#174 – Shopify sues Shopline, eBay’s QR code, & Netflix’s new ad server

by Shopifreaks | May 20, 2024 | Recent Newsletters

Hi Shopifreaks!

I'm running a little experiment this week where I publish 3-4 headline stories from my newsletter in their entirety on my LinkedIn (connect with me) to help reach new potential readers through post engagements and reposts.

A few weeks ago, I also started publishing each headline story as a separate post in my website archives to reach new visitors through SEO. Historically I've only been publishing my weekly editions as one big archive post, so this new strategy expands my reach through additional meta titles and descriptions. I'll let you know in a few months how those two growth strategies work for me after I've acquired some data.

I also added a new automation to my welcome series called “Most Recent Edition,” where I immediately send the previous week's edition to a new subscriber. Otherwise, if someone joined Shopifreaks on a Tuesday, they wouldn't hear from me for almost a week until I sent my next edition the following Monday. Sending my most recent edition immediately after sign up allows new readers to become addicted to my content right away and look forward to the next edition. I shared some results of this strategy on a LinkedIn post.

Hope you don't mind that I share details about my growth strategies with you. I try to be as transparent as possible with my business practices and involve my readers as much as possible with my progress.

And now onto your regularly scheduled content…

In this week's edition I cover:

Amazon is catching up to Walmart (and growing faster)
Shopify is suing Shopline for stealing its Dawn theme
Temu & Amazon are accused of using dark patterns
Amazon made its first-ever upfront appearance
eBay launched a QR code feature that I love
Poshmark launched Promoted Closets
Why Klarna isn't reporting to US credit bureaus
Amazon sellers are rethinking Prime Day deals
Netflix is building its own ad server
Google reintroduced old school web searches

All this and more in this week's 174th Edition of Shopifreaks. Thanks for subscribing and sharing!

Stat of the Week

Amazon could finally surpass Walmart to become the nation’s biggest company by revenue, having grown by 12% last year compared with Walmart's growth of 6%. Two more years of similar growth discrepancy would push Amazon past Walmart in sales.

Amazon vs Walmart Revenue

1. Shopify sues Shopline for creating a Dollar General version of its Dawn theme

Shopify is suing Shopline in New York federal court, accusing it of illegally copying Shopify's software to build its own e-commerce platform. Shopline is a Singapore-based subsidiary of the Chinese technology company JOYY Inc.

Shopify said in the lawsuit that Shopline created a “thinly disguised knockoff” of its Dawn theme to power a competing e-commerce service. The company said its Dawn theme “forms the backbone of the way an e-commerce site appears and functions” and that Shopline's Seed theme copies it “wholesale.”

Shopify wrote, “To create Seed, Shopline started by making an unauthorized copy of Dawn, translated that unauthorized copy into a different programming language, and then made cosmetic changes to the Dawn code. From the highest level of overarching organization to the smallest level of individual lines of code, the evidence of Shopline's copying is overwhelming.” It also noted “large swaths” of matching filenames and other elements.

The lawsuit even says that the “Shopify” name still appears in the code of various versions of Seed that Shopline is distributing, and that Shopify found a Chinese webpage hosted by Joyy with the title “Seed Theme” that still carries headers reading “dawn-test.”

You can see a side-by-side comparison of Shopify Dawn vs Shopline Seed themes here and judge for yourself.

Shopify asked the court for an unspecified amount of money damages and a court order blocking the alleged infringement. The company defends its work:

“Shopify merchants can use Dawn to quickly launch a compelling online presence or to design their unique store. It is the product of many thousands of hours of creative effort by Shopify employees and the investment of many millions of dollars and Dawn is protected by copyrights registered in the United States.”

One one hand: If all that Shopify alleges is true about Seed running identical code, then Shopline is unequivocally guilty and should be forced to pay damages and stop distributing the Seed theme. No software company should have their code blatantly ripped off, repackaged, and resold as a different product. I mean what is this — a WordPress theme? LOL.

On the other hand: Dawn theme without the Shopify platform and its extensive App Marketplace integrations is fairly worthless. Let's not pretend that out-of-box, Dawn doesn't look like EVERY other e-commerce theme on the planet! It sounds like Shopline took a major shortcut, but inevitably it would've visually arrived in a similar place with its storefront — like every other theme developer on every platform in 2024. Shopline should pay for its copyright infringement, but I also don't think that the courts should overvalue the proprietariness of Dawn's design.

What are your thoughts? Hit reply and let me know.

2. Temu & Amazon accused of dark patterns and manipulative practices

In other lawsuit news this week — Temu is facing legal action from 17 companies accusing it of violating new EU laws with “manipulative practices” and lack of transparency. Temu was the most downloaded app in the UK in 2023 and still remains as a top downloaded app in 2024.

Here's what the complaint alleges:

Some Temu traders are untraceable, which is against EU laws.
The company uses manipulative practices like making it hard to delete your account.
Temu uses dark patterns to coerce consumers into spending more.
The company misleads customers on pricing.
Temu is not clear enough about why certain products are recommended to users, which is also against EU law.
Lack of transparency over product ingredient lists or disclosures.

Temu responded to the complaint by saying, “We take it very seriously and will study it thoroughly. We hope to continue our dialogue with the relevant stakeholders to improve Temu's service for consumers.”

Temu isn't the only company taking heat this week for its use of dark patterns.

The state of Arizona has taken legal action against Amazon, launching two lawsuits that accuse the company of monopolistic behavior and deceptive practices involving dark patterns.

The first lawsuit claims that Amazon's business practices violate the state's Consumer Fraud Act by employing dark patterns to make it difficult for users to cancel their Amazon Prime subscriptions.
The second lawsuit alleges that Amazon breaches Arizona's Uniform State Antitrust Act by maintaining a monopoly via enforcing agreements with third-party sellers to prevent them from offering lower prices on other platforms.
The second lawsuit also challenges Amazon's Buy Box algorithm under the Consumer Fraud Act, claiming that it favors sellers who use Fulfillment By Amazon.
The legal actions echo similar complaints from the FTC and various states.

Arizona is seeking a court order to halt Amazon's deceptive and anticompetitive practices, seek civil penalties, and return any ill-gotten gains.

Amazon said the company was surprised and disappointed over the lawsuits and that the Arizona Attorney General initiated the cases without reviewing any documents from the company.

🔥 Partner News

Flowspace CEO Ben Eachus has been honored as an Ernst & Young EY Entrepreneur of the Year finalist for the third consecutive year. The program recognizes exceptional leaders and innovators who demonstrate entrepreneurial spirit, purpose, growth, and impact in their respective industries. Eachus was selected by a panel of independent judges and peers based on his contributions to the greater business landscape, commitment to innovation, and drive to impact meaningful growth. Winners will be announced on June 13th.

3. Amazon makes its first-ever upfront appearance

Every year at the upfronts, TV networks, streaming services, and media companies present their content lineups and other features and services to advertisers, who then negotiate and sign deals with the companies, committing to spend a certain amount of money to buy ads. The name comes from the event's main purpose, to allow advertisers to buy commercial airtime “up front”, or several months before the television season begins.

Last week Amazon made a big splash with its first-ever event during upfront week, taking over Pier 36 in New York which has previously hosted upfront presentations from Disney and TelevisaUnivision.

The company called on celebrities including Jake Gyllenhaal, Reese Witherspoon, Will Ferrell, and Alicia Keys to demonstrate how premium their content is.

Here are highlights from Amazon's first upfront:

Amazon worked to separate itself from its competitors by showcasing its scale. Prime Video now has an average monthly ad-supported reach of 200M customers, with 115M in the US, making it the largest premium ad-supported streaming service both globally and in the U.S.
Amazon confirmed that it is developing a sequel to this year’s “Road House” reboot.
It also ordered a live-action series based on “Spider-Man Noir”, a series based on “Tomb Raider”, and a prequel series to “Legally Blond” called “Elle” from Reese WItherspoon's Hello Sunshine company.
Witherspoon will also star alongside Will Ferrell in a comedy called “You're Cordially Invited.”
“Thursday Night Football” saw weekly viewership gains of 24% YoY.
Amazon Music will continue to broadcast Amazon Music Live, a series of livestreamed concerts that air after its Thursday Night Football broadcasts.
Amazon has built out more than 500 free ad-supported TV channels, partnering with 135 other services.
It also expanded its sports programming and selection of movies to rent or buy.
Amazon announced three new TV ad formats that boost interactivity and shoppability on Prime Video.

Mike Hopkins, senior VP and head of Prime Video and Amazon MGM Studios, said, “No other streaming service can reach the number of customers with premium entertainment that we can. And our audience is not just a number on a page. They’re highly engaged viewers who are passionate about the deep and broad selection of programming we deliver including live sports, series and films.”

4. eBay launched a QR code feature to list clothing for sale

eBay launched a new feature called “resell on eBay” that is designed to make it easier for brands and consumers to list clothing for sale on its marketplace.

The feature is built into Certilogo, which was acquired by eBay in 2023, which features an AI-powered digital ID printed on the product tag to help brands manage the lifecycle of their garments and give consumers a way to confirm the item's authenticity.

Here's how it works:

Users scan a QR code on a product's smart label to generate a “resell your garment” button.
Clicking the button directs the user to check the authenticity of the item through Certilogo's AI authentication system by signing in with their eBay account.
From there, an eBay listing is prefilled with information from the brand about the item.
Users can then edit the listing, upload additional photos, and publish the item for sale.

Charis Marquez, global general manager of fashion at eBay, said, “Reducing friction and removing barriers to brands and consumers engaging in reCommerce is crucial to fostering a preloved fashion marketplace. Our new resell feature helps brands keep their product out of landfill, while giving consumers an incredibly easy way to give their item a second life.”

Resell on eBay will roll out this month with Save The Duck being the first brand to pilot the feature.

Personally, I love it! I'm a big fan of any technology that supports the circular economy and makes it easier to resell and give new life to used items.

5. Poshmark lets sellers promote their entire store at once

Poshmark launched a new paid marketing tool called “Promoted Closets” that gives sellers the ability to promote their entire shop at once.

The tool uses machine learning to automatically promote individual product listings from a seller's entire inventory, identifying shoppers' search terms and matching them with promoted items.

Promoted Closet works on a cost per click model where sellers only get charged when a shopper clicks and views the item from a promoted listing. There's an option to set the budget manually or get a recommendation from Poshmark. Each campaign lasts for 7 days.

The feature has been in beta with tens of thousands of sellers since 2023 and now is officially available to all users in the US on both desktop and mobile. It will eventually roll-out to Canadian sellers, but the company did not say when. Poshmark is offering a 7-day trial for a limited time.

It'd be great if Poshmark sellers had more control over their budgets, such as the ability to set a max CPC on a per-product basis, or opt certain items out of the campaign altogether. However I understand Poshmark's desire to create a one-click way to promote a seller's inventory.

Poshmark has over 130M users in the US and Canada and claims that sellers have earned more than $7B on its platform.

6. Klarna isn't sharing its data with US credit bureaus

Klarna says that it is not sharing its customer data with credit bureaus in the US because the bureaus “do not have proper models to responsibly process the data and ensure good consumer outcomes.” It does share its data with UK credit bureaus.

Klarna added that the credit models used today in the US “were built decades ago and calculate data based on monthly payments, long-term loans, and open lines of credit. But BNPL does not fit into these categories.”

The company claims that BNPL is different because it offers bi-weekly instead of monthly payments, and unlike a credit card, Klarna doesn't offer an open line of credit — but I beg to differ.

Technically Klarna does offer an open line of credit to all consumers. It just doesn't tell them what it is. Just like a traditional credit card, Klarna has a maximum amount that it's willing to lend each consumer (ie: an open line of credit), which it doles out on a purchase-by-purchase basis.

The big difference is that credit cards don't care what you spend your credit limit on, as long as you pay it back. Whereas Klarna says it underwrites each individual purchase. But let's be real — Klarna doesn't really care what you spend money on either, as long as you pay it back. If the merchant works with Klarna, and the customer hasn't hit their undisclosed credit limit, Klarna is going to lend to you.

So what's the real reason they aren't sharing their data with credit bureaus in the US?

Klarna says that “the 96% of Klarna BNPL users that pay on time would improve a consumer's credit score, but the large credit bureaus continue to use outdated FICO and Vantage models that do not properly account for BNPL data.”

Perhaps if Klarna started sharing that data with them, the credit bureaus could begin to update their scoring algorithms.

Apple recently started providing its BNPL data to Experian, but the bureau said that it is not going to incorporate the data into a consumer's credit score yet because their models can't properly account for the data.

So it appears that credit bureaus are well aware of their inability to account for BNPL data, but it's a chicken and egg scenario. Which came first — the BNPL data or a bureau's ability to account for it?

While I'm no fan of credit bureaus, I'm also not a fan of BNPL companies flying under the radar of consumer protection laws and credit reporting by pretending that they're not traditional lenders. Just be honest and say, “We're not going to do it unless we have to” — as was the case in the UK.

7. Amazon sellers are rethinking their Prime Day deals

Third party sellers on Amazon, which make up 60% of sales on Amazon's marketplace, are reconsidering how heavily they'll discount products this year for Prime Day, given how much seller fees have increased on the platform in recent months, according to Modern Retail.

Jon Elder, CEO and founder at Black Label Advisor, says, “Sellers are feeling the pressure mathematically to offer less deals. The average seller is going to be looking at pulling back on discounts.”

According to data from SmartScout, Amazon FBA fees for standard-sized products have jumped 96% over the past 10 years, outpacing inflation.

Seller fees can eat up about half the cost per sale on Amazon, according to Marketplace Pulse. That doesn't leave much room for running Prime Day deals, which primarily benefit Amazon as opposed to the individual merchants who are pressured to wipe out their little remaining margin for the sake of running a deal at all.

For sellers, the benefits to running Prime Day deals are to raise brand awareness and boost product reviews ahead of the holiday season. However it's one thing to break even on a product by offering a deal, but it's another thing to lose money selling a product. And given the recent fee increases, many sellers may find themselves in the red if they run deals.

The choice this year will either be to run smaller discounts (and probably not get much visibility on Amazon during the event) or not run deals at all and miss out on any benefits.

Mark Power, founder and CEO of the agency Podean, said, “Half of our clients are still going to be discounting, but in a more conservative way. The other half may not be deploying discounting at all.” Power added that to protect profit margins, some sellers are nixing discounts altogether and instead investing more in social media channels to drive traffic during Prime Day.

PREDICTION: Amazon is going to feel this. If enough sellers stop running Prime Day deals, or run smaller deals that aren't as attractive to shoppers, Amazon Prime Day is going to lose its luster — which Amazon can't have happen given the current competition from Temu and other Chinese marketplaces which offer “Prime Day Everyday.”

My prediction is that to encourage sellers to continue running heavy discounts on Prime Day, Amazon is going to start subsidizing the discounts with reduced seller fees for the sales events. Amazon already announced that it would provide an exception to its new low-inventory fees for products that are part of Prime-exclusive sales for the four weeks following Prime Day, but that's not enough. They're going to have to ease up on their other existing fees as well if they want to continue to bring the types of deals to the table that get customers to shop like a billionaire.

8. Netflix is building its own ad server

Netflix announced durings it Upfronts presentation that it's launching its own advertising platform to compete against Google, Amazon, Hulu, Comcast, and other ad giants. Amazon has only been in the advertising business for a year and a half after launching its ad-supported tier in Nov 2022.

Netflix originally partnered with Microsoft to develop its ad tech, which let the streaming platform enter the ad space quickly and catch up with rivals like Hulu, which has offered an ad-supported tier since 2010.

Launching its own in-house ad tech will allow Netflix to take full control of its advertising and create targeted and personalized ad experiences.

Amy Reinhard, Netflix’s president of advertising, said, “Bringing our ad tech in-house will allow us to power the ads plan with the same level of excellence that’s made Netflix the leader in streaming technology today. We’re being incredibly strategic about how we present ads because we want our members to have a phenomenal experience. We conduct deep consumer research to make sure we stay ahead of the competition, bringing opportunities that are better for members and better for brands.”

Netflix wants to experiment with “episodic” campaigns, which involves a series of ads that tell a story rather than delivering repetitive ads. Brilliant!

Netflix's ad-supported tier currently has 40M global monthly active users, up from the 5M users it boasted a year ago.

9. Other e-commerce news of interest

Slack is under attack after users discovered that the company has been using their messages, content, and files to train its global AI models, which Slack uses to power their channel and emoji recommendations and search results. It was discovered that if you don't want Slack to use your data, you have to e-mail the company to opt-out, which isn't a good look for a company that makes a big deal out of telling customers that “You control your data.” In response to the outrage, Slack published a blog post to clarify how its customers' data is used.

Google will now let you perform a “web” search, which lets you filter out almost all of its AI results and knowledge panels that currently take over its SERPs, leaving you with just links and text like the old days. The order of the search results are the same regardless of whether you pick “web” or “all”, and it doesn't block links to YouTube videos or Reddit posts. There are also still ads that appear above and below the results.

YouTube is officially launching its YouTube Select “creator takeovers,” which lets advertisers buy out the ad inventory on channels representing the top 1% of content on the platform. The program began as a pilot at the end of 2023 and is now opening to more top creators.

Wix launched three new AI-powered image enhancement and creation tools to help users create and display high-quality images. The new tools include an AI Image Creator to make the images, Object Eraser to remove unwanted objects in the images, and AI Image Editor to add/edit portions of the image. Honestly, the three tools kind of sound like one tool with three features, but you do you, Wix.

Temu, which is already 20% bigger than Shein in the US and gets 42% of its business from the US, Mexico, and Chile, is turning its attention to Europe and wants to grow rapidly in the region. The company has redirected its enormous ad spend to Europe and Mexico while Washington scrutinizes its business practices in the US.

Visa announced major changes to how its credit and debit cards will operate in the US in the coming months and years. The new features mean consumers will be carrying fewer physical cards in their wallets, and will make the 16-digit card number increasingly irrelevant. The biggest change will be the ability for banks to issue one physical card that is connected to multiple bank accounts, which consumers can apply usage rules to.

Mastercard and Salesforce announced a new integration designed to help customers speed up the resolution of transaction disputes and chargebacks, as well as reduce costs associated with resolving them. The partnership will integrate Salesforce's Financial Services Cloud with Mastercard's dispute resolution services, providing real time notifications and a central dashboard for managing disputes.

Meta is taking inspiration from BeReal and Snapchat by developing a feature for Instagram called “Peek” that allows users to post authentic pictures that can only be viewed once. A photo shared via a Peek would have to be taken with your camera in the moment, as you would not be able to upload an image from your gallery, and you won't be able to add filters or edit the photo.

Ikea launched a TikTok livestream where cats and dogs model and demonstrate new Ikea products for pets. The Pet Shopping Network will appear for everyone in the UK on TikTok and showcase pets demonstrating Ikea's 29-piece pet furniture range.

Sam's Club is planning to launch an online shopping portal in Hong Kong within the next two months, giving the territory access to its products via e-commerce. The service will include free delivery for purchases over 599 yuan ($83).

Amazon raised warehouse worker wages to $15/hour five years ago, but today half of workers surveyed told researchers they struggle to afford food and rent. Amazon called the researcher's methodology “deeply flawed” and said the company had tried to raise its concerns with the study’s authors but never heard back.

Lots of layoffs this week… Amazon laid off more than 100 customer service reps, Walmart let go of hundreds of corporate staffers and ordering employees across the US and Canada, Gopuff laid off 6% of its staff, and Indeed laid off 8% of its workforce.

Remember that former diversity program manager at Facebook who stole more than $4M from the company through fake business deals in exchange for kickbacks? I first reported on Barbara Furlow-Smiles in December of last year when she pled guilty to the theft. Well, last week she was sentenced to five years and three months in prison for her scheme.

In the world of corporate turnover… The chief of Amazon Web Services, Adam Selipsky, is stepping down next month after a three-year term to be replaced by Matt Garman, a senior VP who has overseen sales and marketing at AWS. Also, eBay's VP of Global Communications, Michelle Friedman, departed the company to take on a role at Samsara, a cloud platform built for tracking and analyzing data from physical operations.

Meta is shutting down Workspace, a version of Facebook that had been built to enable communication among business teams and organizations. Sources say that it will be business as usual on the platform until August 25, 2025, and then it will be read-only until May 2026. Meta is recommending Zoom-owned Workvivo as a migration-ready alternative.

Ted Baker Canada is holding store-closing clearance sales across locations in the US and Canada after filing for bankruptcy in April. As of May 10th, online shopping is no longer available and all sales are final across the company's brick-and-mortar retail locations.

Sezzle, a US-based BNPL service, partnered up with Celerant Technology, a POS system for retailers, to offer a BNPL option when checking out in-store . The two companies had partnered in 2023 to offer BNPL options online, and now the solution is being brought to brick-and-mortar stores.

BuyBay, a Dutch recommerce platform, is launching a SaaS product using its own recommerce software. Retailers and manufacturers can now resell unreturned products from their own distribution center, which helps reduce CO2-emissions and increase profits.

Setapp Mobile, a subscription-based alternative to the Apple App Store that's now possible thanks to the EU's Digital Markets Act, went into invite-only beta last week. The new app store allows customers to play with a range of apps without being hit with reduced features, ads, options to upgrade, and without spending money on something they may not use. The biggest challenge with the Setapp iOS store is getting the app installed on your iPhone, which involves following a link, installing software, and then activating it — a process made intentionally cumbersome by Apple.

Avalara expanded its partnership with Shopify by joining the Shopify Tax Platform. Avalara has powered tax calculation for Shopify Plus customers since 2015, and now through the Shopify Tax Partner Platform, the company can serve all Shopify customers with their global tax compliance tools.

Walmart delivered 4.4B items the same day or next day, beating Amazon, which said it did 4B items in one day. Walmart's advantage is that it uses stores for its same-day deliveries.

10. Seed rounds, IPOs, & acquisitions

Gorgias, a customer experience platform that combines all of a company's support channels into one inbox, raised $29M in a Series C-2 round led by SaaStr and Alven. The funds will be used to launch its new AI Agent, which combines a brands' knowledge bases, data, and integrations to answer support tickets and perform actions in other apps.

Aplazo, a Mexico-based omni-channel payment platform, raised $70M in equity financing, which includes a $45M Series B round led by QED Investors. The company will use the funds to double down on product innovation including developing AI capabilities to enhance risk decisions.

clicOH, an Argentina-based fulfillment and logistics provider, acquired Rayo, a Chile-based last-mile fulfillment platform, for an undisclosed amount. Rayo is now fully integrated into the clicOH platform, and the founders of Rayo will take on new corporate leadership roles at clicOH.

Pepper, an e-commerce platform for food distributors that supports catalogs of over 100k items and enables companies to launch mobile apps and websites, raised $30M in a round led by ICONIQ Growth, bringing its total amount raised to $46M. To differentiate itself from competitors, Pepper doesn't operate as a marketplace and doesn't have a Pepper app. Instead it places the distributor's brand identify front-and-center instead of its own.

Aeropay, a Chicago-based payment solutions provider for cannabis retailers and gaming companies, raised $20M in a Series B round led by Group 11, bringing its total amount raised to $35M. The company created its own cashless and contactless digital payments solution that bypasses Visa, Mastercard, and AMEX by connecting customers' bank accounts and allowing them to make purchases directly on e-commerce websites.

Cover Genius, a global insurtech that enables partners to embed and sell multiple lines of insurance and consumer product protection, raised $80M in a Series E round led by Spark Capital, bringing its total amount raised to $245M. The funds will be used to expedite the company's growth plans, invest in AI technology, and expand the protection solutions available on its platform.

Maad, a Senegal-based B2B e-commerce startup that enables mom-and-pop retailers to source fast moving consumer goods directly from partner suppliers, raised $3.2M in debt-equity funding in a round led by Ventures Platform, with the $900k debt financing from French DFI Proparco. The company will use the funds to bolster its growth in western Africa and explore new opportunities in the Francophone region, which encompasses the 29 countries where French is the official language.

Convesio, a WooCommerce hosting platform, acquired Growmatik, a marketing automation tool for WordPress and WooCommerce, for an undisclosed amount. The deal is part of Convesio's ongoing strategy to expand its tech stack and improve its market position by integrating automation capabilities into its suite of services.

GrubMarket, a California-based platform that helps link up and manage relationships between food suppliers and their customers, acquired Butter, a SaaS platform that aims to digitize the traditionally manual food distribution process with AI, for an undisclosed amount. Butter's eight-person team will join GrubMarket, and its software suite will be integrated with the platform.