How are your crypto and stock portfolios looking this week? If they're anything like mine — YIKES! Just a dip though, right? I guess if you zoom the chart out far enough, it doesn't look so bad…
In this week's 53rd Edition of the Shopifreaks E-commerce Newsletter, I've got news of partnerships between Canadian and Chinese mega-companies, alarming figures about Big Tech's volume of acquisitions in 2021, Shopify's future in fulfillment, and more.
And of course, what's a Shopifreaks newsletter without news and rants on BNPL? I've got that for you too. Thanks for being a Shopifreaks subscriber and for sharing my newsletter to help me grow.
Stat of the Week
The value of global e-commerce transactions will exceed $7.5 trillion by 2026, from $4.9 trillion in 2021 — a growth rate of 55% — according to Juniper Research. – Retweet It
1. Shopify and JD.com partner up
Shopify has partnered with the Chinese e-commerce marketplace JD.com to help U.S. merchants sell their goods. Shopify merchants will be able to set up a shop on JD.com in around 4 weeks, as opposed to the typical 12 months that it takes foreign brands to begin selling in China.
JD will handle the price conversion as well as shipping logistics from U.S. to China, and will work closely with Shopify to simplify compliance procedures for merchants across both countries to sell in each other's market.
This isn't the first time that Shopify has engaged with the Chinese market. In 2020, Shopify began allowing merchants to accept payment via Alipay, one of China’s two most popular digital wallets.
What are your thoughts on Shopify getting in bed with China? On one hand, it could be good for Shopify's merchants to reach a market of over 550M active customers. But on the other hand, the deal comes with the stigma of entering the Chinese market — a region that other Western tech companies haven't historically fared so well in.
2. Record breaking acquisitions by Big Tech in 2021
Microsoft, Alphabet and Amazon all announced more acquisitions in 2021 than any other year in the past decade, according to Dealogic, suggesting that companies are trying to do deals before an antitrust crackdown ensues.
Lina Khan, chair of the FTC, took over the position seven months ago, and has been vocal about how her agency will aggressively enforce antitrust policies. She's already filed an amended complaint against Facebook, claiming its acquisition of Instagram and WhatsApp contributed to its current status as a social media monopoly.
In 2021, Alphabet had 22 deals, Microsoft had 56 deals, and Amazon had 29 deals, which were all 10 year highs.
Notable acquisitions include:
- Microsoft’s $69B deal for Activision Blizzard
- Microsoft’s $19B purchase of Nuance Communications
- Amazon’s $8.5B deal for MGM Studios
- Alphabet bought Fitbit for $2.1B
- For more acquisitions from 2021 see my newsletter archives.
What’s undetermined is how far the FTC is willing to go to make good on its threats of action against antitrust, especially given its budget which hasn't kept pace with the department's responsibilities and pales in comparison to that of the companies it takes on.
Khan said in a CNBC interview that fighting Big Tech “takes courage” and that she was up against “enormously well-resourced companies” who are “not shy about deploying those resources.”
3. BNPL is taking over the world, but is that a good thing?
I feel like every week I'm talking about BNPL in one way, shape, or form — and that's because 2021 was the Year of BNPL. 2022 seems to be following in its footsteps.
If you've been reading this newsletter long enough, you know that I've got mixed feelings about the industry.
As a merchant and e-commerce business developer, I appreciate the convenient payment option which can result in higher AOV and increased conversion rate. One reader even told me last year that BNPL accounted for 25% of his sales, and that surprisingly many of the BNPL purchases were for orders under $50 (including one for $8).
However as a consumer advocate, I hate the idea of one more avenue for consumers to get themselves into debt trouble. Two weeks ago I reported that The Consumer Financial Protection Bureau is looking into the policies of BNPL platforms, concerned that they may encourage overspending while dodging existing regulations around credit and lending.
The option to buy now and pay later is starting to gain traction in developing markets, but is it a good thing to follow in USA's footsteps? According to a recent survey, 57% of BNPL users said that the payment option caused them to overspend on purchases (sometimes through multiple accounts), and 36% have missed a payment at least once.
One big risk to consumers is that unlike credit cards, there's no consolidated dashboard to view / manage all your BNPL debt across various providers — so it's easy for it to grow out of hand. Out of sight, out of mind. However those 4 easy installments can start to add up if consumers aren't careful.
Unfortunately, consumers aren't being very careful with the payment option, and BNPL companies and e-commerce websites are promoting the heck out of it — a dangerous mix. A company in London was recently blasted by the media for promoting BNPL to buy pizza! Who the hell wants to pay for dinner in 4 monthly installments?!
At what point is the industry going to become saturated (or is it already?), and the first company will offer 5 interest free installments, and then the next company offers 6, and then 7? Will consumers eventually be paying for their winter coats for 18 months? Remember when the longest car loan was 60 months? Banks now-a-days will finance your car up to 10 years!
It's certainly an interesting industry, and a lot of money is being thrown at it right now — but I feel like there are better solutions out there than what's currently being offered. For example, how about Visa, MasterCard, or AMEX simply issue a credit card that begins with 4 interest free installments on purchases and then defaults to traditional credit terms? Who needs a million different integrated BNPL payment solutions when my CC is already accepted everywhere?
It'll be interesting to see how the industry evolves this year. Did you know that there are currently over 150 BNPL providers (and growing)? Leading some industry experts to predict that accelerated consolidation is on the horizon, the first of many to come being Square's $29B acquisition of Afterpay last year.
As always, I love to hear your thoughts on BNPL, so please continue to share. You can hit reply to any of my e-mails to shoot me a message. I read them all.
4. Amazon is opening a brick-and-mortar clothing store
Amazon announced that it will open its first clothing store this year in Glendale, California at The Americana shopping mall. Hey, I used to live in Glendale! I'd walk to that shopping mall almost every day for a coffee and to check out new books at their Barnes & Noble. The store will be about 30,000 sq.ft., and items will range from $10 to $400. This will be The Americana's second Amazon store. It currently has an Amazon 4-Star store.
Amazon Style (cool name), will be very tech heavy. Customers will be able to scan an item's QR code to view more info like customer ratings, and they can use the Amazon Shopping app to have additional items brought to their fitting room, because apparently talking to people in the customer service industry is above Prime members. The fitting rooms will also offer suggestions about what else to try on. (Anyone else predicting smart mirrors?)
Amazon has previously overtaken Walmart as the largest apparel retailer in the US, with estimated sales of more than $41 million in 2020, so it's an area of retail that can't be ignored.
5. Business Insider names Shopify's top 8 competitors
Business Insider published an article profiling the e-commerce companies that they consider to be Shopify's Top 8 Competitors. I'm curious who else you'd add to the list (or remove)? Hit reply and let me know.
A glaring absence from the list in my opinion was Automattic, the developers of WooCommerce and WordPress, which has an estimated 23% global e-commerce market share.
Here's their list with a summary of their thoughts on each platform:
- BigCommerce – emphasis on open platform, well funded, focused on mid-sized and enterprise level clients
- Adobe – acquired Magento in 2018, also caters to larger brands, large app store
- Salesforce – acquired Demandware in 2016 (now called Commerce Cloud), smaller app store
- Lightspeed – built-in loyalty, accounting, and analytics products
- Square – acquired Weebly in 2018, offers products for business bank accounts, payroll, and employee benefits
- Squarespace – website builder with recent heavy push towards e-commerce, built-in video app for sellers
- Wix – also web builder that moved into e-commerce, offers full suite of products for businesses including appointment booking, restaurant ordering, app builders, etc
- Amazon – acquired Selz last year
6. Google and Walmart new hires of interest
Google has hired former PayPal executive Arnold Goldberg to run its payments division and set a new course for the business after it scrapped a push into banking. Bill Ready, Google's president of commerce, said that the move is part of the company's broader strategy to team up with a wider range of financial services, including cryptocurrencies. Historically the Google Pay system has largely avoided the crypto industry.
Walmart has hired Tom Ward, their current senior VP of last mile deliveries, to replace Casey Carl, their top e-commerce executive, at the end of February after nearly two years. Ward's new title will be executive vice president and chief e-commerce officer starting February 1.
Last week, Walmart also announced the retirement of Scott McCall, their chief merchandising officer in the US, who was replaced by Charles Redfield, their current grocery chief.
7. Shopify cancelled contracts with warehouse and fulfillment partners
An insider reported that Shopify is expected to halve its previous capacity for fulfilling e-commerce orders for merchants after terminating contracts with several warehouse and fulfillment partners. The report cites executives at four fulfillment companies in Shopify's network.
This could either mean that Shopify is preparing to grow its own owned-and-operated distribution warehouses, or that they are backpedaling from their move into fulfillment.
At least three analysts have cut their share price targets on Shopify since Tuesday, pushing the average target to its lowest point since July. The stock took a hard dip — but then again, what hasn't right now? So I think that correlating this particular news to their share price might be a big assumption.
8. Other e-commerce news of interest this week
- Coinbase will let you pay with Mastercard in its upcoming NFT Marketplace.
- Ethiopian Airlines Group is ramping up its investment in cargo services and infrastructure to become a logistics hub for Africa's growing e-commerce market.
- Amazon and Meta spent a record amount of money lobbying the federal government in 2021, while Apple actually decreased its lobbying budget during the year.
- Walmart is opening a new e-commerce fulfillment center in Mississippi in spring 2022.
- An eBay seller pleaded guilty to selling $3.2M in stolen goods, acquired at their pawn store in Rochester, NY.
- Officials from India's Department for Promotion of Industry and Internal Trade (DPIIT) met last week with representatives from Amazon, Flipkart, and other top e-commerce companies, to discuss proposed e-commerce policy.
- Researchers rom the NYU School of Global Public Health are questioning whether e-commerce retailers should be responsible for providing nutritional labeling given the rise in online grocery sales. What do you think?
- The US Patent and Trademark Office upheld two oppositions filed by Spotify for trademark infringement against US Software Inc for its cannabis software known as POTIFY, ruling that the two names are so similar in appearance and sound that it can cause consumer confusion. Uh oh… hmm… Shopifreaks… should I be worried?
9. This week in seed rounds & acquisitions….
- Calii, a Latin American grocery delivery startup, raised $22.5M in a Series A round co-led by Dalus Capital and JAM Fund, bringing the company's total amount raised to $35M. The company aims to bring produce and thousands of grocery items to customers’ doorsteps in less than two hours.
- Fairplay, a Mexican revenue-based investment startup, raised $35M in debt and equity in a Series A round co-led by Dila Capital and Kayyak Ventures. The company will use the funding to invest in the online marketing campaigns of direct-to-consumer e-commerce brands and marketplace sellers in Latin America.
- Castiron, an e-commerce platform for independent chefs, raised $6M from Bowery Capital, Foundry Group, and High Alpha. The platform provides users with customizable e-commerce websites on a revenue sharing basis.
- Vartana, a managed checkout and BNPL platform, raised $57M in equity and debt in a round led by Audacious Ventures. The company will use the funding for product development by doubling its engineering capacity and adding more sales and operations staff.
- Zuper, a Seattle-based provider of productivity tools for field service management and customer engagement, raised $13M in a Series A led by FUSE, bringing the company's total amount raised to $14.1M. The company will use the funds for product leadership innovation in workflows, location intelligence, dispatching, marketing and sales.
- Copia Global, a Kenyan B2C e-commerce platform, raised $50M in a Series C equity round led by Goodwell Investments, three years after its Series B round of $26M. The company will use the funds to grow its model across Kenya, Uganda, Rwanda, Tanzania, and other areas of East Africa.
- PAPS, a Senegal-based logistics and delivery company, raised $4.5M in a pre-Series A round co-led by 4DX Ventures and Orange. The company will use the funding to grow its tech team and build out physical infrastructure to onboard more warehouses, hubs and fleets, as well as extend its offering to more African companies.
- Mention Me, a London-based customer referral platform, raised $25M in a Series B round led by Octopus Ventures. The company will use the funding to expand into the US and further develop its product offering.
- Dropee, a Malaysia B2B wholesale platform, raised $7M in a Series A round led by Vynn Capital. The company will use the funding to introduce new financing products for wholesalers and retailers over the next 12 months by working with regional banks and non-banking financial institutions.
- Proton.ai, an AI-powered sales platform for distributors, raised $20M in a Series A round led by Felicis Ventures.
- Chari, a Moroccan B2B e-commerce and retail startup, secured a bridge round at a $100M valuation. The company will use the funding to test BNPL services with its existing customers.
- BillEase, a Philippine-based BNPL platform, raised $11M in a Series B round led by Burda Principal Investments, bringing the company's total amount raised to $15M. The company will use the funding for customer acquisition, developing new products, and hiring.
- Exotec, a warehouse robotics company, raised $335M in a Series D round led by Goldman Sachs Asset Management. The company will use the funding to scale its automated storage and retrieval system technology.
- ExpandCart, an e-commerce platform that operates in the MENA region, raised $2.7M in a Pre-Series B bridge round led by Betatron Venture Group. The company will use the funding to fuel their growth in current markets, focus on maximizing R&D, and building their products with a goal of hitting 1 million merchants over the next 3 years.
- Finclusion, an African-focused fintech platform, raised $20M in funding from Lendable. The company will use the funding to expand into new markets, product expansion, and to enter the BNPL space.
- Shoplazza, a Canadian-based e-commerce platform, raised $150M in a Series C1 round led by Softbank Vision Fund 2. The company will use the funding for R&D and talent acquisitions.
- OSF Digital, a digital agency, acquired FitForCommerce, an e-commerce consulting firm, for an undisclosed amount. Bernardine Wu, founder of FitForCommerce, will continue working for the company after the acquisition.
What'd I miss?
Shopifreaks is a community effort and I appreciate your contributions to help keep the rest of our readers in the know with the latest happenings in e-commerce. Whenever you have news to share, you can e-mail [email protected] or hit reply to any of my newsletters.
You can also mention @shopifreaks on Twitter or submit posts to r/Shopifreaks on Reddit, and I'll curate the best submissions each week for inclusion in the newsletter.
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See you next Monday!
Paul E. Drecksler
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