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⚔️ This week's newsletter is all about battles. ⚔️
- The battle between AI models.
- WordPress vs Squarespace.
- Retailers vs payment processors.
- Digital currency vs cash.
- DIY vs professionals.
- Water balloons vs TikTok streamers.
- Adobe vs its own AI products!
This is an intense edition! Plus I bring you updates in the world of grocery delivery, stories about the revival and closure of failing brands, and Drake's bizarre Shopify store.
All this and more in this week's 133rd Edition of Shopifreaks. Thanks for subscribing and sharing.
Stat of the Week 📈
Apple surpassed 1 billion paid subscriptions. The company added 150M subscriptions through the trailing 12 months. Apple also announced that its Apple Card logged $10B in deposits. – According to PYMNTS
1. BigCommerce + Google AI
Well, well, well… guess who's hopping on the AI train? Although interestingly enough, they decided not to build their own tracks!
(Or would AI be the locomotive in this analogy? Either way…)
BigCommerce is adding AI to its platform via a partnership Google, leveraging the company's advanced Cloud AI technologies.
Through the partnership and integration, new AI-powered solutions will become available to BigCommerce merchants including:
- AI-powered writing and SEO features for product catalogs, leveraging Google Cloud's Vertex AI.
- Personalized storefronts and product recommendations powered by Google Cloud's Recommendations AI.
- Deeper insight into business performance with AI-driven data analytics.
- The internal BigCommerce E-commerce Insights tool will also evolve and feature new AI capabilities.
BigCommerce’s AI-powered solutions will become globally available by the end of 2023.
Smart move to leverage the AI capabilities of a juggernaut like Google, who is pouring billions into its AI development, as opposed to building out their own AI features like competing platforms.
BigCommerce is choosing to directly integrate Google's AI tech instead of developing their own AI features in-house or building a branded featureset on top of an existing model — like how Shopify Magic and Sidekick are built on OpenAI LP’s GPT-4 model.
Wix's new AI Site Generator is also built on ChatGPT, as is Salesforce's Einstein GPT.
It wouldn't surprise me if BigCommerce opened up a partnership with OpenAI in the future as well to give merchants a choice of AI engines.
After all, BigCommerce prides itself on giving merchants their choice of tech versus locking them into an app ecosystem or payment provider. So why would their relationship with AI be any different?
2. Battle of the website builders!
In June I reported that Squarespace was acquiring approximately 10M domains from Google, which is selling its Google Domains division that it launched in 2014. The $180M acquisition is set to close in Q3 2023.
Squarespace promised that it would honor Google's domain pricing for at least 12 months before jacking up its renewal fee.
Well it turns out that Automattic isn't going to let Squarespace have all the fun!
WordPress.com sent out a promotion last week offering to cover the transfer cost for those interested in moving from Google Domains to them instead of Squarespace, plus an extra year of registration for free.
WordPress is willing to foot the bill for up to 1M domain transfers. (Google Domains has about 10M domains under management.)
The e-mail said, “As you may know, Google Domains has been sold to Squarespace and, while they've mentioned maintaining prices for the first year, nothing says they won't increase them later. For a limited time, bring your Google domains to WordPress.com, and we'll cover the transfer fees and throw in an extra year of registration on us. Switch now, save money, and rest assured that your domains are in good hands.”
Automattic also published a blog post about the deal, commiting to keeping prices low for the future. “This isn’t a temporary thing. We’re committed to keeping domain prices low, and will only raise them if our wholesale costs go up (we’ll run our domains business like Costco).”
(Costco never marks up products more than 15%, to explain the analogy).
As someone who owns hundreds of domains, I appreciate that domain registration has become a highly competitive industry, which has subsequently brought down the price and profit margins.
At this point, companies like Cloudflare (who don't mark up the domains at all above wholesale) and Automattic (who are now capping their markup) are using domain registration as a loss leader to bring website owners and merchants into their ecosystem of other products.
Now let's bring some competition into the credit card processing industry and do the same! (See Story #5 below.)
3. Instacart updates its e-commerce
Instacart revamped its Instacart Storefront and Storefront Pro offerings, which power e-commerce websites and apps for grocers. The new updates make it easier for retailers to customize their storefronts and launch shoppable campaigns.
Grocery retailers can now:
- Modify their website homepage layout using templates or create custom layouts
- Create customized landing pages that can include images, text, and clickable elements.
- Integrate their homepage content and custom landing pages into targeted campaigns.
- Set specific goals for their campaigns, like increasing conversion or driving customer retention.
- Launch shoppable campaigns that capture seasonal moments. (OREO S'mOREO's anyone?)
Stew Leonard's is currently using these new capabilities and Gelson's Markets will introduce them soon.
The latest updates build on Instacart’s efforts to offer retailers improved in-store and online solutions as grocers seek more opportunities to personalize their shopping experiences for customers.
Last year I reported that Instacart is facing more competition, including internally from their own partners, as retailers build out their own logistics operations. Including Uber, who also launched shopping features last year to directly compete with Instacart.
4. The U.S. should learn from India
Two weeks ago I reported that FedNow, the U.S. government's new instant payment system that'll serve as a faster payment rail for financial institutions, is live with 54 financial institutions and service providers already participating.
John Mitchell of American Banker feels that in order to succeed, FedNow must take some lessons from the world's most widely used real-time digital payments system: India's Unified Payments Interface (UPI) — which you see me write about often in this newsletter. I'll recap his thoughts below.
1) FedNow must include clear standards for the integration of APIs.
This will promote the kind of openness and commercial interoperability that ensures healthy competition among finance, tech, retail, and other businesses.
2) The government needs to boost corporate participation in FedNow.
UPI is ubiquitous in India because there are government mandates for private firms to support it. FedNow isn't mandatory, which might lead to its demise with only 57 of the tens of thousands of financial firms across the country using it so far. (Although be patient, it's brand new.)
3) FedNow must be accessible to everyone.
UPI is an open framework, so people don't need to use a special app to make or receive payments. It's as simple as cash. FedNow must become a household name in the same way.
4) FedNow must be secure.
18% of UPI customers have experienced some kind of failed, fraudulent, or mistaken transaction. FedNow's incorporation of ISO20022 could help overcome these challenges, but in general, security should be top of mind.
5) Users will need to understand it.
Much of UPI's success grew from comprehensive public awareness campaigns. The U.S. government will need to invest in similar educational campaigns for citizens to understand its benefits and foster adoption.
My guess is that if you ask 10 people on the street right now their thoughts on FedNow, that at least 9 out of 10 of those folks will have never heard of it. In other words, FedNow has a long way to go to become mainstream.
5. Retailers vs Payment Processors
A new bill in Washington is pitting retailers like Amazon, Walmart, and Target against credit card processing networks like Visa, Mastercard, and Discover.
The Credit Card Competition Act is actually an old bill that was proposed a year ago, but never brought up for a vote in either the House or Senate, and is now being reintroduced via a bipartisan push to clamp down on credit card fees.
The measure aims to bolster competition for the credit card processing industry by requiring big banks to allow at least one network that isn't Visa or Mastercard to be used for their cards, giving merchants who pay interchange fees a choice they otherwise rarely get. It also stipulates that Visa and Mastercard can only account for one of the choices as a way to prevent the two largest networks from being the only options offered to merchants.
FOR THE MEASURE:
Retailers in support of the legislation argue that credit card processing costs hurt consumers by driving up the cost of business, and in turn, the price consumers pay at checkout. (That's true.)
AGAINST THE MEASURE:
Major credit card processing networks say the bill will actually hurt consumers by diminishing popular credit card rewards programs and lessening fraud protections. (Okay, I can see that argument too.)
However despite the few consumer perks that come from high transaction fees, the cons outweigh the pros for me. I'd certainly give up a few consumer credit card rewards in exchange for reducing my merchant processing fees each year!
Credit card processing in the U.S. is a burdensome tax on merchants and consumers, who both inevitably end up absorbing the cost. In 2023, there's got to be a better way.
Shopify president Harley Finkelstein said, “Interchange fees are effectively a tax on commerce.” (Hey that's what I said.) “Relative to every other country Shopify operates in, interchange fees are the highest in America.”
Sen. Dick Durbin said in a statement to CNBC, “It's time to inject real competition into the credit card network market, which is dominated by the Visa-Mastercard duopoly.”
Visa and Mastercard account for 80% of all credit card volume, a monopolistic market share that has allowed swipe fees to double in the past decade, hitting a record of $160.7B in 2022.
The increase in swipe fees has led to several battles between retailers and the networks. For example, two years ago I reported that Amazon informed customers that from Jan 19, 2022 onward, they would no longer accept Visa credit cards issued in Britain, blaming the decision on high fees charged by the payment processor. They ended up coming to an agreement in the final hour, but the frenemy relationship between the two companies remains.
What are your thoughts on the Credit Card Competition Act? Yay or Nay? Hit reply and let me know.
6. Amazon Fresh For Everyone
Amazon extended access to its Fresh grocery deliveries to non-Prime members across a dozen cities, with plans to expand countrywide by the end of the year.
Previously, Amazon grocery delivery had been limited exclusively to Prime members, who pay $139/year for the Prime subscription and $3.95 to $9.95 per delivery under $150, with free delivery on orders more than $150.
Now non-Prime customers will have access to the grocery delivery service, at a slightly higher price, ranging from $7.95 to $13.95, with no option for free delivery at any price threshold.
Up until February, Amazon Fresh offered free deliveries on orders over $35, same as on Amazon.com, but had to up the free delivery threshold to $150 because they were hemorrhaging money on the service otherwise.
For now, the change applies only to orders from Amazon Fresh, not Whole Foods, but that may change in the future, which would open Amazon grocery delivery up to a much larger audience. There are only tens of Amazon Fresh locations, but there are over five hundred Whole Foods stores in the U.S.
Will this work out in Amazon's favor by unlocking new revenue for the company? Or will it lessen the value of Prime memberships?
At only a $4 difference between the delivery fee for Prime vs non-Prime members, it would take over 35 deliveries a year for the $139 Prime membership to pay for itself if that was a customer's primary motives for being a Prime member.
Then again, who the heck can spend less than $150 now-a-days when grocery shopping?
7. Wix Studio for Freelancers & Agencies
Wix announced a new offering called Wix Studio, a platform for freelancers and agencies to grow their businesses with Wix's suite of tools.
Wix Studio offers:
- A business website builder
- A new creation editor with coding capabilities
- Complete design & CSS control
- AI design, text, and images
- Team management
- One dashboard to power all projects and clients
- Wix Blocks to build and sell reusable applications
Co-Founder and CEO, Avishai Abrahami, said, “We are introducing a completely new platform for them to build quality websites, manage all of their clients and so much more.”
It's an interesting move, as historically Wix hasn't had the best reputation with designers and developers. It's always been considered the DIY website builder while pros gravitated towards other more developer friendly CMS. However they've been trying to change that for the past few years, beginning around 2020 when Wix launched Editor X, a website creation platform made for designers and agencies.
Two weeks ago, when I reported on the launch of Wix's AI Site Generator, it felt like they were looking to bypass designers as opposed to enable them, however apparently my assumption was wrong.
Perhaps Wix realizes that even with DIY-friendly tools and AI enhancements, it still takes knowledge and experience to work those tools and output an effective website for small businesses. And rather than only cater directly to the end user like other website builders and AI tools on the market, Wix wants to build them into professionals' workflows.
8. The big business of TikTok Live
TikTok Live has quietly turned into a huge business as users pay for tips and gifts for bizarre entertainment. Viewers send streamers digital gifts using TikTok Coins, a currency that allows them to send cash via playful digital icons like stars, owls, school buses, and roses.
The Atlantic's Caroline Mimbs Nyce spent hours on TikTok Live, discovering some of the most popular (and profitable) live streamers on the platform, which I'll recap below:
- A guy dressed as Santa Clause thanks senders for sending cash with a jolly belly laugh as Christmas carols play in the background.
- Another man slaps himself every time he is given a gift.
- One streamer has a counter set at 9,999,999,999,999, one below his goal of 10 trillion, with certain gifts moving the number down, and others up, but never quite hitting the mark.
- Sleepfluencers livestream themselves sleeping, sometimes earning tens of thousands of dollars a month.
- QVC-style salespeople hawk wigs, crystals, and fast fashion 24/7.
- One streamer burns viewers names into a Popsicle stick after receiving a tip.
- PinkyDoll, a 27-year-old streamer in Montreal, went viral for acting as a video game non-player character, or NPC, which spawned many copycats.
While all these lives streamers are raking in the big bucks, ByteDance is taking a cut of half! What's ByteDance going to do with all those rose icons?
LOL those silly icons catapulted TikTok to become the first app to exceed $1B in consumer spending in a single quarter, beating out Candy Crush and Roblox. Of that revenue, more than 99% of in-app purchases in the U.S. came from people buying TikTok Coins to give to creators, which range in price from one cent to a couple dollars.
Nyce explained that calling these transactions “tips” isn't quite right, as you're not offering gratuity, but rather “paying up front for a sliver of attention or a slice of control.”
She wrote, “You don't tip a livestreamer because you enjoyed watching them pop a giant water balloon; you give them one digital rose with the explicit purpose of adding more water to an unpopped water balloon — over and over, until the water balloon swells into a nearby needle and explodes. The audience is part of the performance.”
9. Other e-commerce news of interest
Adobe employees are concerned that moving forward with AI in the art space will cause companies to downsize their graphic design departments, which could result in fewer subscriptions to its Creative Cloud offering. The threat of its own technology has become a very real conversation at Adobe, with many concerned that the company is “in danger of cannibalizing” its own source of income.
Shopify has chosen finance automation platform Ramp its sole expense management provider, after the company launched a new tier for larger companies called Ramp Plus. (Panding to Shopify a little with the name?) Ramp is also now offering a new and automated “procure-to-pay solution” to give large enterprises an alternative to incumbents in the space like Amex, Concur, and Coupa.
Meesho deactivated 4.2M counterfeit listings and 1M restricted products within the span of six months, after integrating AI tools aimed at detecting and flagging suspicious listings and accounts. Whew! That doesn't speak too highly to the junk that must've been populating the marketplace previously! The company also established the Suraksha List, which is comprised of approximately 1,800 high-risk brands vulnerable to infringement and counterfeiting.
In other Meesho news, the company reported profitability in the month of July, overtaking Flipkart and Amazon as the first e-commerce company in India to do so. However Meesho did not disclose the exact profit figure, so it could very well be like 80 cents.
Stripe launched Stripe Tax, a service that platforms like WooCommerce, Mindbody, and Squarespace can offer their customers to help them sell cross-border and deal with the complex tax requirements that international selling brings. The service is an expansion of Stripe Tax, which launched in 2021, and automatically calculates and collects sales tax, VAT, and GST across 40+ countries.
AdRoll and WooCommerce teamed up to provide a unified solution for merchants to add tracking pixels to their websites for real-time monitoring of customer actions like adding items to their cart or viewing the checkout page. Merchants can then use the data to create customer profiles based on their shopping journey, which in turn allow them to target customized ads and e-mails to specific segments.
BigCommerce hired Steven Chung as its new president, who will oversee the company's sales, marketing and services organizations, and consolidate the company's go-to-market teams. Chung previously served as president of Delphix, where he led the company's strategic and commercial operations globally.
Overstock unveiled its new Bed Bath & Beyond website for U.S. customers, which will carry kitchen, bed and bath products, and home furniture and decor. It looks good! Last month I reported that Overstock bought the BB&B brand from bankruptcy for $21.5M and is adopting the name, which will replace the Overstock brand name moving forward.
TikTok is building a dedicated team tasked with boosting sales of pre-owned luxury items like handbags and sneakers, according to a new set of job openings on its website. The company is also thinking about how to loop more influencers into the sales category.
USPS is about to deliver its third quarter financial report tomorrow, likely continuing its run of financial losses that began in 2007. eCommerceBytes expects USPS to simultaneously announce its third postal rate hike of the year in the form of its temporary holiday surcharge which ran from Oct to Jan last year.
Amazon will begin archiving orders older than two years next month, giving sellers 30 days notice to download orders if they need access to buyer information. The move is related to new-ish laws regulating the storage of buyer names and personally identifiable information, such as the EU's GDPR.
WooCommerce, which powers over 3.4M online stores, announced ambitious plans to expand its reach even further with upcoming improvements focused on performance, payments, product management, and site design, with aims to power 10-15% of all websites globally. WooCommerce is also adopting the Gutenberg visual editor from WordPress, and releasing AI features to assist in generating product titles, descriptions, and AI content.
Block is shutting down Cash App's Verse brand in the EU and its BNPL platform Clearpay in Spain, France, and Italy, after dismal growth and profitability, with plans to shift resources towards areas that offer a higher potential ROI. The company acquired Verse in 2020 with hopes of replicating the success of Cash App in Europe, and Clearpay is the European brand of Afterpay, which Block bought in 2021 for what would've been the dumbest and most overpaid acquisition of the decade at $29B, if not for Elon Musk sweeping in and buying Twitter for $44B the following year.
Ocado's mid-year financial reports revealed that the company paid $12.7M to buy 6 River Systems from Shopify, just 3% of the $450M that Shopify paid for the company in 2019. In May, I reported on the sale, but terms of the deal were not disclosed at the time.
Pitney Bowes expanded its regional delivery network for e-commerce parcel shippers, extending 1-3 day delivery to more than 20 cities across the South. Three day delivery? What is this 1996? The move follows the company's decision to launch its first regional delivery service models in 2022 starting in California, New York, and Massachusetts.
Last week I covered Shopify Collective, a new feature that lets brands on Shopify collaborate and sell products from each other's stores and mentioned that the company is very proud of the fact that Drake is on the platform. However at the time, I hadn't seen Drake's actual shop, which Business Insider did a write up on last week for its interactive shopping experience (albeit not a very usable one in my opinion).
Salesforce announced the release of Einstein Studio with a Bring Your Own Model feature that allows customers to bring their proprietary data into Data Cloud to build and train their model. The solution is aimed at companies with data teams that have been building models in other places like SageMaker and want to put those models to work in other contexts.
Amazon plans to double its number of same-day delivery warehouses in the U.S. to compete with Walmart and Target in the business of ultra-fast delivery. The expansion of same-day delivery, which currently serves 90 metropolitan areas, will rely on smaller warehouses that are closer to customers than traditional fulfillment centers.
Jeff Bezos and Lauren Sánchez hosted an engagement party last week aboard Bezos's $500M yacht in the Amalfi Coast, with big names like Bill Gates and his girlfriend Paul Hurd in attendance. Bezos and Sánchez got engaged this past May while on holiday in Cannes, France.
People are renting out SpaceX Starlink kits on Facebook Marketplace for $25-$30/day, with one renter making $5,000 a month renting out seven devices. The service costs about $599 for the equipment and $110/month in the U.S., depending on the plan, and is available in over 55 countries.
Meta and Alphabet reported a 12% and 3% increase in ad revenue for Q2 to $31.5B and $58B respectively. Within ad revenue, e-commerce was the largest contributor to YoY growth, followed by entertainment & media.
Amazon created a new alert system and dedicated page within accounts to view recalls and safety alerts impacting items you've purchased. The company has been criticized in the past for being slow to remove recalled products, and the Consumer Product Safety Commission accused Amazon of failing to remove hazardous and defective items from its marketplace in 2021, so this is their way of being able to say “Nah uh!” in the future.
Klarna dropped its open banking brand, Klarna Kosma, a tool that gives clients the ability to plug into Klarna's API and access account statements and banking data, and is planning to move the sub-brand directly under the Klarna corporate brand. Regarding the name, the company said, “Look away, I'm hideous!” Oh wait, that was Cosmo…
DoorDash is adding Staples to its marketplace just in time for the back-to-school season as part of its efforts to expand into new retail categories. With the new partnership, almost 1,000 Staples stores in the U.S. are now available to shop from via the app.
Salesforce laid off 50 sales and customer service employees from its Irish offices to top off their 8,000 employee / 10% companywide staff reduction earlier this year. The additional job cuts reflect the company's intensified focus on profitability.
Fanatics partnered with Dazn Group to introduce purchasable merchandise on Dazn's sports entertainment app. Starting this year, Dazn customers will be able to purchase licensed team merchandise and sports apparel directly from an integrated store within the app.
Apple launched a campaign called “Pay the Apple Way” promoting its Apple Pay service as a solution to the inconveniences of carrying around a bulky wallet, struggling to find the right card, and feeling concerned about privacy. The ads appear across prominent street and mall placements in the U.K. and U.S. with messages like “Your watch is your wallet” and “Pay the secure way” and “Hungry for Apples?” (More details about this story on my LinkedIn post.)
10. Seed rounds, IPOs, & acquisitions
Rapyd, a fintech-as-a-service startup that provides APIs to enable payments, card issuing, and digital wallets, is acquiring a large piece of PayU, the payments group of Prosus that focuses on emerging markets, for $610M. The company is currently valued at $8.75B and has raised more than $806M from Fidelity, Dragoneer, General Catalyst, Target Global, and Stripe.
Traction, a Nigeria-based merchant solution platform that allows small companies to receive payments, manage accounts, and access operational tools, raised $6M in a round led by Ventures Platform and Multiply Partners. The company will use the funds to accelerate its growth in the country, build its team, and drive expansion outside of Nigeria.
Tradeshift, a formerly Denmark-based and now San Francisco-based platform for building B2B payments, supply chain procurement, and B2B marketplace services, raised $70M in a round led by HSBC. The company will use the funds to scale its business network, which currently stands at over 1 million users.
Google launched the Google for Startups Women Founders Fund, which will provide $100k in equity-free cash to six female-founded startups this year. The fund will focus on startups in India, Japan, and South Korea before expanding into other Asia-Pacific markets.
Cohart, a social marketplace to discover, buy, sell, and engage with art, raised $4M in a round co-led by Courtside Ventures and Slauson & Co. After 18 months in beta, the company has closed over $1.6M in sales with pieces going for an average of $7,000 each.
Buymed, a Vietnamese B2B e-commerce startup that connects pharmaceutical manufacturers, distributors, clinics, and local pharmacies, raised $51.5M in a Series B round led by the US International Development Finance Corporation and UOB Venture Management. The platform aims to give small drugstores an edge over larger drugstore chains, which are rapidly expanding into lower-tier cities and rural areas.
Levit, a South Korean e-commerce startup that operates Alwayz, a shopping app for users to buy food and clothes at low prices with free shipping, raised $46M in a Series B round led by DST Global Partners. Alwayz combines value-based shopping with gamified experiences like a game where players nurture virtual crops to earn real fruits and vegetables.
Pockit, a London-based app that offers financial services to underserved consumers, raised $10M in a round led by Puma Private Equity, bringing its total amount raised to $50M. The company will use the funds to enhance its credit building tools, introduce a BNPL product, and extend its platform into investments.
One Model, a platform that uses AI to help employers make decisions about recruiting, hiring, promotions, layoffs, and general workplace planning, raised $41M in a round led by Riverwood Capital. The platform can perform basic tasks like identifying areas where a company has shortage of skills or talent, all the way to calculating the cost of turnover and headcount while attempting to create a plan that reduces this cost over time.
Orbital, a London-based financial and crypto payments platform that enables enterprise businesses to integrate blockchain payments into their normal financial workflows, raised £5M in a round led by Golden Record Ventures. The company currently supports more than 80 clients and processes $250M in transactions every month.
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PS: iRobot is facing privacy concerns over its Roomba vacuums spying on customers. Apparently they've been gathering dirt for years….