Will Bitcoin surpass its all-time high of $68,990 this week? Or take a dive back into $50k territory? What's your prediction? Hit reply and let me know. At the time of sending this newsletter, Bitcoin is hovering around $67,000, having gained over 50% in market cap since the start of the year.
While we're waiting to find out, I've got some e-commerce news for you!
In this week's edition I cover:
- Flexport's exclusive offer to Shopify merchants
- TikTok Shop advertising on Google
- The perfect number of payment options
- The CPSC's inability to keep up with Chinese imports
- Automattic's controversial AI licensing deal
- Wendy's backpedaling on its surge pricing
- TikTok's sinking engagement
- Klarna's AI obsession
- Meta potentially changing its name in Brazil
- Thrasio's bankruptcy
All this and more in this week's 163rd Edition of Shopifreaks. Thanks for subscribing and sharing!
btw – Feel free to forward these editions to your colleagues if I cover something they'd be interested in reading about. Your forwards only help us to grow!
Stat of the Week
Squarespace surpassed $1B in revenue for the first time last year. Q4 bookings surged by 23% to reach $286M, with Google Domains, acquired in Sep 2023, accounting for half of this growth.
Unique subscriptions and price increases across subscription offerings were also significant growth drivers, representing 60% and about 30%, respectively, of top line growth for the full year.
1. Flexport offers perks to Shopify merchants
Shopify is now offering discounts for its merchants to fulfill and ship orders through Flexport as the two companies deepen their logistics ties. The discounts include:
- 10% off Flexport’s fulfillment services for first-time users for up to $1M in savings
- 10% savings on shipping fees up to $250k for any shipment upgraded to Flexport’s “Flexpedited” service
The discounts only apply to inventory inbounded and fulfilled by June 30, which is a fairly short window of time for a company to switch fulfillment services and subsequently fulfill enough orders for the savings to offset the cost of the transition.
Three weeks ago I reported (story #2) that Shopify began prompting merchants to sign up to Flexport's fulfillment services directly through the app via its newly launched Shopify Fulfillment Network. This was the first significant preferential treatment Flexport saw on Shopify's platform since becoming their “preferred” logistics partner a year earlier.
As you might recall, Shopify sold off its logistics division last year, including Deliverr which it acquired for $2.1B in May 2022, to Flexport in an all stock deal that gave Shopify 13% ownership in the company. Shopify has since invested another $260M in Flexport this year, which presumably increased that ownership.
Is this a sign of more Shopify-exclusive deals to come across its portfolio of investment companies? Will Klaviyo come out with a discounted “Shopify Tier”? Will Faire merchants who also sell on Shopify receive discounted rates?
Or is it a sign of desperation from Flexport who possibly bit off more than it could chew this past year and urgently needs to stop bleeding cash?
2. TikTok Shop listings surface on Google Shopping
TikTok Shop listings began to pop up in Google Shopping in recent weeks, particularly within results for beauty and skincare products. Searches for trendy products like “nail art” and “dior lip oil dupe” featured results that linked to smaller sellers on TikTok Shop.
TikTik confirmed the company's Google Shopping ads, but declined to comment on specifics such as how much it was spending or how long they plan to advertise on Google.
Juozas Kaziukėnas, founder and CEO of Marketplace Pulse, noted that Google Shopping's results allow people to compare similar styles, features, and prices across retailers, which is “not TikTok's strength.” He added, “TikTok Shop is for impulse buying when you are flipping through videos on the app, and one of them interests you enough for you to buy the product it is featuring.”
However apparently TikTok Shop is willing to leverage the strength of Google for its customer acquisition, as is Shopify, Shein, Temu, and other online marketplaces. A few weeks ago I reported (story #7) that a search for “Lego toy” returned more Google Shopping results for Temu than it did for Lego.
Since TikTok Shop is still relatively new, it’s too soon to tell whether the company’s long term plans include heavily investing in advertising on third-party platforms like Google, or if it's simply trying to supplement sales from its own discovery feed to keep sellers interested.
3. Too many payment options, or not enough?
PYMNTS recently reported that 70% of consumers consider the availability of their preferred payment method extremely influential when choosing which online store to purchase from. The report concluded that merchants who offered a customer's preferred payment method saw lower cart abandonment. In other words, if the store offered Apple Pay or Affirm (or whatever their preferred payment method was), the customer would be more likely to purchase.
However on the flip side of the coin, Modern Retail says that some brands question the value of having too many payment options on their checkout, particularly too many BNPL options, wondering if it looks too cluttered and scares away shoppers.
Modern Retail learned from conversations at eTail West:
- Brands talked about the importance of ensuring that their target audience is offered its preferred method of payment. For example, a clothing brand aimed at 55+ women sees significant PayPal activity, but said it isn't interested in introducing Venmo because it caters to a younger use base.
- A C-level executive who works for a subscription service in the beauty space said having multiple payment methods increases conversion rates. “Sometimes it’s convenience,” they said, but other people “feel more secure using something like PayPal so they don’t expose their credit cards.”
- Pat Suh, svp at Affirm, said that clients are increasingly interested in offering more than a pay-in-4 installment plan, including longer-term financing models that can stretch on for years for high-ticket purchases.
- Colin Mellon, head of sales for SplitIt, said, “Optionality is becoming a must-have. It's not like you can only pay with cash, check, or card like back in the day.” (The BNPL guy would say that. LOL)
In December I reported that Bold Commerce launched a dynamic payment featured called Payments Booster, which delivers personalized payment experiences based on the shopper's profile and device they are using. For example, a shopper making a purchase on social media may be more likely to pay with a digital wallet versus someone on their desktop. The feature is designed to help brands find the middle ground between payment flexibility and an excess of options.
I think we'll see more payment personalization features like that enter the market in the coming years as consumers become overloaded with payment choice — features like remembering a customer's preferred digital wallet or BNPL service of choice and hiding the rest.
How did you decide which payment options to include (or not include) on your store? Hit reply and let me know.
4. The Consumer Product Safety Commission can't keep up with the volume
The Consumer Product Safety Commission said on Friday that the ability of the US to enforce product safety standards is being strained by the huge number of goods shipped directly to American consumers from factories in China via marketplaces like Shein and Temu.
The agency said that it receives limited data on products entering the country, is dealing with a huge volume of imports, and has limited staff at major entry points, which is presenting significant challenges to their ability to stop dangerous products before they enter the market.
Last week, Ohio Sen. Sherrod Brown and Florida Sen. Rick Scott wrote a letter urging President Joe Biden to use his executive power “to end duty-free treatment for… e-commerce shipments that are facilitating the import of illegal products, goods produced with forced labor, and other contraband to the detriment of U.S. manufacturers, workers, and communities.”
Senator Brown and others have proposed legislation that would eliminate duty-free treatment for packages coming from China, which account for over 60% of all shipments that fall under the duty-free threshold.
I've regularly argued that the de minimis rule offers way too much of a competitive edge for Chinese retailers, and that at the current pace of its abuse, we're handing US retail to China on a tax-free platter.
Jason Greenwood and I recently discussed some ways to reform the de minimis rule in the US on an episode 317 of his Ecommerce Edge Podcast. Other countries are already reforming their policies, and it's important that the US catch up and think ahead because the volume of e-commerce imports is going to continue to grow each year otherwise.
In other Chinese commerce news, US lawmakers are calling for a ban on all imports of goods sold on Temu, citing concerns that the company hasn't done enough to crack down on forced labor. That would also reduce the volume of imports, I guess.
5. WordPress & Tumblr to sell your content to AI companies
Automattic, the parent company of WordPress, WooCommerce, and, Tumblr, is in talks to sell content from its platforms to AI companies like MidJourney and OpenAI for training purposes, according to a new report from 404 Media.
The company plans to introduce a new setting that will let users opt out of training AI systems, but it’s not clear whether the setting will be toggled on or off by default for users. Squarespace introduced a similar setting to opt out of allowing your data to be used for training AI last year.
Automattic wrote in a blog post:
- We currently block, by default, major AI platform crawlers—including ones from the biggest tech companies—and update our lists as new ones launch.
- Currently, no law exists that requires crawlers to follow these preferences, though this may change soon with pending legislation in the European Union. Regardless of geographic location, we want to provide you tools that grant as much control as possible.
- We will only share public content that’s hosted on WordPress.com and Tumblr, and only from sites that haven’t opted out.
The plans at Automattic have been extremely controversial internally, to the point that a product manager started pulling his own photos off Tumblr to make sure they're not used to train AI.
One commenter on a Gizmodo article pointed out the challenges with Automattic's opt-in / opt-out idea. He wrote, “With the way reblogs work on tumblr, no-one can ever meaningfully opt out. Once you’re reblogged, your words and images become part of someone else’s blog. Deleting your entire account and all of your own copies of each post will only add a ‘-deactivated' suffix to your username in the reblog chain. Up until now, this has been part of the charm of tumblr. Posts stay even after people leave. This change gives things a bit of a sour edge.”
Welcome to the future of the Internet. What's mine is yours, and what's yours is AI's.
Last week I reported (story #3) that Google and Reddit negotiated a $60M content licensing deal to allow Reddit's data to be used to train their AI models. A few months ago, OpenAI signed deals with Politico, Business Insider, and The Associated Press to license stories to train models.
So this is happening everywhere right now on every platform. And given how many journalists and bloggers are using AI to write articles now-a-days, it seems that we're about to enter into a closed loop of AI training AI!
6. Wendy's says it won't use surge pricing
I'm sure you saw the news and the TikTok videos blasting Wendy's for its recent announcement that it'll begin using Uber-like surge pricing at its restaurants during peak hours.
It was reported by CNN and other news outlets that the fast food restaurant will begin testing dynamic pricing as early as 2025 as part of its $20M investment in new digital menu boards across its US restaurants, which will enable them to change prices throughout the day depending on demand.
Wendy’s CEO Kirk Tanner said the new menus will let it test “more enhanced features like dynamic pricing and day-part offerings along with AI-enabled menu changes and suggestive selling.”
However after all the backlash, Wendy's now wants you to know that it will NOT be using surge pricing.
The company wrote in a statement:
“This was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants. We have no plans to do that and would not raise prices when our customers are visiting us most. Digital menuboards could allow us to change the menu offerings at different times of day and offer discounts and value offers to our customers more easily, particularly in the slower times of day.”
That's fair, right? I mean it's normal for restaurants to offer happy hours and other discounts depending on the time of day, isn't it? And technically most restaurants across the US already employ a form of surge pricing with Lunch and Dinner menus that price the same portions at different prices.
Despite Wendy's saying that the stories were inaccurate, CNN doubled down on its coverage:
“But the questions over what to call Wendy’s experiment – surge pricing? Dynamic pricing? Something else? – underscore the PR problem around a pricing system that’s already been used for years in a range of industries, from ride-sharing to airlines to your local happy hour. Surge pricing refers to dynamic pricing, which is a way for businesses to charge more (or less) based on how many people want their products at any given time.”
Twelve in one hand, a dozen in the other. Either way, it appears that Wendy's will still be pursuing its dynamic pricing, but position it as discounts during off-peak times instead of surge pricing during peak times.
7. TikTok engagement dropped by 50%, but it's still the best
The latest Social Media Benchmarks report from Rival IQ reveals that engagement with brand posts has dropped on every social media platform except Facebook in 2023. The report is based on 5M posts and over 10B likes, comments, and favorites across Facebook, Instagram, TikTok and Twitter, pulled from 150 companies at random from each industry in Rival IQ's database of over 200k companies.
Here are some key takeaways from the report:
- TikTok engagement rates dropped by about 50% this year, however despite the significant drop, with a median engagement rate of 2.63%, TikTok still performed better than any other channel.
- Brands posted more frequently on TikTok than they did last year across the board. Media brands posted nearly twice as often as they did in the previous period.
- Post frequency increased on Instagram and TikTok while decreasing on Facebook and Twitter.
- Almost every industry earned top engagement rates from holiday-hashtagged posts.
- Reels overtook video on Instagram, but overall Instagram engagement rates declined 8%.
- Brands posted a little less often on Facebook last year overall, but Fashion, Financial Services, Food & Beverage, Home Decor, and Sports Teams actually increased their activity.
- Engagement rates declined about 20% on Twitter this year.
- Tweet frequency decreased by about 15% this year across all industries as brands pulled back their efforts in response to the channel’s volatility.
How does that sample set of findings align with what the engagement your brand has experienced across these platforms? Hit reply and let me know.
8. Klarna ditches customer service teams for AI
Klarna announced that within one month, its AI-powered assistant had handled two-thirds of customer service inquiries and is “doing the equivalent work of 700 full time agents.”
Klarna currently outsources its customer service to five global third-party providers that collectively employ more than 650,000 people, of which 3,000 of those agents were dedicated to Klarna.
A Klarna spokesperson told Sourcing Journal, “Since the launch of the AI assistant, we have seen that number reduce to 2,300 agents fully dedicated to Klarna. Because our third-party customer service agents have such a large volume of work from other clients, they are able to redeploy those agents. But for Klarna, that implies a direct reduction in our customer service requirements, and therefore, cost savings.”
Klarna’s CEO, Sebastian Siemiatkowski, is obsessed with AI and how it can reduce the company's overhead. He told the Telegraph in December that Klarna has elected to not hire any new employees outside of its engineering department because he believes AI can automate many tasks.
In a statement last year, Siemiatkowski said, “When I come to work, I focus solely on how AI can help us realize our vision faster.”
The company noted that it expects the AI assistant, still in its infantry, to drive $40M in profit in 2024 as it gears up for its IPO.
9. Other e-commerce news of interest
Flipkart is developing its own Unified Payments Interface service for online and offline payments to compete with Paytm, PhonePe, Google Pay, and Amazon Pay in India. The service will offer loyalty features such as supercoins, cashbacks, milestone benefits and branded vouchers to its over 500M customers.
Amazon's typical shopper is a white Gen X woman earning around $60,000 per year, according to a study by Numerator. The typical customer makes an average of 72 orders per year (or roughly 1-2 orders per week) at an average cost of $37 per order for an annual spend of $2,662. Sounds about right. She's probably the type to bake cookies using prepackaged dough and then tell other parents on the PTA that they were made from scratch, but we all know.
Apple is reversing its decision to kill Progressive Web Apps in the EU after backlash from users. Last month, Apple said this decision was due to requirements under the Digital Markets Act related to support alternative browser engines on iPhone, but that obviously made no sense and everyone saw past it, so Apple reversed course. As of March 1st, EU users will continue to be able to install and use home screen web apps on iOS.
Experian will be the first credit bureau to include Apple Pay Later loans on consumers' credit reports with a BNPL designation. The loan information will not immediately be factored into existing traditional credit scores, but it may in the future as new credit scoring models are developed.
ShopBack, a Singapore-based loyalty platform, is discontinuing its BNPL service PayLater as of March 22nd because the company feels it lacks growth potential. The PayLater service was introduced after ShopBack acquired Hoolah in November 2021.
Amazon, Walmart, Temu, Shein, and Sears are recommending and selling doorbells that hackers can infiltrate and gain access to footage, IP addresses, and WiFi networks. Despite the alleged security concerns, at least one doorbell has the “Amazon's Choice” recommendation and receives over 300 sales a month. Anyone can walk up to the doorbells, hold the button long enough for it to go into pairing mode, and link it to their account on the app. The info could then be used for porch piracy or other unscrupulous things.
The US Drug Enforcement Administration issued a letter to e-commerce companies informing them that if they continue to turn a blind eye to the sale of the pill presses that are being used to make fentanyl pills on their platforms, that the DEA will hold them accountable. Last month eBay agreed to pay a $59M fine and enhance its compliance program to resolve allegations that it violated the Controlled Substances Act after selling thousands of pill presses and encapsulating machines on its website.
Etsy and Amazon will be hosting spring sales events to promote seasonal items such as Outdoor & Garden, Home, Beauty & Fashion, Pets, Travel and other relevant categories. To participate, Etsy sellers can pick the listings to include in the sale, whereas Amazon is collecting deal submissions for an opportunity to participate in its promotion. The sales will have a dedicated landing page and will be promoted through paid media and merchandising placements.
Meta is removing restrictions on how much creators can earn from its Creator Bonus program, which previously limited a maximum payout to $30k per month. Meta is also inviting more creators to participate in the program including creators from Italy, France, Germany, Spain, Colombia, Argentina, Peru, the Philippines, Thailand, and Indonesia.
Brazil ordered Meta to stop using its name in the country within 30 days, after a local computer services provider with the same name fled a lawsuit saying it has been damaged by third parties confusing the companies. Meta Servicos, which registered its brand in the late 2000s, said that since Facebook changed its name in 2021, it has been wrongly included in more than 100 lawsuits and had Instagram profiles disabled for supposedly impersonating another company. Zuckerberg's Meta must pay $20k per day if it fails to comply with the decision, which it can appeal. But something tells me Meta Servicos is about to get a buyout offer.
Amazon labeled Apple's FineWoven iPhone 15 case as a “frequently returned item” and warned customers to read the reviews — many which are one star. Customers have been complaining about the case since it was released last September, claiming its the worst product Apple has ever released.
The European Parliament banned Amazon representatives from accessing its buildings due to multiple events where the company did not attend meetings requested by members of the parliament. Apparently Amazon refuses to attend more than one meeting with EU lawmakers to discuss the condition of its workers. It is now the responsibility of the secretary general to initiate the process of withdrawing their badges and to determine the duration of the ban.
US e-commerce sales penetration hit a new all time high, representing 22.0% of total retail sales in 2023, according to Digital Commerce 360 analysis of US Dept of Commerce data. However total retail sales grew just 3.8% in 2023, which is just over half the rate they did in 2022.
Studios staffed with Chinese livestreamers are training Americans to sell on TikTok Shop, convinced that a livestream shopping boom is inevitable in the West. More than 20 agencies have popped up in the US, filled with staff experienced in Chinese livestream e-commerce, who seek to professionalize livestream shopping on TikTok by recruiting and training local talent.
Macy's is closing 150 underperforming stores by 2026, leaving just 350 stores at that time. The company is pivoting to focus on its successful Bloomingdale's and Bluemercury brands, which have outperformed the Macy's brand, and is planning to open more, smaller versions of those stores over the next several years. Okay cool, but does Bloomingdale's and Bluemercury have Thanksgiving Parades??
A former Shopify employee was awarded €10k following his layoff, which he successfully argued was a result of accusing female team leads of discrimination. Mark Wells was allegedly subjected to abuse from a customer, with his subsequent complaints being poorly handled by his employer, leading to his unfair dismissal.
Elon Musk is suing OpenAI and CEO Sam Altman, claiming that the ChatGPT-maker's partnership with Microsoft is jeopardizing its original nonprofit mission. The suit claims that the company's pivot to a “capped-profit” division breached its contract of being an open-source, nonprofit company, as it was first established in 2015.
Affirm, which operates in US and Canada, has its sights set on the UK, where the BNPL provider sees a demand for the longer-term, interest-bearing loans it offers. Beyond that market, Affirm is seeking to plan flags where its partners, Shopify and Amazon, have a presence.
Pinterest launched its first-ever streaming show, Deliciously Entertaining, developed and produced in partnership with the media company Tastemade. The series is available on the Tastemade streaming channel with a shoppable experience on Pinterest. Viewers can scan an on-screen QR code which links to a Pinterest board filled with shoppable Pins to recreate recipes, DIY tutorials and inspirational Pins connected to the episode theme.
DICK'S Sporting Goods released a new e-commerce ad campaign entitled Click on DICKS.com that stars actors Will Arnett and Kathryn Hahn. The campaign features two 30-second spots that showcase the seamless, hassle-free experience of shopping on DICK'S website and highlights the retailer as the ultimate online shopping experience for athletic apparel, footwear, and sporting goods equipment. Watch Basketball Shoes and Soccer Cleats on YouTube. They commercials were okay. Personally I would've pulled inspiration from some classic Gob quotes like, “Yeah, like I'm going to get grass stains all over these $120 cleats! COME ON!”
10. Seed rounds, IPOs, & acquisitions
Thrasio, once one of the largest and most well funded Amazon aggregators on the market valued at $10B, filed for Chapter 11 Bankruptcy on Wednesday. The company said that it has received commitments for $90M in new financing from existing shareholders and that it has entered into a restructuring agreement with some of its lenders to reduce its debt by $495M. Thrasio listed estimated assets in the range of $1B to $10B (LOL that's a huge range) and estimated liabilities of $500M to $1B.
Speaking of aggregators… Razor Group, a Berlin-based e-commerce business aggregator, acquired Perch, a US-based aggregator, and simultaneously raised just over $100M in a round led by Presight Capital with participation from other undisclosed investors. The combined business has an enterprise value of $1.7B and holds around $400M in debt on its book that is not due to come up for payback for at least another four years.
Shein may pursue an IPO in London rather than in the US after determining that the US is unlikely to approve its IPO due to scrutiny over its business practices, particularly its alleged use of cotton from forced labor regions in its clothing. Pressure on the UK government to boost London’s equities market could result in Shein facing less regulatory push-back than in the US, and a multi-billion dollar listing by Shein could become London's biggest IPO ever, however it's still uncertain if the plan will come to fruition.
Amazon officially became a member of the Dow Jones Industrial Average last week, replacing Walgreens Boots Alliance as one of the 30 stocks in the index. The three largest tech stocks in the Dow by market cap were previously Apple, Microsoft, and Salesforce, but now Amazon has taken Salesforce's 3rd place spot.
Pimberly, a Manchester-based software firm who develops software to help businesses boost e-commerce sales, raised £4M from NPIF – Mercia Equity Finance, bringing its total amount raised to £14M. The funds will enable the company to enhance its platform, further expand into the European market, and grow its team across the UK, US, and CA.
Fairbanc, a Singapore-based B2B embedded finance startup, raised $13.3M in debt financing from the digital lending arm of Pegadaian. The company will use the funds to expand its operations in Indonesia, focusing on off-balance sheet financing via its newly introduced BNPL gateway.
Salla, a Saudi Arabian e-commerce platform, raised $130M as a pre-IPO investment from Investcorp, Sanabil Investment, and STV. The funding aims to accelerate the company's mission of empowering SMEs and entrepreneurs within the Kingdom.
MoneyHash, an Egyptian fintech that streamlines payment processes for merchants through unified payment APIs, raised $4.5M in a seed investment round, bringing its total amount raised to $8.0M. The company plans to use the funds to further invest in its technology and growth across the region.
Shadowfax, a logistics service provider that offers hyper-local and on-demand delivery in India, raised $100M in a Series E round led by TPG NewQuest. The startup is attempting to streamline logistics operations by unifying disparate elements in Idnia's last-mile ecosystem, currently reaching over 2,500 cities and 15,000 zip codes with over 3.5M registered users.
Particle.news, a new startup developed by former Twitter engineers that offers a personalized “multi-perspective” news reading experience that summarizes news and attempts to summarize authors and publishers, raised $4.4M in a round led by Kindred Ventures and Adverb Ventures. The product went into private beta this past weekend and the company plans to offer a mobile app in the future.
Totango and Catalyst, two customer success companies, are merging in an effort to take on the market leader, Gainsight. No money is exchanging hands in the deal. Instead the two companies are combining entities to take advantage of each other's strengths.
Kestrel, a new venture formed by the co-founders of SkyVerge which created over 60 WooCommerce add-ons and was acquired by GoDaddy in 2020, acquired seven plugins from Barn2, a developer of WordPress and WooCommerce plugins, for an undisclosed amount. The deal was part of Barn2's plan to sell off some of their existing plugins to focus on their more profitable ones.
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Paul E. Drecksler
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PS: Why did the car get a flat tire? Because there was a fork in the road.