Ever since I started this newsletter in January 2021, I've had my ear to the ground of the e-commerce industry like never before. Consequently a positive result has been that I've made some incredible stock picks!
I bought OLO on Mar 22 at $31.35 which is now up $40.33 (+28.58%) after reporting about their IPO.
I bought AFRM on May 17 at $50.61 which is now at $59.14 (+16.85%) after reporting on their stock tanking due to the Pelotan recall, and GLBE that same day at $27.04 which is now at $36.82 (+36.21%) after reporting on Shopify's investment in the company and their IPO.
Those are three names in the e-commerce industry that I'd never heard of before. I discovered these companies through my research with this newsletter and saw their potential.
The future mega multiplier growth opportunities in the e-commerce industry isn't necessarily with Shopify, BigCommerce, or other well known big players in the space, which already have their future growth factored into the share price (although I own stock in them as well), but with behind the scenes ancillary companies that help power e-commerce, however, aren't household names or media favorites. This newsletter is helping me discover those opportunities early on.
While I'm never going to tell you that you should buy a stock (because I'm not a financial advisor), by subscribing to Shopifreaks newsletter, you're receiving the same information as me each week that has led to these three great picks. By closely following the e-commerce industry, our community is discovering hidden gems and buy opportunities before they get reported on by mass media and retail investors take note.
One more reason to open our newsletters each week and recommend that your friends subscribe to Shopifreaks!
btw – So far I've had three wins that I've shared above, but don't worry, I'll also inevitably share my losses in the future too. If you ever have a great stock reco or company worth looking into, hit reply to my e-mails and let me know.
And now, onto the 20th edition of Shopifreaks newsletter….
1. Etsy is buying the fashion resale marketplace Depop
Depop launched in 2011 as a social network where readers of People In Groove magazine could buy items from the creatives featured in the magazine. They later pivoted to a fashion marketplace where everyone had the ability to sell their fashion wares. That sounds Etsy-esque, doesn't it?
Etsy is acquiring the London-based privately held company for $1.625 billion in mostly cash. The transaction is currently expected to close during the Q3 of 2021.
This will be Etsy's 6th acquisition, first $1 billion plus acquisition, and first acquisition in over eight years. Most recently they bought Reverb in 2013 for $275 million.
2. eBay will no longer be depositing seller funds to PayPal
After nearly a two-decade relationship, eBay informed sellers that soon, any funds they receive will no longer be credited to their PayPal account, and payouts will need to be directly deposited into a bank account.
While the new fee structure is currently ambiguous, eBay is promising sellers that whatever cut they take will mostly always be lower than the approximately 13% they are collectively paying eBay and PayPal.
eBay bought PayPal in 2002 and spun them off into their own company again in 2015 with an agreement that it would keep managing payments for a five-year transition period, which is now over. In preparation for the agreement ending, eBay began rolling out beta versions of its own payment processor in 2018.
3. Shippo is now valued at over $1 billion
The shipping platform Shippo raised another $50 million in capital, doubling its valuation to over $1 billion since its last $45 million round just three months ago. The company has 100,000 ecommerce clients and is looking to expand internationally through marketplace and platform partners.
CEO Behrens Wu commented, “ecommerce businesses that are not Amazon are trying to play catch up with the free and fast consumer expectations. We’re changing that from catch up to giving them a head start. We aggregate a lot of shipping volume to negotiate better rates with carriers, using analytics data to benchmark and make recommendations. Customers can focus on what they’re best at, running an ecommerce business, and we handle the shipping.”
Given the push towards headless commerce and universal APIs, I believe we'll start to see more one-dimensional e-commerce ancillary companies rise to unicorn status in the near future. Basically, “You do shipping and we'll do subscriptions and they can handle checkout.” The pro of this type of one-dimensional arrangement is that e-commerce merchants will have more options. The con is that there will be a lot of Live Chat support tabs open at once when integrations don't play nice with each other.
4. How many of the 15 largest e-commerce companies in China have you heard of?
E-commerce has blown up in China in recent years. 52.1% of the country’s retail sales will come from online stores in 2021, up from 44.8% in 2020. This in comparison to USA's 15.9% in 2020 and estimated 19.5% in 2021.
Scheherazade Noor took a look at China's 15 largest e-commerce companies. The companies are listed below alongside 2020 revenue in USD. How many of the companies below are you familiar with?
15. Douyin Flagship Store, Owned by ByteDance Inc. – $35 billion
14. Yihaodan, Owned by JD.com Inc. – $1.8 billion
13. Autohome Inc. – $1.33 billion
12. E-commerce China Dangdang Inc. – $1.37 billion
11. Xingin Information Technology (Shanghai) Co, Ltd – $1.45 billion
10. Momo Inc. – $2.30 billion
9. Jumei International Holding Ltd – revenue unavailable
8. Pinduoduo Inc. – $4.07 billion
7. 58.com Inc. – $11.29 billion
6. NetEase, Inc. – $11.29 billion
5. Vipshop Holdings Ltd – $15.61 billion
4. Baidu Inc. – $16.4 billion
3. Tencent Holdings Ltd – $73.56 billion
2. JD.com Inc. – $114.3 billion
1. Alibaba Group Holding Ltd – $109.48 billion
5. BigCommerce makes a push towards B2B
BigCommerce globally launched their B2B Edition with functionality aimed exclusively at B2B merchants. While their Enterprise edition previously offered B2B sales features and functionality, the B2B Edition enhances their offering through partner integrations packaged as one all-inclusive bundle.
BigCommerce's push towards B2B is aligned with a global trend of B2B companies embracing commerce technology. Gartner Inc estimates that 80% of B2B sales interactions between suppliers and buyers will occur online by 2025.
So is B2B about to catch up with the times? Does that mean wholesalers and distributors are no longer going to send me Excel spreadsheets and PDF order forms?
6. Speaking of BigCommerce…
BigCommerce's Chief Services Officer, Paul Vaillancourt, sold 13,638 shares of the company's stock in a transaction dated Friday, May 28th. The stock was sold at an average price of $55.51, for a total transaction of $757,045.38.
Prior to Vaillancourt's sale, insiders had sold 1,749,973 shares of company stock valued at $103,954,769 in the last three months, leaving 31.70% of the stock currently owned by corporate insiders.
BIGC has experienced much fluctuation in price since its IPO in Aug 2020, launching at an offer price of $24 and trading at open at $68 per share. From there the stock reached a high of $162.50 and low of $42.17. It's now hovering around $58 and has caught the recent attention of analysts who have given it a buy or hold rating, as well as institutional investors who have increased their positions.
What are your thoughts on BIGC? Hit reply to this e-mail and let me know if you're BULL or BEAR on the stock. Disclosure: I'm in at an average cost of $55.99/share.
7. Get ready for e-commerce on WhatsApp & Instagram messages
During Facebook's F8 Refresh conference for developers, held virtually on June 2nd, Facebook announced its intention to launch tools that will enable seamless commerce interactions between businesses and customers on Instagram and WhatsApp.
VP of Platform Partnerships, Konstantinos Papamiltiadis said, “Every day, more than 175 million people message a WhatsApp Business account to discuss products and get customer support. As more people turn to WhatsApp to connect with businesses, we’re announcing new updates that will make it easier for businesses to get started using the WhatsApp Business API and for people to easily chat with these businesses.”
Unless you've lived or traveled outside the US, you might not be aware of the impact and dominance of WhatsApp in many countries. Here in Ecuador, for example, where I'm writing to you today, WhatsApp accounts for almost 100% of my interactions with friends and businesses. Want to rent a house? Message the landlord on WhatsApp. Does this auto body shop fix transmissions? Message the mechanic on WhatsApp.
Part of what's been responsible for the slower adoption of e-commerce in foreign markets, especially Latin America, is that customers and businesses aren't ready to pay with or accept credit and debit cards. Facebook, however, is in a prime position to catapult e-commerce into these markets with their ability to bypass traditional debit/credit transactions and connect customers and businesses digitally through their own internal payment processing that connects directly to a user's bank account.
Similar to how Latin American markets sort of skated by the desktop Internet era that USA experienced in the 90s and early 2000s and jumped straight to mobile, Facebook could similarly bypass the credit card era that USA had and take users straight to digital account-based payments via the apps that already dominate their business and personal communications.
8. Pakistan's e-commerce marketplace Tajir raises $17M
Tajir was formed by two brothers, Babar and Ismail Khan in 2018, and targets grocery stores commonly called “Kiryana” stores in Pakistan. Tajir currently only serves small grocery stores in Lahore and central Punjab, however intends to expand its operations to Karachi through their latest round of investment capital.
Tajir aims to revolutionize the grocery segment in Pakistan with a primary focus on enhancing the supply chain operations of Kiryana stores, of which 90 percent of Pakistan’s retail economy flows through these small grocery stores.
9. BLS International signs exclusive 3-year agreement with Amazon
BLS Centers will reserve the product for the consumer on Amazon.in, allowing the customer to pay for the product in cash upon pickup at their 10,000+ locations. The agreement will provide last-mile connectivity to customers throughout India, particularly in areas where customers lack digital payment methods.
10. Wix says sorry for removing Hong Kong pro-democracy website
A Hong Kong pro-democracy website was taken down for 3 days after Hong Kong police warned Wix, an Israel-based company, that it breached a national security law
In the request, police stated that messages on the site were “likely to constitute offences endangering national security and Wix could be prosecuted if it allowed the site to remain.”
Wix obliged the request, but after public backlash, they reviewed their initial screening and came to the conclusion that, “the website never should have been removed and we would like to apologize.”
Wix also promised to review their screening process to ensure that, “mistakes such as this do not repeat in the future.”
11. Shopify invested in Bench Accounting
Shopify was part of a $60 million funding round led by Contour Partners, Altos Ventures, Inovia Capital, and Sage Group.
Bench streamlines the accounting process for 11,000 U.S. small businesses by automating the intake, categorization and processing of their data to prepare financial statements and file their taxes. Their human bookkeepers also review discrepancies and review the statements before sending them to customers.
Bench has positioned itself to become the accounting partner of choice within other small-business online platforms such as Shopify, Stripe, and Freshbooks.
12. Wayflyer raises $76M and secures $100M in debt facility
Wayflyer, a Dublin-based company that provides funding for e-commerce companies, will use this latest round of funding to support marketing, product development, and international expansion.
Wayflyer CEO, Aidan Corbett, commented, “we’ve only just scratched the surface of this enormous market. The number of direct-to-consumer brands launching every day continues to amaze us and we’re excited about the next stage of our mission to become the go-to-growth platform for merchants looking to realise their potential.”
Wayflyer faces enormous competition in this space including direct funding integration by Shopify Capital, which we reported has provided $2B in funding to merchants over the past 5 years, as well as Amazon and eBay, both which offer their own internal lending to merchants.
13. Microsoft Audience Network gets an e-commerce upgrade
In the wake of Google Shopping Graph announcements and Google integrations with major e-commerce platforms, Microsoft announced that later this month, they will be domestically rolling out their Similar Audiences feature, which finds new customers by looking for searchers similar to the ones on merchant's remarketing lists.
Microsoft also announced its new Microsoft Smart Shopping, a feature that simplifies the Shopping campaign creation process, as well as a simpler Google Import process for importing Google Ad campaigns.
Recently it seems that Google has been playing e-commerce search market share catch-up, which means that Microsoft will have to play e-commerce market share catch-up-catch-up!
14. How e-commerce is preparing for a cookie-less future
E-commerce and online marketing up until now has relied on cookies for ad targeting, measurement, and cross-channel attribution — but all that is about to be increasingly more difficult.
Search Engine Journal reports on the changing landscape of online commerce and the move towards a cookie-less future, as evidenced by Google's announcement to remove support for 3rd party cookies in Chrome, and Apple's recent iOS 14.5 update's affect on Facebook.
While some may look at these moves by tech giants as valiant steps towards a privacy-centric future online, others may see it for what it also is — sealing the walled garden that Google, Apple, and Amazon have built around our data which helped lead to their dominance.
SEJ reporter Ben Wood wrote, “This challenge could actually incentivize brands to dedicate the majority of their ad investments within one platform to reduce the fragmentation of data and insights. Platforms like Google are in a great position to offer this as they have coverage across the world’s largest display, video, and search platforms. The irony here could be that increased user privacy leads to big tech platforms capturing even greater revenues.”
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See you next Monday!
Paul E. Drecksler
PS: I went to the beach yesterday, and based on my location, Google asked me to rate the Sun. I gave it 1-star.