#116 – PayPal’s on the rise, Buy with Prime is not

by Shopifreaks | Apr 10, 2023 | Recent Newsletters

Big news this week… I had a baby girl! This is Mia Alejandra and we're going to travel the world together. She was born April 5th, and every day her world has grown just a little bigger.

Mia was kind enough to sleep for a few hours today so that I can bring you the latest e-commerce news.

This week I cover PayPal's new integrations and partnerships with big names in the industry, a progress report on Buy with Prime a year after its launch, and Walmart's newly revealed automation plans.

I also share stories about Facebook adding videos to Marketplace listings, Amazon's commitment to supporting local content in India, plus a look at the current state of venture capital deals in our industry.

All this and more in this week's 116th Edition of Shopifreaks. Thanks for subscribing and sharing!

Poll of the Week 🗳️

🛍️ Have you bought or sold apparel items on a secondhand marketplace in the past 12 months?

🗳️ Take the Twitter poll.

Last Weeks Poll Results: I asked if Amazon should split up into multiple entities like Alibaba. 72% voted “YES Amazon should split up”, while 28% voted “NO it needs to be big.” [View Poll]

Stat of the Week 📈

One in three apparel items bought in the last 12 months was secondhand, with 37% of consumers spending more of their apparel budget on secondhand items than before. – According to Forbes

One of my readers, Zoe Rowswell, founder of Tern Eco, recently taught me a thing or two about the secondhand market.

She wrote, “Whilst resale is likely to be the primary ‘second life' solution for many retailers/products, not every product is suitable for resale, and resale is not the only second life option available.”

Other second life options include recycling, donation, and upcycling, all which keep a product out of landfill for a while longer (or indefinitely).

Share this week's stat on Twitter & LinkedIn.

1. PayPal rolls out new integrations

PayPal had a busy week releasing new features and partnership integrations. Here's a recap:

PayPal + Bold Commerce

PayPal and Bold Commerce collaborated to launch a new headless checkout integration with Magento Open Source and Adobe Commerce.

Bold CEO Peter Karpas discussed with PYMNTS about opening the door to tailored checkout experiences that focus on what he calls “the royal trio” — ie: conversion, AOV, & LTV — rather than a single-minded obsession with driving conversions.

Karpas gave two example scenarios:

1) “On my Instagram, I click the ad, it goes to a product page that has one-click checkout in it. That’s a flow when you want to be driving conversion as much as possible, because they’re coming from Instagram, and if you give them any problems, they’ll probably just be like, oh, let me go to my next feed.”

2) For someone on a Google hunt for a very specific product, Bold detects the long-tail search behind it. “They want the product. At that point, one-click checkout makes no sense at all. You want to be driving average order value, turning that dial. In that case, you want a checkout flow that is all about driving upsell and potentially cross-sell.”

PayPal + Apple

PayPal introduced Apple Pay checkout compatibility.

Companies that have setup Advanced Checkout integration through PayPal, which provides additional customizations and payment options over Standard Checkout, can now take Apple Pay as a form of payment.

Currently Apple Pay is only supported for one-time purchases, but recurring payment support is coming shortly.

Last year, PayPal and Venmo announced support for Apple’s tap-to-pay-on-iPhone solution, marking the beginning of a new business relationship between the two companies.

Save Options For Retailers

PayPal also upgraded its payment system with a new feature that allows customers to save their payment preference for that particular retailer.

That way if a user is shopping from a business frequently, they won’t have to enter their card details every time. A PayPal account is not needed for that feature.

Automatic Card Updates

PayPal developed support for an account updater and network token service, which automatically updates details when lost or stolen cards are reissued.

Wait, so does that mean that if someone stole my card and used it on a particular retailer, and I marked the card as stolen, PayPal would automatically update that same retailer with the new card so that the thief can continue making purchases?

I'm hoping PayPal has built that scenario into their security equation by automatically not updating cards with the retailers where the stolen info was used.

IC+ Pricing

Lastly, PayPal is introducing the IC++ pricing model for businesses, which consists of interchange fees, card network fees, and markup fees (as opposed to a flat rate) so that merchants can incentivize customers into using cards by a specific bank or network.

PayPal + Live Nation

One more big move for PayPal this week, the company partnered up with Live Nation to become Ticketmaster's preferred payments partner. The partnership will let fans buy tickets via PayPal, Venmo, or using the company's Pay Later products. It also makes PayPal Braintree Ticketmaster's primary global payment processor.

Probably a good move financially since Live Nation and Ticketmaster control 70% of the market, but not the best move reputationally given the scrutiny that the event companies have been under this past year for their anti-competitive practices.

2. Who's using Buy with Prime?

A year after launching in April 2022, only a few hundred brands have adopted Amazon's Buy with Prime checkout and fulfillment service.

Amazon is aggressively pushing agencies in its network to get brands onboarded and has worked out some brand partnerships with the promise of co-marketing, but adoption has still been slow.

During its first year, Amazon has addressed many of Buy with Prime's initial limitations:

Added functionality to support size/color variations.
Added the ability to sync orders and customer data with the brand's e-commerce website.
Brands can now show Amazon reviews on their websites.
Amazon introduced conversion tracking with Facebook and Google pixels.
Amazon overhauled the experience for non-Prime members, now offering them to join Prime instead of not being allowed to progress.

In April 2022 I reported that Amazon launched its Buy with Prime service on an invitation only basis. By September, Shopify was warning merchants that Buy with Prime was an unsupported external checkout and enabling it was against their TOS. In January, Amazon began expanding the service nationwide to US sellers. Most recently in March, I reported that the two companies were in talks to add Buy with Prime service as a Shopify payment / fulfillment partner, but so far nothing has come to fruition.

Some say that Shopify is what's standing in the way of Buy with Prime's immediate success, however I think that idea ignores the fundamental problems with Buy with Prime. Although Shopify is warning merchants that the checkout system is unsupported, I haven't seen any reports of merchants having their stores shut down for implementing it.

The reality is that switching fulfillment partners (for those not already using FBA) is a much bigger ask than experimenting with a new payment gateway. There's a limited slice of the merchant market who are already using FBA for all their products who would be the best fit to try it out.

Alternatively Amazon's Buy with Prime would be a great fit for Amazon Sellers who exclusively sell on their marketplaces to branch out into their own e-commerce storefronts — however Amazon has minimal incentive to encourage that group of sellers to do so since it would mean sending sales away from their marketplaces where they earn the most fees.

The other major roadblocks with using Buy with Prime are:

It doesn't allow shoppers to order more than one product at a time, which is frankly dumb. V1 of Buy with Prime never should have launched without that ability. No merchant wants to trade AOV for BWP, especially since there have long been existing integrations to use FBA as a fulfillment partner, but not use Buy with Prime as a checkout solution.
Larger retailers are wary of sharing too much information with Amazon, which has been known to compete against its own sellers. That's why I mentioned earlier that Buy with Prime makes the most sense for existing Amazon FBA Sellers who don't already have their own e-commerce shops and want to branch out.

What's been your experience with Buy with Prime? Are you one of the developers or marketers who have worked on one of the hundreds of Buy with Prime stores in the past year?

Hit reply to this e-mail and let me know what your experience has been.

3. BigCommerce Wins Two VIP Awards for Solution Provider Excellence (Sponsored)

Every year the Australian Vendors in Partnership (VIP) Awards celebrate solutions that power the retail ecosystem, and the new ways that partnerships were formed and challenges were overcome.

The awards were established during the NRF Retail Week in New York 2020 and are now brought to Australia to celebrate vendors forging stronger relationships and giving retailers a formal way to recognize partners with outstanding shared success measures and service level.

BigCommerce is proud to share that the company won two 2023 VIP Awards including:

The VIP Challenger Award
Best Cross-Industry Collaboration/360 Degree Solution

BigCommerce was recognized with these prestigious awards for its innovative Open SaaS and partner-centric approach that equips merchants with a composable foundation for ambitious growth.

Shannon Ingrey, VP and general manager, APAC at BigCommerce said, “This recognition is a fantastic acknowledgment of BigCommerce’s focus on empowering merchants to innovate and remain adaptable amidst shifting economic conditions. As BigCommerce leads a new era of ecommerce, we are committed to driving innovation for our merchants by giving them freedom and flexibility to combine technologies from our best-in-breed partner ecosystem to create a customised and robust stack that grows as they grow, and respond unexpected change. Congratulations to all of the finalists and winners of these prestigious VIP Awards.”

The award ceremony was held at Retail Global’s Award Gala on Monday 27 March 2023. Read the full list of 2023 VIP Award winners here.

4. Walmart's automation plans

Walmart revealed on day two of its annual investors meeting several upcoming milestones in the areas of e-commerce including:

It expects by the end of 2026 about 65% of its stores to be serviced by automation, 55% of its fulfillment center volume to move through automated facilities, and unit cost averages to fall by 20%.
Walmart predicts it can double the number of orders they are able to fulfill in a day so that packages arrive at customer's doorstep faster.
Walmart's more than 5,300 locations, including 600 Sam's Club warehouse stores, are within 10 miles of 90% of the U.S. population, and the company plans on using its geographic footprint as a competitive advantage against Amazon.
U.S. CEO John Furner said, “..we know customers want speed. And we also know that the last mile costs more than the middle mile, and the middle mile is more costly than the first mile. So having 4,700 points of distribution shortens the last mile, lowers delivery time and it lowers costs.”
In the next five years, nearly 90% of Walmart’s capital expenditures will be in “high return areas like e-commerce, supply chain and store investments.”
The company does not expect these investments to impact jobs negatively, and say it will actually result in more higher-paying jobs, keeping its headcount nearly flat. (Although this coming a few days after laying off 2,000 positions at its U.S. e-commerce warehouses.)
Scaling these types of investments will allow the company to realize a profit inflection in the next five years.
For this fiscal year, Walmart expects net sales to rise 2.5% to 3.0% and capital expenditures to be flat to last year which reached $16.9B

In other Walmart news… the company revamped its website and app to highlight a selection of goods and cut down on clutter.

The goal of the new curation-focused design is to entice shoppers with items they weren't looking for, instead of offering a utilitarian framework for consumers who already know what they want, which they can still easily search or browse for.

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5. Facebook adds videos to Marketplace listings

Facebook added a new ability for Marketplace sellers to include video within their listings, and for users to request a video to assist in their purchase decision. This has been one of their most requested features for Marketplace.

Facebook wrote on their blog, “While photos can help you know what an item looks like, what size it may be, and any issues or defects it might have, video can give you 360-degree views of an item, greater proof that the item a seller has listed is what they say it is, and that they actually have the item on hand making the buying process smoother and safer.”

Facebook says that it’s now encouraging all sellers to add videos to their listings, and share videos with buyers, as a means to improve the Marketplace process.

At the time of publishing this edition, I was unable to add a video to my Marketplace listing. However I'm in Ecuador right now, so it may be a feature that is being gradually rolled out.

In the future, Facebook may integrate Reels into the Marketplace, of which this could be a precursor of.

6. Amazon India to promote local content

Amazon India joined forces with the country's information and broadcasting ministry to promote local products and content. The partnership will involve Amazon's Prime Video, miniTV, Music, Alexa, IMDb, and its marketplace business.

On the media side of the partnership, Amazon will promote made-in-India content on a global scale as well as provide internships and scholarships to students from state-run film institutes.

Currently Amazon Prime Video (20M subscribers) is a distant second in the Indian streaming market, which is currently led by Disney+ Hotstar (50M subscribers).

There are also plans to widen the reach of All India Radio via Amazon Music and Alexa.

As for the marketplace and product side, Amazon.in will curate a storefront feature to promote books and journals reflecting India's heritage.

Amazon signed an agreement on Wednesday and said in a statement that the move “strengthens our commitment to globally promote and showcase India’s creative talent and stories through our multiple services.”

India is a key market for Amazon and its streaming service, but the company has faced antitrust challenges, legal battles surrounding religious sentiments in its TV shows, and allegations of using anti-competitive strategies to undercut small businesses in the country.

Amazon India saw a 36% YoY increase in income on its 2022 financial year at $5.6B and reduced its losses by 8% to 834M during the period.

7. E-commerce deal value fell, but quantity up

A new E-Commerce Report from markets research company PitchBook reported stats about the overall health of the industry, as seen through the number and value of e-commerce venture capital deals. Here's what they found:

E-commerce ended Q4 with 77 venture capital deals globally, accounting to $1B in total deal value
Deal value fell in Q4 by 42.1% compared to Q3, but the number of deals increased by over 50%
Compared to 2021, deal count in Q4 declined by 25.2% and deal value fell by 59.7% YoY
Exits during Q4 were down compared to Q3, totaling five exits versus seven.
The entirety of 2022 yielded $1.5B in exits across 23 deals, compared to $1.1B in exits in Q4 2021 alone.
Rising CACs and Apple’s iOS 14 privacy changes opened the door to innovation and pushed investors to look for “category-defining” companies.

Pitchbook also made note of two emerging opportunities:

B2B BNPL – holds potential as consumer BNPL growth slows
Re-commerce – great affordability for customers and growing consumer expectations around sustainability

Amazon is looking to acquire diamonds for its future plans in quantum computing and networking, and is working with infamous diamond miner De Beers to develop the stone under laboratory conditions.

(Is De Beers really going to develop the diamonds in a laboratory or simply pull from their giant stockpile reserves and say they were lab made? Oh wait, they're not doing that anymore…)

Unlike the conventional binary computing system, which you're currently using in your phone or computer to read this e-mail, quantum computing offers a newer and faster way to compute.

However our current fiber optic infrastructure isn't fast enough to keep up with the technology, so Amazon is looking to solve that problem by utilizing different materials like diamonds to make signal repeaters to relay the information stored in qubits (as opposed to bits) through networks. Thanks to their hardness, diamonds will enable stabler transmission than traditional repeaters.

Numerous companies have proven the viability of quantum networks, however they've been accessed across short distances in limited trials. Scaling the technology to support larger networks across longer distances remains a challenge, which Amazon hopes can be solved with diamonds.

AWS says that harnessing diamonds to boost the range of quantum networks isn't theoretical and that it's closer to commercial viability than you might think.

8. Amazon is growing diamonds

Amazon is looking to acquire diamonds for its future plans in quantum computing and networking, and is working with infamous diamond miner De Beers to develop the stone under laboratory conditions.

(Is De Beers really going to develop the diamonds in a laboratory or simply pull from their giant stockpile reserves and say they were lab made? Oh wait, they're not doing that anymore…)

Unlike the conventional binary computing system, which you're currently using in your phone or computer to read this e-mail, quantum computing offers a newer and faster way to compute.

AWS says that harnessing diamonds to boost the range of quantum networks isn't theoretical and that it's closer to commercial viability than you might think.

9. Other e-commerce news of interest

Amazon's $1.7B takeover of Roomba is being examined by the UK's Competition and Markets Authority (CMA), which has called for evidence on whether the deal could lead to “substantial lessening of competition within any market or markets” within the country. Antirtust groups have warned that the acquisition gives Amazon dominance in the smart home market and gives the company unprecedented access into consumers' lives.

Amazon banned the sale of the Flipper Zero tool, a portable and programmable pen-testing tool that can debug various hardware devices via RFID, radio, NFC, infrared, Bluetooth, and others, after tagging it as a card-skimming device. Users have showcased its capabilities to activate doorbells, unlock cars, open garages, and clone digital keys, but Flipper CEO Pavel Zhovner asked Amazon to reconsider the ban as the device is not capable of skimming bank cards.

ZestMoney, a Bengaluru-based BNPL platform, is laying off around 20% of its workforce, or around 100 employees, just weeks after an acquisition deal with PhonePe fell through. The company had raised around $140M since its inception in 2015, most recently at a $450M valuation, but now it's in survival mode.

Google and Amazon are struggling to layoff employees in some European countries like France and Germany where labor protection laws make it difficult, so instead they are asking employees to voluntarily leave by offering incentives up to a one-year pay package. In many countries, tech companies are legally required to consult with labor councils before executing layoffs, which involves a potentially time-consuming process of data collection, discussions, and the option of appealing.

Amazon told managers that it decided to reduce the number of stock awards for employees in 2025 and instead increase the cash portion of pay instead, which employees have been asking for after its stock price dropped recently. The company has historically offered less base cash pay compared to some of its peers and instead used stock grants to attract talent, which paid off early-on, but times have changed.

Book Depository, a UK-based online bookseller founded in 2004 that Amazon acquired in 2011, is closing at the end of April after Amazon decided to eliminate positions across its Devices and Books businesses. Amazon did not share how many jobs will be lost specifically at Book Depository.

Microsoft and Amazon are being investigated by the UK's Competition and Markets Authority over their dominance in the country's cloud computing market, collectively controlling almost 70% of the market. Both companies are already targets of competition watchdogs in the US, UK, and EU on multiple fronts.

Kobo Plus, which lets you read unlimited e-books and audiobooks for a flat monthly fee in Canada, New Zealand, and Portugal, is coming to the US. The plans will range from $7.99 to $9.99 a month to access Kobo's library of 1.3M e-book sand 100k audiobooks, accessible through their app.

Apple is eliminating a small number of jobs within its corporate retail teams, marking its first known internal job cuts during the recent wave of tech layoffs. The employees being laid off are part of Apple's development and preservation teams and are responsible for the construction and upkeep of Apple retail stores and other facilities.

Amazon is under heat for giving some large sellers “Small Business” badges and non-Black-owned sellers “Black Owned Small Business” badges, calling into question their badge programs' legitimacy and effectiveness. For example, Amazon gave Black Rifle Coffee Co a small business badge even though it generated over $300M in revenue in 2022 and is valued at $1.1B.

India's ONDC is finalizing a mechanism to ensure compliance with its rules and help small retailers expand their business through e-commerce without reliance on giants like Amazon and Walmart. ONDC's coverage has expanded to over 210 cities, and its logistics partners can deliver products to 90% of the pin codes across India.

Obsess, an experiential e-commerce company, launched a new offering that gives brands the ability to build their own virtual stores and customizable 3D experiences. Through its virtual store builder, brands can add products and enable clickable content like in-scene videos, social media integration, and branded avatars.

Twitter officially listed 50% less ads as a feature for paid users, months after making the promise. For $8/month for Twitter blue, subscribers will now see approximately half as many ads in the For You and Following timelines. Since when is “half ads” a premium feature? It should be “no ads” for the price.

Bob Lee, chief product officer at MobileCoin, was tragically killed in a fatal stabbing in San Francisco. Before joining MobileCoin, he worked at Google, focusing on Android core library development, later joining Square to develop its Android app and create Cash App. Our condolences to his family, friends, and colleagues who he left behind.

Wix and Amazon India announced an integration that enables Wix merchants in India to connect their Wix Store with Amazon, sync their inventory, and manage orders within a single dashboard. Wix is moving and shaking with their integrations! Last week I reported that Wix and Meta teamed up to allow users to connect their WhatsApp, Instagram, and Facebook Messenger messages directly to their Wix Inbox.

JD.com announced its new “France E-commerce Week”, a week-long celebration that features discounts on French products, which began April 6th. JD.com has a special relationship with the country and was the first e-commerce marketplace to partner with LVMH to bring its fashion brands to its platform, including Louis Vuitton, DIOR and others.

Levi Strauss & Co warned investors of margin decline in 2023 stemming from having to offer higher promotions than previously anticipated while also grappling with higher costs. Even with multiple price hikes on its products, the company has been unable to protect its margins from rising costs of freight, labor, and cotton.

Boxed, a NY-based online bulk grocery company, announced that it will file for Chapter 11 bankruptcy. The company thrived during the pandemic as online grocery delivery grew, went public in 2021 via a SPAC deal, but the sector soon became flooded with new companies while new funding dried up.

OnBuy, a UK-based online marketplace that prides itself on its support for its sellers, introduced direct payment into UK bank accounts along with WorldFirst and Payoneer to benefit overseas sellers who are often affected by high international payment fees. Sellers no longer need to connect PayPal in order to sell on the platform and receive payments, removing a blocker that has been a deterrent to some in the past.

PhonePe launched Pincode, a hyperlocal e-commerce discovery platform built on top of India's ONDC. The Pincode app will promote local shopkeepers and sellers to digitally connect each city's customers with the neighborhood stores they usually buy from offline.

Amazon reported that it removed 6M counterfeit items globally from the supply chain in 2022 and stopped over 800k attempts to create new selling accounts by counterfeiters. The figure has come down from 2.5M attempts in 2021 and 6M attempts in 2020.

10. Seed rounds, IPOs, & acquisitions

Native AI, a market intelligence platform startup that enables brands to build digital clones of their customers using generative AI, raised $3.5M in a round led by Jumpstart Ventures and Ivy Ventures. The company's platform is powered by its own proprietary AI model that uses real-time consumer and product data to create what they call “digital twins” of their customers, which users can interact with and ask questions about products, preferences, and interests to get insights into their behaviors.

Treat, a generative AI startup that creates personalized product images based on customer data, raised $8.5M from Greylock Partners. The software leverages a company's data on customers to automatically generate personalized product images that incorporate elements shown to perform well with certain target demographics — like showing mushrooms to 18 to 25 year old males in the background of photos for a mushroom coffee brand based on data showing that this demographic prefers seeing pictures of a product's ingredients.

Flyby Robotics, a drone automation and delivery company that provides end-to-end automated fulfillment command and control, raised $4M in a round led by MaC Venture Capital Management LLC. The funds will be put towards product development with the goal of achieving Level 4 autonomy for their flight systems, which is where drones operate without any human intervention throughout he delivery process but allow a pilot in a remote command center the option to override control in rare circumstances.

Covariant, a startup developing warehouse robots that can be deployed faster than traditional automation hardware, raised $75M as an extension to a Series C round originally announced in 2021. Radical Ventures and Index Ventures co-led the new investment which will be used to grow the company's market presence.

Staytuned, a software development company that acquires and builds e-commerce applications with a new focus on Shopify, raised $34M in a round led by TenOneTen, Rembrandt VC, and others. The company's founder describes Staytuned as “the Salesforce suite for e-commerce stores”. They have acquired seven apps so far and work with more than 28k customers.

Apptile, a SaaS startup that specializes in no-code mobile app development, raised $2.5M in a round led by Mankekar Family Office and Ramakant Sharma. The company will use the funds to expand its team and further develop its platform, with a focus on allowing Shopify merchants to create customized, high-performance mobile apps.

POSaBIT, a point of sale system for marijuana and cannabis dispensaries, acquired Hypur's marijuana e-commerce and compliance software assets for as much as $7.5M if certain benchmarks are hit. The acquisition includes the purchase of Hypur Pay, an ACH e-commerce payment solution, Hypur Comply, a compliance tech for the cannabis industry, and Hypur's PIN debit merchant processing solution.

Finanzguru, a Germany-based financial advice and banking app that lets customers manage all their banking accounts and contracts in one place and obtain advice on insurance and financial products, raised $14M in a round led by PayPal Ventures and SCOR Ventures. The company will use the funds to expand its platform and add to its staff of 70 employees.

What'd I miss?

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See you next Monday,

PAUL

Paul E. Drecksler
www.shopifreaks.com
[email protected]

PS: Why did the Easter egg hide? Because it was a little chicken!