that may not be so voluntary in the future. If/when governments enact tighter regulations on the BNPL industry, credit reporting will most likely be one of the requirements, so it doesn't hurt to get ahead of the regulation. However customers who didn't realize or weren't informed that their late BNPL payments would negatively affect their credit when signing up for Klarna may have a bone to pick with the new policy. 

Klarna, though having just laid off 10% of its workforce, isn't slowing down, and is hoping to shorten the distance between themselves and U.S. consumers with the launch of their new Klarna Card in the US, bringing the company’s popular “Pay in 4” service to a physical Visa card form.

Over 1M U.S. consumers signed up to Klarna's waitlist to obtain their new card, which does not charge any interest. Instead, Klarna Card is available for $3.99/month and is entirely free for the first 12 months after activation, enabling consumers to try it out for a year.

Members of the Klarna Rewards Club who use the Klarna Card can earn points by completing “Missions” – small, engaging tasks aimed at encouraging consumers to discover different features in the Klarna App and take control of their finances. They can then redeem the points for gift cards or vouchers to various partner brands. 

3. Showcase your NFTs on Instagram

Have you noticed any NFTs displayed on Instagram accounts during the past few weeks? Meta has been testing digital collectibles with select US creators and collectors to share NFTs that they have created or bought.

Creators and collectors can connect a digital wallet and choose which NFTs from their wallet they would like to share on Instagram. Once a user posts a digital collectible, it will have a shimmer effect and can display public information such as the description of the NFT.

Depending on the privacy settings of both users, the creator and collector can be automatically attributed in the digital collectible post. 

Technologically speaking, the way this is happening, is that Instagram collects and organizes public data from open blockchains, such as Ethereum and Polygon, to which they use to identify users who connect their third-party wallets to Instagram. It's a pretty simple process to make the connection between creator, collector, and token.

I think it's an interesting and transparent way to connect the NFT world with social media. People were sharing their purchases before anyway simply by downloading and posting copies of their NFTs on Instagram, but this new integration adds a new level of “social authenticity” to digital collectible posts in that wallets have to be connected to show proof of ownership. 

Good job with this one, Meta. 

4. Square to begin beta testing Apple's Tap To Pay

Square announced that it will begin to support Apple's Tap to Pay technology later this year with a beta test arriving this summer.

Currently, a company using Square to process sales needs to use Square's dongle attachment to receive payments. However with support for Apple's Tap to Pay, the merchant should be able to process most payments using nothing more than an iPhone and the Square App.

I first reported on Apple's Tap to Pay in February 2022 when the company announced plans to introduce the feature for the iPhone XS and later models. Stripe was initially the first payment platform to offer Tap to Pay on ‌iPhone‌ to business customers, including Shopify users, and now Apple is expanding with other partners. 

Square said in its press release that spots for its Early Access Program are limited and did not specify an exact date when the program would start.

This is a good thing that Apple is opening up their Tap to Pay technology to other payment platforms. It's also a preventative measure to avoid anti-competitive complaints in the future, and a market share grab by leveraging the merchant bases of other providers (like Stripe and Square) to get users into the habit faster of using Tap to Pay.

Because at the end of the day, whether the payment is processed through Square, Google Pay, Shop Pay, Stripe, or whatever other payment network, the consumer is using their Apple iPhone and iOS software to make the payment — and that's money.

5. Amazon opposes new antitrust legislation

Amazon sent out an e-mail to all their U.S. sellers in opposition of the new legislation that Congress is proposing, which they feel is particularly targeted at them, and bad for sellers and consumers. 

The proposed legislation, known as the American Innovation and Choice Online Act (AICOA), is intended to limit conflicts of interest that may be created when a tech platform owns more than one type of business — such as Amazon owning the platform and selling its own branded products that may be in competition with sellers, or favoring third-party sellers who use their fulfillment services.

I'll highlight some of Amazon's points from their blog post below. They make a great point about how the rules, if passed, should apply to all marketplaces regardless of size. However, towards the end, the blog post felt a little threatening towards sellers, as if to say, “Support our opposition, or that marketplace you love so much might not be here one day…” I bolded the parts that stood out in that regard. However you can be the judge. 

  • “Congress is considering legislation that jeopardizes two of the things American consumers love most about Amazon: the vast selection and low prices made possible by opening our store to third-party selling partners, and the promise of fast, free shipping through Amazon Prime.”
  • “Sen. Klobuchar’s vaguely worded bill would mandate that Amazon allow other logistics providers to fulfill Prime orders. We’ve tried allowing our selling partners to use other logistics providers to get Prime-eligible products to customers; unfortunately, these providers were not able to consistently deliver in the timeframes Prime customers have come to expect (meeting our “delivery promise” is something we measure and monitor extremely closely).”
  • “There are a myriad of broadly written restrictions aimed at the concept of self-preferencing that prohibit commonplace retail practices (e.g., utilizing usage and buying data from our stores to personalize consumers’ customer experience, ordering search results by Prime eligibility, etc.). These rules would apply only to companies covered by this proposed legislation (of which Amazon is the only retailer) and would obviously place Amazon’s current customer-obsessed experience at a disadvantage relative to other retailers not forced to operate under these awkward restrictions, such as Walmart, Target, and others.”
  • “Oddly, and inappropriately, this legislation is targeted at only one U.S. retailer—Amazon. This has been accomplished by requiring a market value of at least $550 billion to qualify for regulation.”
  • “Walmart had annual revenues of $559 billion, nearly $90 billion more than Amazon. But Walmart is excluded despite also being a large retailer that allows small businesses to sell in its online marketplace.”
  • “Further, the proposed fines for each incidence of running afoul of these rules are so outlandish and extraordinary (amounting to tens of billions of dollars that would cause us to operate at a loss) that it would make it difficult to justify the risk of Amazon offering a marketplace in which selling partners can participate.”
  • “We consistently hear from our selling partners that what they find most valuable in working with us is the broad distribution and traffic from hundreds of millions of consumers they get by listing their products in our store—the very benefit they stand to lose with this proposed legislation.
  • “While the proposed legislation is flawed for the several reasons mentioned above, if and when Congress decides to enact legislation, it should apply to companies equally instead of just targeting individual ones.”

In response to Amazon's blog post, a spokesperson for Sen. Amy Klobuchar, who is leading the bill in the Senate, said the company was misrepresenting the bill's effects and that it would help the very small businesses Amazon claimed to represent.

One thing rubbed that me wrong about the blog post is that Amazon attempts to position itself as a savior and advocate of small businesses. Pretty much every huge tech goliath does this though, so I don't mean to single out Amazon, but as Archer would say, “Phrasing!” 

In the full post, Amazon wrote, “Amazon’s decision over two decades ago to open our virtual shelf space to third-party sellers was a bold one at the time because we weren’t sure how it would impact our own direct retail business. But we pursued it anyway because we believed that it would lead to a better customer experience and help small businesses at the same time.”

While admirable for its novelty at the time, the move wasn't completely altruistic. Amazon takes a 15% cut of all third party sales on its platform, of which it holds no inventory risk. So in reality, the move two decades ago to allow third party sellers was about increasing their market share and number of SKUs available for sale on their platform to become a one-stop shop for consumers for all products — the way it initially did for books. 

Third party sellers account for 60% of gross merchandise sold on their marketplace, which is a sizable revenue source for Amazon. To hint that new legislation could put their third party seller marketplace at risk of shutting down is a bit of a stretch. 

6. Walmart's big advantage over Amazon

Walmart is increasingly relying on its more than 5,500 store locations around the U.S. to build out its e-commerce business, which may give it an edge over Amazon. In comparison, Amazon only operates a little over 100 fulfillment centers in the U.S. and only several hundred retail locations including its Whole Foods stores. 

Amazon has a long ways to go to catch up to Walmart's existing geographic footprint across the U.S. And while Amazon moved too quickly with warehouse space and now has to sublet at least 10M sq.ft., Walmart has the benefit of having thousands of fulfillment locations (ie: stores) setup around the country that already pay for themselves.

Plus, Walmart owns the real estate on over 4,700 of its locations in the U.S., which means it has the added revenue of renting space to other retailers within their shopping complexes. It's entire geographic footprint is subsidized by its stores and real estate investments, compared to Amazon who either need to rent or acquire their future fulfillment locations.

In other words, Walmart is really well positioned.

Walmart U.S. CEO, Tom Ward, said in his first interview since stepping into the role, “The store is becoming a shoppable fulfillment center. And if the store acts like the fulfillment center, we can send those items the shortest distance in the fastest time.”

Here are a few ways that Walmart is using its stores for e-commerce purposes:

  • 90% of Americans live within 10 miles of a Walmart store. That's a huge existing hyper local distribution network.
  • Walmart will soon start packing and sending third-party sellers’ goods from stores.
  • Walmart is using its stores as launch pads for delivery drones. Their drone service will expand to 37 stores across six states by the end of the year.
  • The company is also using its stores as departure locations for direct-to-fridge drop-offs, which is a service where employees walk into strangers’ homes and put food directly into the fridge or on the kitchen counter. Customers can also leave out returns for Walmart employees to take back to stores.

It took Walmart a while to start to play catch up to Amazon (too long if you ask me), but now they are positioned to explode. As commerce becomes increasingly omnichannel, and consumers begin to expect more options in regards to in-store delivery, pickup, and returns, Walmart is “prime” to do some damage to Amazon's bottom line.

7. New USPS rules for used electronics with lithium batteries

Effective today, a new interim rule by USPS will require that packages containing pre-owned, damaged, and defective electronic devices containing lithium batteries be marked “Restricted Electronic Device” and “Surface Transportation Only”.

In addition to increased markings on the packages, the new rule restricts the mail class that can be used when shipping the devices to ground transportation (ie: no more air service) including USPS Retail Ground, Parcel Select, Parcel Return Service and Ground Return Service.

The restrictions and rule changes are due to an increase in incidents involving lithium batteries and other hazardous materials. 

A spokesperson for USPS said, “Look, if we don't know that the packages contain hazardous materials, we're going to handle them like absolute garbage. I'm talking about tossing, kicking, and dropping great distances, as well as occasionally running them over with our fleet trucks. Rather than treat all packages delicately, we just really need to know which ones are explosive so that we can subcontract their delivery to Amazon drivers.”

Did I have you for a second? Okay, that's not a real quote, but we were all thinking it…

The new interim rule takes effect today. Then there will be a 30-day period for public comment, after which a final rule will be published that considers any comments.

8. Deliverr launches a much anticipated returns service

Deliverr, which will soon be acquired by Shopify, announced a new returns service called Deliverr Returns with a goal of simplifying reverse logistics for merchant partners.

The new service will allow merchants to streamline and expedite the returns process for their customers, as well as save money on return labels. It's been a heavily requested service for many years by Deliverr's merchant clients. 

After customers return items to Deliverr's facilities, they will inspect the returned merchandise and either restock sellable inventory or donate/dispose of unsellable products. Merchants are kept up-to-date via their Deliverr dashboard. 

Historically, Deliverr has fulfilled items for their merchant partners, but did not receive returns, which had to be shipped back to the seller directly, inspected, and then shipped back to Deliverr's warehouses for resale (if applicable). 

Their new returns service cuts out the middle-man when it comes to getting returned items back into Deliverr's warehouse for sale. Or wait, aren't they the middle-man? LOL You know what I mean. 

9. Other e-commerce news of interest this week

  • Amazon launched a new program to stop price gougers from buying up low-supply products like gaming consoles and selling them elsewhere at higher prices. Amazon will display a “Request Invitation” button on eligible listings to help ensure genuine customers are able to purchase the products. The invite option is available now for PS5 in the U.S. and will be enabled for Xbox Series X soon. 
  • Amazon announced that it will stop operating its Kindle ebookstore in China a year from now on June 30, 2023. Customers will no longer be able to buy new ebooks, but those that have been purchased can still be downloaded until June 2024 and will remain readable afterwards. So Amazon gives their Selz customers a 60 days notice that they are shutting down their online stores, but ebook readers get a year's advanced warning?
  • TikTok launched a half-hour subscription comedy series that began streaming last week on their platform. The entire eight-episode series costs $4.99 to watch, but the first two episodes will be released for free to TikTok users. TikTok is getting into producing their own full length content? Game changer…
  • Dave Clark, Amazon's CEO of Worldwide Consumer, which is the company's delivery arm, is stepping down after 23 years to pursue other opportunities. He said he feels confident that now is the right time given that Amazon has a “solid multi-year plan to fight the inflationary challenges we are facing in 2022.”
  • Blue Apron, the subscription meal delivery platform, is supplementing its subscription business with partnerships with major retailers, most recently including Walmart, to offer one-time purchases. The offering includes meal kit boxes with 8-12 servings and 6 ready-made Heat & Eat meals to be prepared in a microwave.
  • Shopify reported that some of its hardware products contain conflict minerals which originate from the democratic Republic of Congo or adjacent countries, and may benefit armed groups in the region. Publicly traded companies in the U.S. have an annual deadline to disclose the potential presence of conflict minerals in their products to the SEC.
  • Saudi Arabia's Ministry of Commerce referred 200 online stores to the E-Commerce Violations Committee to impose legal penalties on them for violating their compliance standards for e-commerce reliability. Governments are cracking down everywhere!
  • Lightspeed launched a B2B platform for North American fashion, outdoors, and sports retailers. The new supplier network tool, which is the result of integrating technology from last year's acquisition of NuORDER, integrates B2B orders directly into their POS.
  • The Competition Commission of India (CCI) is investigating deals between Flipkart and Amazon and their preferred sellers after finding documents that revealed financial linkages between them. In India, e-commerce companies are barred from selling products supplied by affiliate companies, so they've historically had to get creative with their deal structures to circumvent the rules. 
  • Meta COO Sheryl Sandberg is stepping down from her position after 14 years. She will not be replaced, as Meta restructures their product and business groups to be more closely integrated.
  • Ford CEO Jim Farley announced that he wants the company's EVs to be sold online-only, with no dealer markups or other price negotiations, and remote pickup and delivery. Basically the Tesla-model. Anyone who's ever bought a car from a dealer is thrilled.
  • Albertsons is now offering consumer-generated product ratings and reviews, powered by PowerReviews, live on several of its retail websites including Safeway, Vons, Jewel-Osco, and Shaw's. Brands can also syndicate their user-generated content to products on Albertson's sites, which is a pretty cool way for a website to start out with populated reviews. 

10. This week in seed rounds, IPOs, & acquisitions….

  • Pinterest announced a deal to acquire The Yes, an AI-driven personalized shopping platform for fashion that enables users to shop a personalized feed based on their size, style, and favorite brands, for an undisclosed amount. Once the acquisition closes, Pinterest will sunset The Yes app and integrate the technology into their platform. 
  • Aramex, a Middle Eastern provider of logistics, courier, and package delivery solutions, signed an agreement to acquire MyUS, a Florida-based e-commerce enabler, in a $265M cash deal. The acquisition, which is set to close in Q3 2022, will help Aramex's strategy to expand its cross-border e-commerce operations.
  • Try Your Best (TYB), a startup that uses blockchain technology to help brands build customer loyalty through their own community channel, raised $9.8M in a round led by Unusual Ventures and Sogal Ventures. The company's main focus is providing experiential features to its NFT collectible holders rather than solely expecting the assets to appreciate in value based on brand recognition. TYB is currently working with 30+ brands in its pilot program and has around 300 potential customers in its pipeline.
  • TRIPP, a virtual reality meditation experience, raised $11.2M in a Series A funding round led by BITKRAFT Ventures, bringing its total amount raised to $26.3M. The company will use the funds to expand its team and support the acquisition of the VR worldbuilding platform, Eden from BeardedEye.
  • Super, an Indonesian social commerce startup focused on small towns and rural areas, raised $70M in an oversubscribed Series C round led by NEA, bringing its total amount raised to $106M. The company will use the funding to expand into new territories. 
  • Slice, a Bangalore-headquartered card-based lending and payment solutions provider that competes in India with PhonePe and Google Pay, raised $50M in a Series C round led by Tiger Global and GMO Venture Partners. The fintech will use the funds to expand its unified payments interface (UPI) payments feature to the 10M customers on its waiting list who have not been able to get access to credit.
  • Appetito, an Egyptian platform that delivers groceries and household products to customers from 11 dark stores across three cities, is acquiring Lamma, a similar startup with operations in the Maghreb regions of Tunisia and Morocco, for an undisclosed amount that's estimated to be in the $10M-$15M range. The deal is expected to close by end of Q3 2022, and Appetito claims it will make them the largest q-commerce player in Africa. 
  • Bonfire Ventures, a Los Angeles venture capital firm that invests in seed-stage B2B software companies, raised $230M in capital commitments from their two new funds, each which will invest in around 25-30 startups. The firm says that they are intentionally selective when choosing their startups and go for low-volume so that they retain the bandwidth to be responsive to founders.
  • Onramp Funds, an Austin-based company that provides financing to e-commerce sellers, raised $42M in equity and credit in a round led by Luther King Capital Management. The credit line will be used for financing small businesses, to which it charges around 1% for its service, and the equity will go towards customer acquisition and increasing staff.
  • Finclusion Group, a neobank serving Africa, raised $20M in debt and equity funding, nine months after its $20M funding round from Lendable. The bank will use the funding to fuel its expansion into Mozambique and Uganda and to grow operations in existing markets.
  • Ayoken, a London-based NFT marketplace for creatives that give fans access to tokens such as behind-the-scenes videos, album art, and livestream music by artists before it arrives on Spotify or other streaming platforms, raised $1.4M in a pre-seed funding round. The company will use the funding to buy exclusive licenses and build out their tech team. 
  • Betastore, a Nigeria-based B2B retail marketplace that enables retail traders to source fast moving consumer goods directly from manufacturers, raised $2.5M in a pre-series A round from 500 Global, VestedWorld, and Loyal VC, bringing its total amount raised to $3M. The startup will use the funding to enter new markets and expand to 100 cities across Nigeria, Ivory Coast, and Senegal.

What'd I miss?

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Paul E. Drecksler
[email protected]

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