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As you'll see in this week's edition, Amazon dominates six of the eight top stories. If you're new to Shopifreaks, please note that while I try to offer a variety of news from big players across the industry in each edition, some weeks inevitably become more about one company than another. That's just how the e-commerce wind blows!
In today's edition, I cover PayPal's new stablecoin, Amazon shuttering its private label brands, and TikTok's new UK fulfillment center.
I also share stories about Amazon's new AI review feature, a second Prime Day this year, curbside Starbucks delivery at Target, and Twitter auctioning its bird branded memorabilia.
All this and more in this week's 134th Edition of Shopifreaks. Thanks for subscribing and sharing.
Stat of the Week đ
Americans credit card debt rose to over $1 trillion for the first time. Total household debt balances increased by $16B in the second quarter of 2023. – According to Center for Microeconomic Data
Share this week's stat on X & LinkedIn.
1. PayPal releases a stablecoin
Last week PayPal released a stablecoin called PayPal USD (PYUSD) that's 100% backed by USD deposits, short-term U.S Treasuries, and similar cash equivalents.
PYUSD is an ERC-20 token issued on the Ethereum blockchain, which means the coin will immediately be available to Ethereum's network of exchanges, developers, wallets, and web3 applications.
Dan Schulman, president and CEO, PayPal said, “The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar. Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”
The coin was issued by Paxos Trust Company, who will publish a public monthly Reserve Report starting in Sep 2023 that outlines the instruments composing the reserves, as well as a public third-party attestation of the value of PayPal USD reserve assets. (This is important. More on that below.)
Quick history of stablecoins:
As the name implies, stablecoins don't fluctuate in price like other non-stable cryptocurrencies such as Bitcoin, Ethereum, VeChain, etc. (Or at least, they're not supposed to.)
Over the years, non-stable coins became more of an investment vehicle due to their price volatility, as opposed to a medium of exchange or payments. In other words, no-one wanted to spend their Bitcoins on purchasing anything because they thought they'd go up in value.
So stablecoins were created to fill that currency void. Since they don't go up or down in value, there's no incentive to hold onto your stablecoins. Folks can freely use them, trade them, buy things with them, etc, while simultaneously having a “safe” way to store their money in crypto.
I say “safe” because several stablecoins have proven to be absolute shams.
Last year, Terra USD (USDT), the largest stablecoin project in the world, collapsed after a surge of withdrawals caused it to begin trading under 20 cents a coin.
But wait, I thought it was “stable” and tied to the USD, so it should never go higher or lower than $1.00?
Well, it was supposed to be. However Terra was never actually keeping $1 USD for every 1 USDT in its reserve. Instead it was using an “algorithmic” approach to offering a stable coin, which maintained the price through a promise to print or destroy currency to match the demand.
Turns out they couldn't destroy it fast enough to keep up with the withdrawals, so the uncollapsible algorithmic stablecoin collapsed! (It's since recovered, but not before costing holders a lot of money.)
Since the incident with USDT last year, stablecoins have been under intense scrutiny by regulators and investors to ensure that the value of the of the reserves the coins are pegged to are actually worth what they say it is. Enter PayPal.
“Why is this stablecoin different from all other stablecoins?”
Unlike previous attempts at a stablecoin, PayPal isn't a startup or a fly-by-night crypto project backed by anonymous screennames. The company has been around since 1998 and is a staple in the worlds of tech, banking, and finance. PayPal brings much needed credibility to the space, and unlike other stablecoin projects, has a whole lot more to lose by not being forthright about its reserve.
PayPal is also significantly larger than Ethereum itself, the network that PYUSD is built on, with 435M active accounts versus 1M Ethereum addresses.
Jamie Coutts, a crypto market analyst at Bloomberg Intelligence, said, “If 1% convert a dollar balance to PYUSD and begin to use it, then the ramifications for the Ethereum ecosystem and ETH, the asset, are massive.”
2. Amazon shutting down its private label brands
Amazon is planning to shutter 27 of its 30 private-label brands, as it looks to cut costs and stave off antitrust scrutiny.
Brands getting the ax include:
- Clothing brands like Lark & Ro, Daily Ritual, and Goodthreads
- Furniture brands like Rivet and Stone & Beam
- Household goods brands like Solimo and Mama Bear
- Pet brands like Wag
The only brands to remain will be its self-branded ones: Amazon Essentials (clothing), Amazon Collection (jewelry), and Amazon Aware (carbon neutral goods).
Amazonâs private-label business had 243k products across 45 different brands, as of a company disclosure in 2020, but accounted for less than 1% of its retail sales.
Amazon will continue to sell products from the now-discontinued brands until they run out.
Why is Amazon shutting these brands down?
Matt Taddy, VP of Amazon Private Brands, told The Verge that the company is âthoughtfulâ about its private brand selection and that it will retire any items that âarenât resonating with customers.â
However the decision to streamline its private label businesses also comes amidst a possible antitrust lawsuit from the FTC, which could lead to a court-ordered restructuring. The company has been under heat for several years for using data from its third-party sellers to develop its own Amazon-branded products, although they've denied all accusations .
India already prohibits Amazon (as well as other foreign marketplaces) from selling their own products directly to consumers, and other countries could follow suit in the future with similar consumer protection and antitrust laws.
At just 1% of its total retail sales, and with direct from manufacturer marketplaces like Temu and Shein making waves in the industry, the private label business simply has too many obstacles in the road ahead for Amazon, with too little upside.Â
3. Amazon boxless deliveries
In addition to getting rid of private label brands, Amazon is also looking to get rid of shipping boxes!
The company is going to begin delivering more products directly in the manufacturer's box, without an Amazon box wrapped around it.
From an environmental perspective, I support this entirely.
It's such a waste to take a toaster, which already comes protected in a perfectly good box, oftentimes with styrofoam encasement, that's already made it from a manufacturer across the world to Amazon's fulfillment center in said box, and shove it into an Amazon branded box for delivery.
Most consumer good packaging is already designed to protect the product from manufacturer to warehouse to your door, and there's very little reason to add an extra layer of packaging.
Amazon has been testing boxless deliveries on certain items since 2020, and moving forward, revealed that around 11% of items the company delivers will arrive without extra packaging through a program it calls “ship in own container.”
Amazon is also using its clout to have companies change their packaging to have their products better ship on their own.
For example, Brita water filters started designing its packaging differently for physical stores and e-commerce sales. Another company that sold a set of screwdrivers reduced their package size by about half to make it less expensive for Amazon to ship 100k of them a year to customers.
Amazon packaging czar Pat Lindner told WSJ, “The recognition by a number of senior leaders was just that this is becoming more and more important. Thereâs a significant need for our company to take the next step in innovation around packaging.”
Some customers have criticized the move as a creating an opportunity for thieves. However the opposite could be true too. Maybe a porch pirate would be less likely to steal your package if they knew it was just a book? Either way, realistically, packaging hasn't, and isn't, going to stop porch theft. That's a separate problem altogether.
Sometimes companies throw an “environmental” label on moves solely designed to save them money, but other times the worlds between what's best for the company and what's best for the environment collide.
This is one of those times, and I'll gladly be choosing “no packing” whenever possible on orders.Â
4. Introducing Amazon Magic
Did you know that there's an entire underground market that exists to help third-party Amazon sellers obtain an unfair advantage over other sellers?
The services are sold via Telegram, WeChat, WhatsApp, and Facebook Groups, which are comprised of Amazon insiders who offer items like:
- Remove negative reviews on a product
- Provide information on competitor products
- Check suspension reasons
- Recover suspended seller accounts
- Secure an upvote on a review or vote down negative reviews
- Attack a competitor's listing
- Get seller information like name, e-mail, phone, or address
One Telegram group has over 13,000 members, where for $200 to $400, sellers can pay for a service called “Amazon Magic” which removes negative reviews and provides info on competitors.
Amazon has been battling the issue of rogue employees taking bribes for quite some time.
Earlier this year, I reported on Ephraim Rosenberg, a consultant for Amazon sellers, admitting to bribing Amazon employees for information to help his clients. Rosenberg, along with five other individuals, was charged in 2020 with conspiracy to commit bribery, and plead guilty in federal court. He apologized for his actions on LinkedIn, and the response was overwhelmingly supportive, with dozens of sellers who he had helped reinstate their accounts in the past praising his career and dedication to the community — which just goes to show how large of a problem Amazon's lack of transparency over account suspensions is for sellers.
Last month, Federal prosecutors put some of the blame on Amazon for these blackmarket services popping up. Due to Amazon not providing such important information such as WHY a seller's account was suspended, sellers have had to find other means of finding the information. When there's a will, there's a way.Â
5. Amazon adds AI powered review summaries
Amazon introduced a new generative AI feature to help shoppers more easily decide whether a product is worth buying. The feature analyzes reviews and automatically creates a summary that consists of a single AI-generated paragraph.
How much will it cost on the black market to have my review summary sound more positive than my competitors? LOL.
According to Amazon, the new feature can:
- Provide high-level info about a product like whether customers find it easy to use.
- Point out more specific product details.
- Highlight that many buyers have a positive view of the product or specific features of the product.
Below each AI-generated review summary is a collection of clickable keywords such as “Easy to Use”, which when clicked, bring up another AI-generated summary offering more details about that particular benefit.
Amazon says it generates summaries only from “Verified Reviews” submitted by customers who have purchased the product.
Last year, more than 124M Amazon customers wrote nearly 1.5 billion product reviews, which are valuable for customers, but also cumbersome to sift through. The new AI-generated summaries could ease that process for customers.
The feature is currently only available via Amazon's mobile app to a limited numbers of users in the U.S.
Have you seen AI review summaries in acton on your Amazon app? If so, what do you think about the summaries? Hit reply and let me know.Â
6. TikTok launches fulfillment in the U.K.
TikTok launched a new fulfillment service in the U.K. called Fulfilled by TikTok. The service is designed to help merchants who sell on its platform store, pick, pack, and ship items.
TikTok says that the service offers:
- Same day, automated fulfilment for all orders made by 7PM Monday to Saturday
- A next working day premium delivery service
- Improved customer feedback and ratings through our instant messaging service and dedicated customer service employees
- Improved metrics in terms of reduced delivery times
Fulfilled by TikTok is only available to TikTok Shop merchants based in and delivering to the U.K., and packages must not exceed 30kg in weight or 31.5 cubic liters per shipment. To participate in Fulfilled by TikTok, merchants do not have to store all their SKUs at their warehouses, or use the service for all of their products. You can take a look at TikTok's fees for warehousing, shipping, labelling, pre-packing and inserting leaflets on their website.
Meanwhile in the U.S., TikTok partnered with Flowspace to power fulfilment for TikTok Shop, marking its first fulfillment partnership. The integration enables merchants to manage inventory across Flowspace's network of over 150 warehouses. Merchants can now access the Flowspace app within the TikTok Shop Seller Center to get started.
In other TikTok news this week…
New executives are joining TikTok, who were previously with Amazon and Meta, to help build its e-commerce businesses in the U.S.
Joining the company are Nicolas Le Bourgeois, currently COO of Flip and formerly director of Amazonâs U.S. marketplace, and Marni Levine, who previously served as VP of global support operations at Meta and VP of supply operations and engagement at eBay.Â
7. Policy changes in the EU & UK
TikTok isn't the only player making big moves in the U.K.
Amazon also made a couple big changes this week for retailers in the region.
#1) Longer payout period
Starting Sep 6th, sellers in the U.K. and Europe will have to wait until a week after the delivery of an item to receive their funds.
Historically Amazon credited sellers accounts when the order was shipped, but now it will be implementing a Delivery Date Based Reserve policy.
Between warehousing fees, employee salaries, loan repayments, and inventory demands, working capital is typically tight for e-commerce merchants. Having to wait an extra week to receive funds on items that are already sold and shipped will make things even tighter, which may not be that great for Amazon either. If merchants can't afford to re-order inventory while their funds are tied up, there's a higher possibility they run out of stock on items, which isn't good for Amazon's customers.
An Amazon spokesperson defended the change, saying, “This process will standardize reserve policies for European sellers to ensure they have sufficient funds to cover any financial obligations, like product returns or customer claims.”
However I don't buy that. Amazon keeps a card on file for every seller to charge for product returns, customer claims, or seller fees when their account balances don't cover the amount.
#2) Discontinuing Small and Light program
Amazon is also pulling the plug on its specialized fulfillment program for small, lightweight, and low-priced goods in Europe, following its discontinuation in the U.S. later this month.
Starting from Sep 26th, items that would normally have fit into this category will automatically be subject to Amazon's new “low-price FBA rates.”
Amazon first introduced the Small and Light program in 2015, which allowed merchants to sell smaller, lighter, and more affordable products with reduced FBA fees. To make this feasible, Amazon provided slower shipping speeds for these items compared to regular FBA items.
The new low-price FBA rates will be on average $0.77 lower per item compared to the current FBA rates, but around $0.30 higher than the Small and Light rates, and they will now ship just as fast as other FBA items.
8. Amazon's second Prime Day
Amazon announced that it will hold a second Prime Day sale event in October, open to Prime members in 19 countries including Australia, Austria, Belgium, Brazil, Canada, China, France, Germany, Italy, Japan, Luxembourg, Netherlands, Poland, Portugal, Singapore, Spain, Sweden, the U.S. and the U.K.
This is the second year in a row that the company is holding an October sales event following its annual mid-summer Prime Day event which began in July 2015.
The October sales event will be called “Prime Big Deal Days” — a name that could mean it'll offer sales on only big ticket items, or just that there will be big savings offered. The LinkedIn announcement from Doug Herrington, CEO of Worldwide Amazon Stores, said that details were on the way.
Last year's October event missed expectations and was estimated to have fallen short of July's Prime Day.
Amazon is historically secretive about its Prime Day sales numbers, and only publicly said last year that “tens of millions” of Prime members shopped its October event, with customers buying more than 100M items across its marketplaces.
The data firm Numerator estimated that average order size during the October event was $46.68, which was about 23% lower than the July Prime Day event.
Amazon needs this second Prime Day event more than ever this year.
One of my 2023 Predictions was that this would be the year Chinese marketplaces give Amazon and Walmart a run for their money — and that prediction is proving to be true.
Amazon, which basically conceded in June that “Temu doesn't count” when it comes to its fair pricing policy because they simply can't compete against it on pricing, desperately needs to remind customers that Amazon is the place to find deals. Additional Prime Day events throughout the year is one way to get that message out.
9. Other e-commerce news of interest
Target is looking to encourage more shoppers to use its curbside order pick-up service with the addition of the ability to add a Starbucks beverage or food item to their order. The feature, which Target began testing at select locations in Feb 2022, will be available at more than 1,700 Target locations by this October.
Amazon is deploying 50 Eicher electric trucks throughout major hubs in India, with plans to introduce up to 1,000 trucks over the next five years. The trucks come equipped with customized cargo stacking configurations, fast charging capabilities, and factor in availability of charging infrastructure, charging time constraints, and battery capacity into their deployment.
Shenzhen Bao'an International Airport's cross border e-commerce volumes doubled in the first two quarters of the year, and it expects further increase between now and year end. The airport added a second 777 freighter to its operation in July, which should boost volumes further by increasing the frequencies of its Shenzhen-Paris service from three to six flights per week.
U.K. parcel volumes have declined for the first time in more than a decade, according to the latest Parcel Shipping Index from Pitney Bowes. The report found that the U.K. shipped, received, and returned 5.1B parcels in 2022, a 5% decline in volumes from 5.4B parcels in 2021, which it attributed to a drop of 7% in e-commerce sales.
Sam Bankman-Fried, the former CEO and founder of FTX that was accused of fraud and money laundering after the collapse of the cryptocurrency exchange last year, was sent to jail for witness tampering after sharing documents related to the former CEO of Alameda Research with the New York TImes. SBF's bail was revoked by a federal judge, who doubted that a gag order would be enough to keep him from speaking to the media.
X is auctioning off over 600 Twitter items, including memorabilia and office equipment, as the company moves forward with its vision of a full rebrand. The auction is set to start on Sep 12th and last two days, featuring neon signs flashing the Twitter bird, a giant hashtag, and the @ icon, office chairs, sofas, and paintings, including one of Ellen Degeneres' Oscars selfie. Can I bid on the Twitter brand name?
Aside from hauling away what Elon Musk probably considers junk, X also reduced the eligibility threshold for its ads revenue sharing program last week from 15M impressions in the previous three months to 5M impressions. The company also lowered the minimum payout requirement to $10 instead of $50 to enable more creators to get paid for posting.
Running Tide, an ocean carbon sequestration company, delivered its first set of carbon removal credits to Shopify last week by sinking 1000 tons of wooden buoys off the Icelandic coast to prevent the embodied CO2 from being released into the atmosphere. (So we release them into the ocean instead? That doesn't sound much better.) Running Tide has been working on Shopify's behalf since 2020, when it became part of the company's Sustainability Fund, an initiative backing carbon removal entrepreneurs.
Amazon India signed a pact (which is kind of like a pinky promise) with the Entrepreneurship Development Institute of India and the Cottage and Rural Industries Department to boost e-commerce exports from the country. Amazon will focus on bringing weavers, artisans, and other MSMEs from Gujarat on Amazon Global Selling, their exports program.
Also happening in India, the Parliament approved the Digital Personal Data Protection Bill (DPDP) last week, mandating that tech companies enhance safeguards for digital data obtained from consumers. The new data protection law dictates how companies process users' data, while giving the government power to seek information from firms and issue directions to block content.
Amazon workers in the U.S. are being tracked and penalized for working from home too much. Notice was sent to employees who were not in the office at least three times a week for five or more of the past eight weeks
Square launched a new consumer-facing app called Square Go that lets customers search, discover, and book appointments with beauty and personal care professionals, with plans to open up to more categories in the future. The app integrates with Square Appointments, which launched in 2014 and helps service providers schedule and manage customer appointments.
Facebook Messenger is dropping its support for SMS next month, which was first introduced in 2012, dropped in 2013, and then launched again in 2016. Facebook noted that users will still be able to access their SMS message history from the phone's default messaging app, which they will be forced to switch to after the upcoming Sep 28th update. Meta did not give reason for the change.
A Canadian woman found herself in possession of more than 50 Amazon packages that she never ordered, leading UPS to send her customs bills for over $300. The items may be part of a vendor-return scheme, which involves sellers evading shipping and warehouses expenses by redirecting returned goods to residential addresses. She should pay the $300 and resell the items!
Grocery e-commerce sales fell 7% YoY in July to $7.2B, following a sharp decline in order frequency and a reduction in AOV. The sector is expected to remain under pressure throughout the year as economic pressure forces shoppers to prioritize costs over convenience.
Amazon Prime Air lost two executives key to the company's drone delivery operations, which has garnered minimal traction after having been hit with regulatory restrictions since its inception. Jim Mullin, the division's chief pilot, left last month, and Robert Dreer, who reported to Mullin and was responsible for all test operations, departed last week for a role at an electric vertical takeoff and landing aircraft startup.
10. Seed rounds, IPOs, & acquisitions
Meesho, an Indian marketplace which I reported last week became profitable in the month of July, is eyeing an IPO in the next 12 to 18 months, according to a senior executive at the company. Meesho, which was last valued at $7B, has been posting losses since its inception in 2015, but expects to cross $800M in annual revenue by year end and remain profitable.
Trove, a resale platform that empowers brands like Canada Goose, Lululemon, and REI to own their resale experience, raised $30M in a Series E round co-led by Wellington Management and ArcTern Ventures, bringing its total amount raised to $150M. The fresh funds will help fuel the company's growth, including its upcoming plans to open five re-commerce facilities in the U.S. and Canada.
Outfindo, a Prague-based SaaS startup that optimizes flow on e-commerce platforms using AI to create shoppable guides for users, raised âŹ900k in a round led by Presto Ventures. The funds will be used to expand its R&D, finetune its product, and expand into new verticals.
Fungies.io, a no-code platform for indie gaming studios to set up websites and e-commerce stores, raised an undisclosed amount in a pre-seed round led by Depo Ventures and others. The platform aims to put control of transactions into the hands of studios to help them bypass hefty marketplace commissions and retain more revenue.
Awayco, a unified e-commerce solution that includes POS and a rental and appointments booking solution, raised $11M in a round led by Thorney Investment Group. The company, which began as a surfboard rental business, pivoted into offering a solution that worked with a retailer's existing ERP and POS systems to make the onboarding process easier.
Urbanic, a London-based women's fashion retailer, earmarked $50M of investment capital for the Indian market. The funds will be invested in strengthening the company's supply chain in the country, where it recently cut ties with Flipkart to focus on enhancing its own D2C presence.
Tracer, a platform that consolidates an organization's data sources and enriches them with business insights, raised $18.1M in a Series A round co-led by NewRoad Capital Partners, Progress Ventures, and BDMI. The funds will be put towards the company's expansion efforts, scaling its tech, and establishing a sales team.
Chargeflow, a startup that uses AI to fight chargeback fraud, raised $11M in a round led by OpenView Venture Partners, bringing its total amount raised to $14M. The platform reduces the amount of time it takes for merchants to fight chargebacks by matching incoming disputes to business data, checking requirements, and generating a dispute response using custom-made templates.
Osano, an Austin Texas-based startup developing a platform to help companies manage their data privacy, raised $25M in a Series B round led by Baird Capital. The platform, which uses AI to help firms locate and classify the storage of protected information, can be integrated with any website or mobile app to add data controls.
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PAUL
Paul E. Drecksler
www.shopifreaks.com
[email protected]
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