#95 – TikTok Shopping, e-commerce packaging laws, & Shopify’s alliance

by Shopifreaks | Nov 15, 2022 | Recent Newsletters

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Intro

How long have we been talking about TikTok Shopping coming to the U.S.? Weeks? Months? Years?? I've got a big update for you on that today…

I also cover stories about the EY + Shopify Alliance, new e-commerce packaging laws, and I share a ton of stats with you about the current state of consumer spending.

All this and more in this week's 95th edition of Shopifreaks. Thanks for subscribing and sharing!

Poll of the Week 🗳️

Will you be primarily shopping online or in-stores this year during the upcoming holiday shopping events?

➡️ Click here to take the poll. ⬅️

Last Weeks Poll Results: 42.3% of respondents HATE the idea of streaming services like Disney+ and Netflix offering shoppable merch through their platforms, while 21.2% LOVE the idea and 36.5% said they were in different. [View Poll]

Stat of the Week 📈

80% of Gen Z shoppers will use social media this holiday season to find gifts, with 41% planning to use it for most or all of their holiday shopping. — According to SimplicityDX

Apparently Google search is for Boomers and Millennials!

Share this week's stat on Twitter & LinkedIn.

1. Ernst & Young + Shopify Alliance

Shopify is making a strategic move to attract more enterprise-level customers to its platform by teaming up with one of the world's largest professional service networks.

Ernst & Young (EY),one of the Big Four accounting firms which provides tax, consulting, advisory, and assurance services to its global clients, is banding together with Shopify in an alliance that it hopes will help its retail clients get the most out of their online operations.

Under the agreement, up to 10,000 EY consultants will be trained on the inner workings of the Shopify platform and will work with Shopify to help make its back-end systems friendlier for large-scale businesses.

EY has over 300k employees in 700+ offices across 150 countries around the world. Shopify hopes that by tapping into EY's expertise in areas such as inventory management and resource planning, it will help their largest enterprise clients adhere to regulations in areas such as tax and trade that vary widely from country to country.

Neither company got into specifics about the terms of the arrangement, saying only that both companies are “investing independently” in the partnership.

This isn't Shopify's first foray into attracting global enterprise clients:

Their enterprise solution, Shopify Plus, launched in 2014.
In Sep 2021, Shopify announced the launch of Shopify Markets, its new centralized hub for merchants that offers tools to manage global commerce.
A year later, Shopify doubled down on those efforts with the launch of Shopify Markets Pro, a premium paid feature that expanded on its integration with Global E-Online (GLBE), of which Shopify took a $193M pre-IPO stake in the company in May 2021.
At the same time, Shopify introduced Shopify Translate & Adapt, a free app which works with Shopify Markets and Markets Pro to help merchants localize the customer journey by offering them the ability to manually or automatically translate their online stores into various languages.

A few days ago, a reader shared her thoughts with me about Shopify. She wrote that Shopify is only marketing itself as the “anyone can do e-commerce” platform until “they can successfully gain more footing in the upper mid-market and enterprise spaces” — which makes sense for their subscription revenue given that non-enterprise plans begin around $20/month while enterprise plans begin at $2,000/month.

These moves above, and others, definitely support the idea that Shopify is pivoting towards a full service enterprise solution, however I don't necessarily think that they'll be giving up on the small business or Creator communities anytime soon.

As Shopify grows into offering more advertising, SaaS, payments, and data services in the future, smaller stores and their customers will continue to serve an important role in their overall strategy.

2. TikTok Shop is finally in the States!

Will TikTok succeed in platform enabled e-commerce where Facebook, Instagram, and Twitter have failed?

That's been the question of everyone's mind since TikTok originally began hinting at entering the U.S. e-commerce market several years ago.

Shopping on TikTok has been long awaited, but the company has had a slow start and bumpy road to get there. The company had previously experimented with a Shopify shopping tab and was gearing up to bring live shopping features to the U.S., but later decided to put those plans on hold temporarily.

Well the wait is over for some U.S. users, according to a report by Semafor. TikTokers can now make purchases directly through the app using a feature called TikTok Shop, which the company officially began testing in the U.S. last week. Previously this shopping feature was only available in the U.K. and seven regions of Asia.

TikTok Shop is not yet available to every business yet — an invitation code is required to apply and only select U.S. businesses will be invited to join — however applicants can expect a response within a couple days after submitting an application. It's not yet clear which businesses and creators are receiving invite codes, only that it's limited to U.S. businesses for now. However TikTok told international merchants that they will eventually be allowed to start selling on TikTok Shop too.

TikTok takes a 1.8% commission on each sale for the first 90 days after registration, and then 5% after that.

Here's a quick recap of TikTok e-commerce milestones in the past two years:

Mar 2021 – TikTok expanded their Shopify partnership into the UK, France, Germany, Italy, Spain, and Canada. An integration between the two platforms had been in place in the USA since Oct 2020.
Aug 2021 – TikTok added a shop tab expansion for Shopify merchant profiles, which added a new product display showcase to creators' profiles.
Oct 2021 – TikTok unveiled a new set of shopping features on its network dubbed TikTok Shopping that gave brands the ability to link products, host live shopping, and choose from additional product ad types. The platform also hit 1B users that same month.
Dec 2021 – TikTok produced its first live shopping event where users could buy products directly on its platform.
Mar 2022 – TikTok and Instacart released Shoppable Recipes where select TikTok users could include links in their videos to their shopping lists and then receive payouts based on engagements and Instacart orders placed.
May 2022 – TikTok signaled its intention to make AR a bigger part of its offering with an integration of Camera IQ’s tools which allow brands to create AR effects.
June 2022 – At least 20 e-commerce employees from the London office of TikTok were reported to have left, citing a toxic work environment as their reason for departure.
July 2022 – TikTok started testing a dedicated “Shop” feed tab in Indonesia that lets users browse and purchase products like clothing and electronics. TikTok also extended a partnership agreement with Shopify that enabled brands to create shoppable video ads to the Middle East.
July 2022 – TikTok had been planning to roll out its new e-commerce Shop marketplace in Germany, France, Italy, and Spain, and was hoping to launch in US by then, but put those plans on hold to solely focus on making the product a success in the UK for the time being.
Sep 2022 – TikTok shared insights about the current state of e-commerce on its platform.
Oct 2022 – According to the LinkedIn job postings, TikTok is planning to build an “international e-commerce fulfillment system” that will include warehousing, customs clearings and supply chain systems that support domestic e-commerce efforts in the U.S. and cross-border e-commerce efforts. It was also revealed that TikTok live shopping was back in the U.S.
Nov 2022 – TikTok Shop becomes available in the U.S. (That's what you're reading about today.)

3. BigCommerce News (Sponsored)

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4. Preliminary shopping habits this holiday season

A few weeks ago, I asked you to predict whether 2022 U.S. holiday shopping would SURPASS or FALL SHORT of last year's GMV (or stay about the same). 61.7% of respondents predicted that this year's holiday season would fall short of last year's.

Adobe and PwC published reports last week sharing some preliminary numbers and survey results as we enter holiday the holiday shopping events. Here's a recap of their findings:

20% of consumers said they're planning to shop on Black Friday, and 17% said they will wait until after the Thanksgiving weekend to shop for the holidays, which means most have either already started shopping during the early sales, or aren't planning on shopping this year.
75% of consumers anticipate higher prices and are looking for markdowns.
74% said they are planning on spending the same or more this holiday season compared to last year.
48% of Gen Z respondents anticipated paying with BNPL this year.
Shoppers spent $72.2B online in October, a 10.9% bump from September, and roughly on par with the $72.4B that was spent in October 2021.
Retailers have offered higher discounts on electronics (17%), toys (15%), computers (10%) than they have on TVs (4%), sporting goods (3%) and furniture (2%).
Adobe predicts that shoppers will spend $11.2B on Cyber Monday, up 5.1% from last year, and $9B on Black Friday, a mere 1% increase YoY.
Consumers are expected to spend more this holiday season but may get less for their money.

I don't think it took Adobe data to determine that last one!

5. Lots of ads on Amazon

Amazon’s ad business grew 58% in 2021 to more than $31B in revenue, making it the third-biggest online ad seller in the US, only trailing Google and Facebook. And on the first nine months of 2022, Amazon’s ad revenue surpassed what it makes from Prime, Prime Video, and its other audio and e-book subscriptions combined. Amazon Ads and Amazon Web Services are now the company's top two profit engines.

Jason Del Rey of Vox offered a short history of ads on Amazon, a look into its current ad offerings, and a glimpse of what's next, which I'll recap below:

History of Amazon Ads:

Amazon hired its first big external advertising executive in 2008.
2012 – Amazon launched Amazon Marketing Services which included Sponsored Product Ads, Text Ads (discontinued), and e-commerce ads (now called Sponsored Display Ads).
Growth of ads on Amazon caused internal tensions at the company. Staff responsible for the overall customer shopping experience believed that ads negatively impacted the overall customer experience. The pro-ads team won.
As Amazon began launching more of their own products, they eventually started to block advertisers with rival products from competing against them with paid ads.

Amazon Ads Today:

58% of all products sold come from third-party sellers.
Successful Amazon sellers have to spend between 10-20% of their sales on Amazon ads, according to six high-volume sellers Recode interviewed.
Advertising fees and an increase in storage and fulfillment fees that Amazon charges sellers are the top two reasons sellers have had to raise the prices of their merchandise on Amazon this past year.
One apparel seller said his firm has had to double their advertising spend on Amazon over the past three years, and subsequently raised their product prices by 20%.
Two weeks ago, I reported on Amazon's newest advertising capabilities including rewarded sponsored display, ads for brands that don't sell on Amazon, sponsored video creatives, digital signage in Fresh stores, campaign presets, performance recommendations, and Amazon Marketing Cloud enhancements.

What's next for Amazon ads:

Expect more Amazon-placed ads in the future, both on Amazon properties and off.
Additional ad revenue could come from rising prices for the CPC rate that advertised pay for sponsored ads.
Amazon will target other parts of the web including Twitch, live sports events like Thursday Night Football, and their streaming TV service Freevee.
More investment into Amazon Marketing Cloud that advertisers use to anonymously compare their customer base with Amazon's to plan their ad campaigns.

6. Mini-splurge shopping is on the decline

Less-affluent luxury shoppers are curtailing their purchases of entry-level products such as Gucci slippers and Balenciaga belts — a sign that global economy is continuing to cool down.

Marc Metrick, chief executive officer of Saks Fifth Avenue’s online operations, said in an interview, “We’re certainly starting to see what I would say is a slowdown in the growth. It was aberrational what was happening in the second half of 2020 and then certainly into last year. The aspirational consumer is supposed to be an ‘or’ consumer — ‘I can have this or I can have that.’ Maybe for a little while they were an ‘and’ consumer — ‘I can have this and I can have that.’ I think what you’re going to see is a little bit of a move back to ‘or.’”

Other luxury brands are feeling similar heat:

Gucci and Yves Saint Laurent said they have seen pressure on entry-price-point items in the most recent quarter.
Capri Holdings Ltd. trimmed its full-year revenue forecast because of weaker-than-expected sales of its Michael Kors brand at department stores.
The number of luxury scarves, card holders and key rings sold online in the US has fallen by one-quarter through October compared with the same 10-month period in 2021.
Wealthier shoppers, in some cases, are accelerating their spending. And “aspirational” luxury consumers are still buying — just less.
Neiman Marcus Group also reported a slowdown in the growth of new, high-end shoppers.
Some customers are turning to luxury fakes, known as “dupes”, to get the look without the price tag, after getting tips from TikTok influencers who encourage them to buy on knock off websites.

7. New EU packaging laws

The European Commission is working on new laws to reduce packaging waste, including plans to cut down on empty space in e-commerce parcels and increase reusable packaging.

This is great! Sometimes companies need a little regulatory kick in the pants to improve sustainability, and this is one of those areas that are in much need of reform.

A draft of the rules, which was supposed to come out at the end of the month, was leaked early by Politico, and the finished plans are supposed to be unveiled Nov 30th. Until then, adjustments to the rules are still being made, however, here's a recap of what's in the works:

Limits on the size of packaging.
Maximum empty space ratio of 40%.
Double walls, false bottoms, and other means to create the impression of increased product volume are not allowed.
20% of e-commerce packaging should be reusable by 2030, with 80% by 2040.

What else would you add to that list if you were drafting the new rules? Hit reply and let me know.

8. Facebook overestimated e-commerce boom

Mark Zuckerberg admitted last week during a private Zoom call for the 11,000 workers his company just laid off that they were losing their jobs partly because he overestimated the staying power of the pandemic’s e-commerce boom.

Like many tech and social media companies, Meta's revenue soared during the pandemic when many retailers were forced to turn to the Internet to reach their quarantined customers.

Zuckerberg thought that even after vaccines allowed people to return to offline activities freely, e-commerce growth would continue to expand rapidly, which is why Facebook doubled its staff to over 87,000 employees in two years.

To be fair, he's not the only CEO in our industry to be guilty of that error, and hindsight is 20-20.

And while it's easy to see these headlines about big layoffs and think that the sky is falling, if you zoom out a little, even after the layoffs, they still have around 37k more employees than prior to the pandemic — which is almost double the 40k employees they had at the start of 2020.

Meta, like many tech companies during the pandemic, overcorrected and are now finding the equilibrium. Many experts believe that in a few years, we'll hear a similar admission about his investment into the metaverse…

9. Other e-commerce news of interest

Alibaba Group did not disclose the sales performance of its Singles Day online shopping event for the first time since it started the event in 2009, only claiming that results were in line with last year. Proof or ban!

Amazon Robotics debuted an AI-powered robotic arm and delivery drone to make its logistics network more efficient. The new drone is lighter and smaller than its predecessor, can fly longer distances, generate less noise, and can operate in light rain.

Shopify is outsourcing dozens of its customer-support roles to the Philippines through TaskUs, after recently laying off 1,000 workers. Employees still working in the support division are concerned that Shopify will replace more of their team with outsourced workers at a cheaper rate.

Peloton is piloting their new Shop the Class feature on bikes, which presents a widget at the end of class that members can tap to shop the styles that the instructor was wearing in class. This triggers an e -mail with the product details, which members can tap through to complete their purchase.

As of October, more than 45,000 workers in the US tech sector have been laid off in mass job cuts so far in 2022.

Essilor International has been fined €81M by the French l’Autorité de la Concurrence in response to actions by the company between 2009 and 2020, during which it forbid online platforms to use its brand and logos, and refused to deliver its products for online retail. The watchdog claims that Essilor unfairly discriminated against online retailers, resulting in higher prices for glasses and limited choice for consumers.

Twitter suspended its new $8 subscription program to combat users impersonating major brands. One account claiming to be Nintendo posted an image of Super Mario holding up a middle finger, while another posing as Eli Lilly & Co. tweeted that insulin was now free.

Microsoft is experimenting with promoting its products in the sign-out flyout menu that shows up after clicking the user icon in the Windows 11 start menu. Screenshots show that Microsoft promotes its OneDrive file hosting service and prods users to create or complete their Microsoft accounts. Will they later test 3rd party e-commerce ads?

Amazon Shipping has officially arrived in India this year, quietly testing its transportation and logistic network to businesses and 3rd party merchants. It is partnering with local firms including Shiprocket, Unicommerce, EasyEcom, ClickPost, and Vinculum for order and delivery management systems.

Amazon Music users are angry after the ability to select individual songs was removed unless they pay $9/month. Amazon Music recently added 98 million songs to the platform to capitalize on an increase in demand, but now the songs can only be played in shuffle mode without paying extra for Amazon Music Unlimited.

A Texas woman has filed a class action lawsuit against Block Inc and Cash App, alleging that the companies were negligent and allowed a data breach that led to consumers personal information being leaked. Customers’ full names and brokerage account numbers, the value and holdings of brokerage portfolios, and trading activity were all exposed.

Apple and Amazon are facing a class action antritust lawsuit in the U.S. for conspiring to drive up the prices of iPhones and iPads by removing nearly every other reseller of Apple's latest products from the Amazon marketplace. The lawsuit claims that Apple gave Amazon a 10% discount on all of its products in exchange for letting just 7 out of its 600 resellers stay on its platform, making Amazon the largest reseller of new iPhones and iPads on its website.

Affirm's delinquency rates were 2.7%, up from 0.8% in 2021. However on a positive note, the company said that the demand for BNPL is increasing and that they are on track to achieve profitability in 2024.

The UK's Financial Conduct Authority is warning BNPL bosses that they could face jail time if they do not follow the new financial promotion rules. Promotions that are not “clear, fair and not misleading” could result in up to two years in prison.

According to a leaked video, Amazon may have a new healthcare offering coming soon called “Amazon Clinic”, which would offer treatment for common conditions like allergies and acne. People could fill out a questionnaire about their symptoms and pay a fee to have a clinician review their answers and provide a diagnosis and prescriptions.

Shein is piloting a marketplace-style model similar to Taobao in Brazil, where merchants set up stores directly on the site and are responsible for their own operations and logistics.

Carousell Media launched a digital ad service called Shopping Ad, which will serve users ads via a targeted feed based on keyword-tracking queries on its marketplaces. The company recently reached more than 150M monthly product searches on its marketplaces.

Gap has officially launched its store on Amazon via a partnership with Amazon Fashion, marking the first time that the company itself has sold its products on the marketplace (outside of 3rd party sellers).

10. Seed rounds, IPOs, & acquisitions

D2C Ecommerce, an India-based company that develops its own brands and sells them on its own platform, acquired Luxura Sciences, which makes a line of over 100 personal care products made with pure ingredients. Through this acquisition, D2C Ecommerce will expand in personal care and beauty segment.

Ordergroove, a platform for brands and retailers outside of Amazon to build similar experiences for their own subscription sales, raised $100M in a round led by Primus Capital, bringing its total amount raised to $150M at an undisclosed valuation. Their plan is to build out more services that enhance their current subscription offering including bringing on more services to enhance prepay subscriptions and more analytics to give more insights into buying patterns.

Hopper, a travel booking startup that claims to be the world's largest structured database of travel information, closed a $96M follow-on investment from Capital One, bringing its total amount raised to $740M. The funds will be put towards supporting the company's new social commerce initiatives.

KodyPay, a London-based payments company that brings the option of online payments to brick & mortar businesses, raised an additional $5M in Pre-Series A financing, bringing its total amount raised to $10M. The company will use the funds to scale its headcount across the UK and invest in its strategic partnerships to release new product features including embedded finance, enhanced data analytics and loyalty.

Humble Sustainability, a Manila-based circular economy startup that aims to keep personal items out of Philippines' landfills, raised $750k in an oversubscribed seed round led by Seedstars International Ventures. The funds will be used to expand its network of partners and buyers and grow its team.

Agriconomie, a France-based agtech e-commerce company designed to be a one-stop shop for European farmers to order agricultural supplies such as fertilizers, animal feed, seeds, and equipment, raised €60M in a round led by Treïs Group, Aliment Capital and Temasek Holdings. The platform also shares data on how much supplies are forecasted to cost at a given time, helping farmers budget months or even a year in advance and allowing them to price shop, negotiate and get quotes on buying in bulk.

Ampla Technologies acquired Upside Financing, a supply chain cashflow solutions provider, as it looks to build out a new extended payment terms solution called Ampla Pay Later. With the new product, Ampla customers will be able to upload invoices from manufacturers and Ampla Pay Later will pay on their behalf.

Next, a multinational retailer with physical and online stores substantively in the U.K., acquired Made.com's domain names, intellectual property, and brand, after the company officially entered administration. Reports suggest that Next paid £3.4M in the fire sale.

Notifi, a communication infrastructure platform that wants to address the broken communication model in web3, which is fragmented across multiple messaging platforms like Telegram, Discord, and Twitter, raised $10M in an oversubscribed round co-led by Hashed and Race Capital. The funding will help the company expand support into other layer ecosystems and provide developers with more tools to enable advanced user experience.

Gap has agreed to sell its Greater China business to Baozun Inc, a Shanghai-based e-commerce provider and digital commerce enabler, who will now operate Gap’s in-market site and stores under a franchise agreement. The company said it will allow Gap to serve the market through a more asset-light, cost-effective model and to benefit from the local and technology expertise of Baozun.

Perfekto, a Mexico-based subscription box company for imperfect food that works with over 70 producers, raised $1.1M in a pre-seed round. The company was part of Y Combinator’s summer 2021 batch, grew to over 3,000 active monthly subscribers and reached $1M in annual run rate.

Ramp Network, a crypto-focused fintech startup that builds payment infrastructure, raised $70M in a Series B round co-led by Mubadala Capital and Korelya Capital, bringing its total amount raised to $123M. The company envisions itaself as the PayPal or Stripe of crypto, providing businesses the ability to deliver a simplified e-commerce experience.

Blnk, an Egyptian BNPL startup, raised $23.7M in equity and debt funding and $8.3M via securitized bond issuance. The funds will be used dto increase the company's lending capacity and to support the development of its AI-powered lending tech.

What'd I miss?

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See you next Monday,

PAUL

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

PS: A duck was about to cross the road when a chicken said, “Don't do it man, you'll never hear the end of it!”