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#135 – Google Tracking Kids, Amazon’s Surprise Fulfillment Fees, & Dell’s Fake Upgrade Discounts

by | Aug 21, 2023 | Recent Newsletters

Are Google and other big tech companies tracking kids' browsing activities (again)? Or is Adalytics up to its old antics of creating clickbait allegations? 

Should Amazon sellers be charged a fee for NOT using Amazon's fulfillment service?

Can AI technology predict that I gained weight and sell me a larger sized sweater? 

Will influencers work for “exposure” on Amazon?

Answers to all these questions and more in this week's 135th Edition of Shopifreaks. Thanks for subscribing and sharing.

Stat of the Week 📈

48% of consumers made a recent online impulse purchase. 56% regretted the purchase, but 45% kept it anyway. – According to SimplicityDX

Share this week's stat on X & LinkedIn.

1. Is Google tracking children again?

A new report from Adalytics alleges that Google and Youtube tracked children across the Internet, undercutting a federal privacy law called The Children's Online Privacy Protection Act, which requires services to obtain parental consent before collecting personal data from users under age 13 for purposes like ad targeting. 

This isn't the first time Google's been under heat for tracking children online. In 2019, YouTube and Google paid a record $170M fine to settle accusations from the FTC and New York that it had illegally collected personal information from children watching kids’ channels and profited from that data collection.

YouTube said at the time that it would stop collecting data and serving personalized ads on viewers of children's videos (no matter who's watching them, including adults). However Adalytics claims that the company is still doing both as of July 2023.

Google called the report's findings “deeply flawed and misleading” and said that it was useful to run ads for adults on children's videos because parents who were watching could become customers. Google also added it did not have the ability to control data collection on a company's website after a viewer clicked on an ad, which is fair.

In response to the allegations, IPG Mediabrands, which manages $40B in marketing investments worldwide, ran its own investigation and found that at least one of its clients had its adult-targeted ads featured on a “made for kids” channel. (btw – “adult-targeted” doesn't mean something disgusting. It could just mean products for adults like cars.)

To avoid potential COPPA violations, the media company advised its clients to temporarily pause campaigns using Google's Performance Max ad type, which doesn't provide advertisers with granular placement reports. In other words, if Performance Max campaigns were serving adult ads on kids products, the advertisers themselves wouldn't have any way of knowing unless they happened to watch a kid's video and see the ad, or if someone reported it to them. However at that point, they'd already be in violation of COPPA.

In response to the Adalytics report, Google released a blog post outlining their “strict privacy standards around made for kids content.”

In other kid-friendly Internet news… Illinois became the first state in America to pass a law protecting child influencers and social media stars, making sure they are paid for appearing in videos on monetized platforms like TikTok and YouTube. And if they're not paid, they can sue. 

2. Shipping fees for 3rd party sellers

Amazon is adding a new 2% fulfillment fee for members of its Seller Fulfilled Prime program, which allows merchants to ship their own packages, but still include the Prime badge on their listing.

Quick recap: There are a few different ways to ship products sold on Amazon: 

  1. Fulfilled by Amazon – where Amazon stores your products in their warehouses and ships each item after it's sold. They charge a storage fee and fulfillment fees for this service, which automatically includes Prime shipping benefits.
  2. Seller Fulfilled Prime – third party sellers store and ship their own products, but adhere to Amazon's strict guidelines regarding fulfillment and shipping time, which allows them to include the Prime badge on their listing. For all intensive purposes, it's the same end shipping benefit to customers (fast and free). 
  3. Seller Fulfilled – third party sellers store and ship their own products, and they decide what to offer in terms of fulfillment times and shipping options. There are still some minimum standards that sellers must adhere to, but for the most part, they set their own shipping settings. 

This new 2% fulfillment fee only affects customers in category #2 Seller Fulfilled Prime. Previously there was no fee to participate in the program, and sellers simply had to adhere to Amazon's fulfillment and shipping policies to participate. However Amazon says it's adding the fee to help offset the costs of developing and running the program. 

In June, I reported that Amazon reopened the Seller Fulfilled Prime program, which was launched in 2015 as invite-only, but paused for new sellers in 2019 after the company realized that only 16% of Seller Fulfilled Prime orders in the U.S. were meeting Amazon's two-day shipping promise.

I mentioned at the time that it wasn't just Amazon who was disappointed with the program back in the day. The consensus among sellers was that SFP simply does not work for single warehouse businesses without incredibly huge margins, and even then, the upside may not be worth the expense.

Amazon said that the re-launch of the program should alleviate most of their concerns, however, I guess that comes with a 2% concern alleviation fee. 

In other Amazon shipping news… the company is restarting its shipping service for external deliveries that competes directly with FedEx and UPS.

Amazon Shipping began in 2018, but was paused in early 2020 at the start of the pandemic because the company was flooded with its own orders that it could barely keep up with during lockdown. 

Amazon Shipping is now available in the U.S. for both packages sold on Amazon's website and items from other marketplaces and selling channels. Now you can sell your item on Walmart.com and have it delivered in an Amazon truck!

Walmart should just buy FedEx at this point. It'd be a win for both companies who offer the logistics and fulfillment complement that the other needs to best compete with Amazon. See my LinkedIn rant about that and let me know your thoughts.

3. This partnership is a true fit…

My headline joke will make sense in 3.. 2.. 1…

Shopify and True Fit have partnered up to offer mechants the ability to utilize the True Fit Fashion Genome solution, a platform which lets consumers create an online fit profile to help them determine which clothes they find online will work best with their particular size and body shape.

Here's how it works:

  • Customers create an online fit profile by entering basic info about their body type and preferred retailers and apparel brands.
  • Customers add a “reference item” for each category so that True Fit can compare what they are shopping with what they already own across different categories of apparel.
  • True Fit then provides AI-based recommendations on menswear, womenswear, kidswear, unisex apparel, footwear, swimwear, and intimate apparel.

Shopify brands currently utilizing True Fit include Few Moda, Greyson, Toast, and Dia & Co., and through the partnership, all brands are now being offered a seven-day free trial of the tech.

Shopify and True Fit claim that connecting to the True Fit Fashion Genome network helps remove shopper hesitation around fit, deliver consumer confidence and conversion, and reduce fit-related returns.

One question though — what if my True Fit profile still says I weigh 195 lbs? If the sweater I purchase is too tight because I haven't weighed that much since 2020, is that my fault or True Fit's fault? LOL

True Fit's platform is used by 82M users and tens of thousands of brands and retailers globally.

Is your brand leveraging True Fit's tech? Have you used it as a customer? Hit reply and let me know if it works well. 

I've been wearing khaki pants and a blue shirt almost every day for the past decade, so I'm not the biggest apparel shopper and haven't tried it myself. 

4. Boost your Shopify store with OpenStore Accelerator

OpenStore, a Shopify aggregator founded in 2021, launched a new offering for Shopify merchants — this time catering to the stores that they're not quite ready to buy yet. 

Typically OpenStore looks to acquire Shopify stores with annual sales ranging from $1M to $10M, and now they're looking to help smaller stores get there.

The new program called OpenStore Boost is an accelerator for Shopify merchants generating between $50k and $500k in sales annually.

Merchants can apply to the program starting this Wednesday, and five will be selected to participate in a 10-week program to optimize their marketing strategy, including help with ad creative and custom insights reports.

OpenStore, in exchange, is charging a fee equal to “a small percentage of net sales” to cover its costs.

The campaign is brilliant. Even though OpenStore is only accepting five stores into its first Boost program, it'll probably receive hundreds, if not thousands, of applications from Shopify store owners, giving them a sneak peak into revenue of stores that could potentially be on their acquisition radar one day. Talk about prospecting!

OpenStore isn't hiding the fact either. Founder Keith Rabois said, “These brands are smaller, but if we can help them grow, then they'd be perfect for acquisition down the road whenever the brand owner wants liquidity.”

Many of the stores could also be fits for OpenStore's Drive program, which allows Shopify merchants to pass off the day-to-day operations of their store while retaining full ownership. 

OpenStore currently has about 50 brands in its portfolio, most of which have come through Drive rather than through its other acquisition channels. This new Boost program could be a new way to funnel applicants into Drive, which could in turn eventually become acquisitions. 

5. Amazon is testing a new star rating system

Amazon is testing a new star rating system in India, Germany, and other regions that's making it harder to gauge how buyers are liking a certain product.

The test system appears to show a product's weighted average rating as single yellow star next to its image in search results. It also only shows the percentage of 5-star ratings the product has received, as opposed to the number of 5-star reviews.

If looking at stars online quickly while browsing items, customers aren't able to easily tell at a glance whether a product's average rating is 5 or 3.5 because both scenarios are represented by a single yellow star. (However to be fair, the numerical weighted average is right next to the star.)

In these test scenarios, Amazon hasn't completely removed the ratings breakdown and details, they've just pushed the info farther down the page to highlight the new average rating system instead.

You can see some screenshots of the new system on Android Police.

Amazon confirmed the tests, but noted that testing a feature doesn't always lead to a wide release. 

The obvious thought here is that Amazon wants to intentionally obscure ratings above 3.5 stars to encourage shoppers to purchase items in that range.

However is that in their best interest? Couldn't that lead to more returns from unsatisfied customers who didn't realize they were purchasing a lower rated product?

Or perhaps obscuring the rating system is meant to discourage sellers from engaging in unscrupulous blackhat activities to boost their 5-star ratings, since the impact of their actions would be diminished? (I covered the Amazon seller black market in last week's edition, story #4.)

I also reported last week (story #5) that Amazon was experimenting with AI powered review summaries that analyze reviews and automatically spit out a short paragraph that includes high-level info about a product, points out specific product details, and highlights if many buyers have a positive view of specific features of the product.

At what point will Amazon replace their entire review system with a message that reads, “It's good. Trust us.”

Personally, I prefer public metrics like return rate, number of verified reviews, and average price over the previous 12 months to help with my purchasing decision making — some of which Amazon offers. But each to their own. 

Speaking of star ratings… Are you enjoying Shopifreaks? Does this newsletter add value to your life each week? 

If so, please write a Google review for Shopifreaks. Your reviews go a long way in helping me reach new readers. Please and thank you. 

6. Levi's to triple e-commerce sales

Last year, Levi Strauss & Co announced its goals to expand its D2C business to account for 55% of its total revenue, and triple e-commerce sales by 2027. The company is already making progress: 

  • For the first half of 2023, DTC accounted for a record 44% of Levi's total sales, up from 36% in 2021.
  • Levi's DTC net revenue for the three months ending May 28 increased 13%, largely due to e-commerce.
  • In 2020, the company debuted its first digital app and loyalty program with free shipping. They also launched curbside pickup, appointment scheduling, and pickup in store.
  • The company brought on Jason Gowans as its first-ever chief digital officer in February, who's been tasked with bringing together the company's engineering data, AI and digital product management, similar to what he did at Nordstrom previously.

In regards to choosing what to tackle first, Gowan said in an interview with Modern Retail, “A lot of listening, a lot of digging into the data and a lot of working with the team. And from that emerge three things that we need to focus on to get us to 3x the e-comm business.”

He went on to say that this would involve a focus on fundamentals like product discovery experience, driving a better in-stock experience for consumers, expanding their assortment, and differentiation.

On the subject of increased assortment, Levi's is still exploring the idea of expanding its non-denim bottoms selection.

And when asked about the metaverse, Gowans said that it all comes down to whether or not it would help the brand create a better consumer experience. “If the consumer wants to shop in the metaverse, then for sure, we're going to test that. For right now, though, again, we're focusing on the fundamentals.”

7. Dell's fake upgrade discounts

Dell Australia has been hit with a $10M AUD fine for making shoppers believe that monitors would be cheaper if bought as an add-on item, even though they were selling them at the same price (or higher) as they usually do. The Australian Competition & Consumer Commission said the company sold 5,300 monitors this way.

In other words, when a customer is in the process of buying a desktop or laptop computer, Dell typically presents at-time-of-purchase upgrade opportunities on memory, storage, software, and computer peripherals like monitors, mice, external keyboards, etc. 

The reasonable assumption, when customers see an upgrade offer that features a retail price slashed with a discounted price after it, is that they are being presented with a special offer to bundle these upgrades with their computer at the time of purchase. However turns out, that wasn't the case. 

In some cases, consumers paid more for the add-on monitor with the slashed price than they would have paid if they bought it as a stand-alone product. Yikes, Dell! (Writing this from a Dell XPS 15 that I purchased with a slash through the price.)

The ACCC noted that Dell Australia's website would use savings-signaling lingo like “Includes x% off,” “Total Savings”, and “Get the best price for popular accessories when purchased with this product.” — which intentionally added to consumers assuming that this was a special deal.

This type of misleading advertising violates Australian Consumer Law, and now Dell Australia is responsible for providing full or partial refunds to customers who were duped by the monitor “promotions”.

Let this be a lesson to any company that wants to mislead consumers in today's world. Someone is always watching!

8. Amazon's “big” offer

Amazon put an offer out to influencers that's rightfully not being received very well. The worst part is — they even used the word “exposure” in the e-mail! (An influencer's least favorite form of payment.)

The company sent out an e-mail offering influencers “up to $12,500 for 500 videos that meet the criteria ($25 per qualifying video).”

The videos must feature two or more Amazon products from the same category such as:

  • A product review of two or more products
  • A product comparison video
  • A ranking video listing the best products in a certain category
  • Gift inspiration featuring multiple products

Amazon is soliciting the video to boost its TikTok-style “Inspire” shopping feed, which I covered in detail in last December. The videos are due by Sep 22nd, 2023 and capped at 35,000 submissions.

First of all — LOL. Second of all — what? Is Amazon out of their minds?

As a video creator myself, I wouldn't even setup my tripod for $25, let alone plan, script, record, edit, write a description, tag products, and upload a video! 

However to be fair, Amazon may be looking for less polished / highly produced videos, and more “Hey guys!” / off-the-cusp videos, and there is also the possibility of earning onsite commissions on the videos you upload — but nonetheless, video creation takes time and commissions aren't guaranteed.

Plus, who's buying the products? Or am I supposed to research, select, purchase, receive, unbox, and try 500 products in the next month before the deadline?

If Amazon really wants to kickstart their Inspire feed with quality videos that keep customers coming back for more, they're going to have to better align with influencers' goals and business models. Whoever created this campaign must have never actually made a product review video themselves before. Because otherwise they'd know that good ones take time.

9. Other e-commerce news of interest

Amazon will begin to serve ads across third-party platforms like Pinterest and publishers like BuzzFeed, Hearst Newspapers, Lifehacker, and Mashable. All ads on the third-party platforms will link back to Amazon product pages, and will only showcase products that are in stock and offer Prime delivery, ratings, and accurate pricing info. In May this year, I reported on Pinterest and Amazon entering into a multi-year strategic ad partnership, which was set to take place over multiple quarters, starting now apparently. 


Afterpay launched a new brand campaign called “Afterpay where you wouldn't believe”, which features a troll accepting payment to cross his bridge with Afterpay from a travelling family. And was that an ASIP reference about paying the troll toll? If so, top notch! 


DHL eCommerce opened a new 352,000-square-foot distribution center in Melrose Park, Illinois, which contains an automated Honeywell cross-belt loop sorter capable of processing up to 40,000 parcels per hour. DHL has recently built or relocated eleven warehouses with seven more expected next year. 


eBay and Etsy, who's celebrity couple name is Ebstay, have begun running tests that push product descriptions down the page, causing concern among sellers that buyers are either not purchasing the item because they can't find the description, or purchasing the item without having read the description, which leads to complaints that items are not as described. Additionally, eBay ran tests splitting seller listing info between sponsored listing ads, leading to a lot of angry sellers. 


Amazon's aviation division, which employees eight airlines, can't keep pilots due to low pay. At Air Transport International, the primary airline flying for Amazon, 282 of its 575 pilots have resigned in the last year and a half, citing low pay as the primary reason.


TrueLayer, a fintech platform used to build financial apps that connect to bank data, verify accounts, and access real time transactions, appointed former PayPal director Michael Brown as its new head of e-commerce. In his new position, Brown will be tasked with leading the company's vertical push, which is similar to his role in PayPal during the previous ten years. 


Riskified and Mastercard partnered up to combine insights from Mastercard's cybersecurity products with Riskified's transaction and identity network. The partnership follows Mastercard's integration with commercetools earlier this month.


PayPal named Alex Chriss as its next CEO, to replace Dan Schulman next month who will remain on PayPal's board until the next annual meeting in May. Chriss currently serves as executive VP and general manager of Intuit's Small Business and Self Employed Group, and is known for his strong record of deal making at the company during the past two decades.


Twiga, a Kenyan B2B e-commerce platform, is laying off 283 employees, or a third of its 850 workforce, in a second round of layoffs as it pushes for a “lean, agile and cost-effective organization.” The company also noted that its making new strategic operating adjustments including doing away with in-house delivery, which was supported by leased trucks, and hiring contractors on a per-use basis instead. 


Setapp, an app subscription service, is preparing to launch an alternative app store in preparation for new EU regulations coming into effect next year that should allow users to install third-party apps on iOS without having to go through Apple's App Store. The company claims to have over 30 partners onboard prepared to offer their apps and is calling for more developers to submit their own. 


Meta is preparing to launch a web version of its Threads app sometime this week, in its latest attempts to get users back onto the platform. Since launch, when Threads became the most downloaded non-game app in the past decade with over 100M downloads, usage has dropped significantly, now hovering around 10M active users. 


Booksellers, authors, and antitrust activists are urging the DOJ and FTC to investigate Amazon's domination of the book market, including both its size and its power to promote certain titles on its site and bury others. Amazon accounts for more than 40% of physical books sold in the U.S., and more than 80% of e-books sold, and is one of the largest audiobook producers and retailers in the world, leaving publishers and authors beholden to its distribution and rules.


Recent investigations by OSHA and WIRED revealed that Amazon's on-site first-aid clinic at its warehouses is prioritizing keeping employees working instead of referring them to appropriate medical care. The report interviewed 11 on-site medical representatives who claimed the company's system jeopardizes the health of its employees by allowing them to return to work with injuries.


Amazon Music Unlimited is raising the price for its individual plan from $9 to $10 per month, or $89 to $99 per year, while the family plan is going from $16 to $17 per month or $159 to $169 per year, marking the second time in the previous 12 months that Amazon has raised the price of its music service. YouTube Premium, Tidal, Apple Music, Apple TV+, and Spotify have also raised their subscriptions in the past year.


Baby boomers and seniors use BNPL less often than any other generation (except newborn babies), however they use credit cards more than anyone else, according to a study by PYMNTS and Sezzle. While they choose to use credit cards for 73.7% of their purchases, boomers and seniors only chose to use BNPL 5.9% of the time.


Demoralized Amazon workers are demanding data, not anecdotes, to support the company's return-to-office policy, after Adam Selipsky, head of Amazon's cloud computing business, wouldn't give employees any data to back up the decision. Some workers have expressed that they feel “demoralized, distracted, and undervalued” as they struggle to stay focused and motivated returning to the office. To be fair to Amazon though, no-one ever promised that the work-from-home scenario was permanent and forced workers to buy homes in Napa Valley. 


A Sriracha shortage, which has been ongoing since 2022, is leading some third-party sellers to list the sauce for sale on Amazon and Walmart for up to $26 a bottle. The shortage is unfortunate, but least they're not being sued for not actually being made in Sriracha!

10. Seed rounds, IPOs, & acquisitions

Splitit, NY-based BNPL firm that offers embeddable installment payment options for merchants, raised $50M from Motive Partners, comprising of two $25M installments. (Well, isn't that ironic?) The first portion will be invested after shareholders approve of Splitit’s voluntary delisting from the Australian Securities Exchange and change the company’s domicile from Israel to the Cayman Islands, and the second if the company hits 2023 financial performance milestones, which they say they are on track to exceed.


MSG Distributors, a US-based regional distributor that caters to gyms, health food stores, pharmacies, and other industries, acquired Boxed.com, a bulk goods marketplace that aimed to offer an online version of Costco or Sam's Club without the membership fee, for an undisclosed amount. Boxed has had a wild ride since it launched in 2013, having rejected a $400M buyout from Kroger in 2018, completing a reverse merger and acquiring Seven Oaks Acquisition in 2021 to begin trading on the NYSE, falling out of an acquisition deal in Jan 2023, and finally entering Chapter 11 earlier this year after news broke that the company held the majority of its cash deposits and assets in Silicon Valley Bank. 


Wonder Brands, a Mexico-based Amazon and MercadoLibre merchant consolidator that later pivoted into brand development, raised $15.5M in Series A round led by Nazca and IDB Invest, with an extension planned for up to $20M to give the consolidator $40M in funding. The new investment will drive the company's expansion from Mexico into South America to capitalize on the rapid e-commerce growth in Latin America.


Clari, a AI platform that helps sales teams streamline operations and improve efficiency via automation, acquired Groove, a San Francisco-based competitor that enables users to create workflows that automate repetitive customer-facing tasks like sending promotional e-mails to leads. Clari will integrate Groove's technology into its platform following the acquisition, and Groove's co-founders will join the team to oversee a product line that the company will build using Groove's tech. 


Param, a Turkish fintech that offers payment solutions, customer loyalty programs, BNPL, and other banking services to consumers and small businesses, acquired Twisto, a Czech BNPL firm from Zip, its previous owner, for an undisclosed amount. The acquisition will allow Param to leverage Twisto's European licenses to offer its embedded financial solutions in the UK, Germany, Netherlands, Czechia, and Poland.


Klar, a Mexico-based fintech platform that offers savings and credit solutions, obtained a $100M debt facility from Victory Park Capital to expand its credit products within Mexico. The company aims to expand into new credit offerings for Mexican consumers to complement its existing cash-back cards, mobile payment offering, and BNPL services.


Sezzle, a BNPL provider, began trading on the Nasdaq under the ticker symbol SEZL to complement the existing common stock trading on the Australian Securities Exchange under SZL. The company noted that the Nasdaq listing will not issue new Sezzle shares and is not a public offering, and will just provide a new exchange to trade its stock on.


Ghost, a B2B members only marketplace for surplus inventory, raised $30M in a Series B round led by Cathay Innovation, bringing its total amount raised to $68M. Since its $20M Series A round last year, the company has doubled its team and grew its membership base to over 1,000 members, while increasing inventory by over 500%. 


Aldi announced plans to acquire Winn-Dixie and Harveys Supermarket from Southeastern Grocers for an undisclosed all-cash amount. The deal includes approximately 400 grocery stores across five Southeastern states and helps Aldi continue its aggressive growth trajectory.

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See you next Monday,

PAUL

Paul E. Drecksler
www.shopifreaks.com
[email protected]
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PS: What kind of music is best for a fishing trip? Something catchy.

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