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And now onto e-commerce news…
This week I cover TikTok's new Trendy Beat e-commerce endeavor, Shopify's payment expansion, and Patreon's new free tier subscription.
I also share stories about how major brands plan on competing with Prime Day this year, a lawsuit that's putting subscription services on notice, and a new form of digital currency in Singapore being backed by Amazon and Grab.
All this and more in this week's 127th Edition of Shopifreaks. Thanks for subscribing and sharing!
Stat of the Week 📈
40% of BNPL users abandon carts if the pay-in-installments method is missing at checkout. – According to PYMNTS
Share this week's stat on Twitter & LinkedIn.
1. TikTok gets trendy
TikTok is testing a new shopping section called Trendy Beat where it offers products for sale that are shipped and sold by its parent company, ByteDance.
The new shopping section offers popular items that have appeared in trending videos, such as tools to exact ear wax or strawberry destemmers, and is being tested exclusively in the U.K.
Trendy Beat is currently NOT being tested in the U.S., where TikTok says it's focused on adding new merchants to its TikTok Shop offering.
However it might be in the future. TikTok filed a trademark application in the U.S. for “Trendy Beat” last month, which listed apparel items like dresses, scarves, hats, footwear, bathing suits, shirts, and more.
ByteDance's plan to start selling its own products within the TikTok app is internally referred to as “Project S” which stands for “Sell Westerners Crap”. (Just kidding, they didn't say what the “S” stood for.)
Project S leverages TikTok's data on products that are gaining popularity and then allows ByteDance to either acquire or manufacture those products. Basically they can become the Shein of trending products in regards to how fast they can start producing them.
TikTok Shop vs Trendy Beat
To further clarify the difference between the two e-commerce endeavors:
- TikTok Shop is offered in the U.S. and allows brands to sell their own merchandise. TikTok has recently been onboarding brands like PacSun and Revolve to the platform.
- Trendy Beat is where TikTok sells its own products.
TikTok Shop is also offered in the U.K., but has failed to gain traction, which may be why the company is choosing to pilot test Trendy Beat in that market.
The headlines for this story read like, “TikTok looks to challenge Amazon and Shein” — but is Trendy Beat an actual challenger to those marketplaces?
Certainly TikTok's data gives ByteDance a huge leg up on market research, but only a short lived one when it comes to trending products.
After all, consumer products tend to trend AFTER they already exist. We've all seen what happens to merchants who hop on a trending product bandwagon too late. Just ask anyone who's still got boxes of fidget spinners in their garage!
Will ByteDance be able to move fast enough with its own data to acquire or manufacture those products before the trends fade? Or do trends on TikTok move too fast even for ByteDance?
The answers to those questions will determine if Trendy Beat is a runaway success or a swing and a miss by ByteDance.
2. Shop Pay Everywhere
Shopify is opening its Shop Pay payment method to enterprise stores — even if they aren't on Shopify. Historically the payment method has been exclusive to merchants within the Shopify ecosystem (less a few select integrations which I mention below).
The company is turning Shop Pay into a commerce component, enabling enterprise stores in the U.S., Canada, the U.K., Australia, and New Zealand, to add the payment method to their lineup at checkout.
Two years ago in June 2021, I reported that Shop Pay opened itself up to retailers selling through Google and Facebook. Now Shop Pay is spreading its wings to reach the internal checkouts for large brands on their own D2C websites.
This new option to use Shop Pay is the latest addition to Commerce Components by Shopify, a program I covered extensively earlier this year that gives enterprise retailers access to Shopify components and lets them select only the ones they need.
Shopify boasts that Shop Pay boosts conversion by as much as 36% compared to a guest checkout, outpacing all other accelerated checkouts by at least 10%. The study they reference, which was performed by one of the Big Three global management consulting companies (although they didn't say which one), also claims that the mere presence of Shop Pay, even when it isn't used by a buyer, results in higher conversion by 5%.
(The timing and publicity of that study makes sense now in hindsight.)
The claims created quite the uproar among experts in the industry, many who criticized Shopify for not releasing their data or recognizing which consulting firm performed the study.
Well now enterprise stores will be able to see for themselves if those claims are actually true. If you'll be adding Shop Pay to your enterprise store, let me know how the experiment goes.Â
3. Retail subscriptions under scrutiny
Retail subscription programs like Amazon Prime and Walmart+ are facing growing scrutiny by the FTC, which filed a lawsuit against Amazon for duping millions of consumers into purchasing subscriptions for its Prime services.
The FTC said in the complaint that for years, Amazon “knowingly complicated the cancellation process for Prime subscribers who sought to end their membership,” and that Amazon “substantially revamped its Prime cancellation process” to some customers before the lawsuit was filed.
Amazon, which launched Prime in 2005 and has around 170M subscribers in the U.S., said it is willing to defend itself in court. Last year the company changed its process to cancel Prime to just two clicks in Europe to comply with the EU's consumer protection rules, and it altered the process in the U.S. in early 2023 to comply with applicable law. But was the damage already done?
Amazon isn't the only retailer who should take notice.
Kathleen Benway, a former chief of staff at the FTC's Bureau of Consumer Protection said that retailers should be “very concerned” that the FTC is pursuing action against auto-renewal terms, multi-step cancellation policies, and other dark pattern practices that have become widespread across online subscription platforms.
Other companies that have faced recent scrutiny include:
- Save X Fenty was sued by the nonprofit Truth in Advertising for luring shoppers to the site with VIP member discounts and automatically enrolling them in its membership program without fully disclosing the terms. The company reached a settlement with California's state government for $1.2M.
- Truth in Advertising also filed a lawsuit against Adore Me for its VIP membership pricing program. The company reached a $2.35M settlement with more than two dozen states over its practices.
- A Michigan shopper alleged in a lawsuit that Walmart used “deceptive subscription practices” including charging customers automatically after a free Walmart+ trial and creating difficulty in cancelling your subscription. He later withdrew the lawsuit.
- A shopper filed a class action lawsuit against Best Buy after purchasing a TV online, alleging that he was automatically enrolled in two subscription programs totaling $22.98/month without his knowledge. Best Buy did not include an option to cancel either membership online.
Awareness is on the rise
Last week the FTC tweeted a message informing consumers that they can now get information about marketplace sellers and report questionable activity thanks to a new law called the INFORM Act, which I reported on extensively in December. The tweet linked to a page on the FTC website where it explained more about the law.
The more aware that consumers are of new laws like the INFORM Act, the less likely corporations will be to participate in deceptive marketing or dark patterns. So spread the word!
4. Patreon adds free membership tier & e-commerce tools
Patreon is rolling out an expansion of its tools for digital creators that include the ability to sell one-off digital goods and offer free subscriptions.
It’s the first time Patreon has offered a free subscription option for creators who want to give fans a taste of their content before having them pay for access.
Historically Patreon has exclusively offered the ability to onboard monthly fan subscriptions, but the company feels that a free subscription product will be beneficial to their creators by allowing them to connect off social media, even if the fans don't yet pay to subscribe.
The company says that creators can use the free subscription product like a newsletter, or a way to reach all their biggest fans at once, and hopefully get free members to make a monthly pledge later by incentivizing them with perks.
The ability to sell one-off digital products like like videos, podcasts, or other downloadable files also allows Patreon creators to keep their fans shopping on the platform, where they already do business, as opposed to directing them to other platforms to make product purchases.
Patreon will keep 5% of the sale, plus tax and payment processing fees, which is lower than the cut they take form subscriptions (around 8%).
Great move Patreon! Some might say it's about 2-3 years late, but better late than never.
5. Retailers competing with Prime Day
Amazon Prime Day, which started in 2015 and has since expanded to two separate two-day events in the summer and fall, took the retail world by storm.
A shopping event in July? But that's not Christmas or Back to School! Turns out Americans don't need a holiday or major life event to gravitate towards discount shopping. This year Amazon will hold its Prime Day sale on July 11th and 12th.
Ever since Prime Day became a household event, retailers have launched various endeavors to compete. This year a few of those competing events include:
- Walmart will hold its first Walmart+ Week beginning July 10th, which will overlap with Prime Days. The first 24 hours of the sale will only be available to Walmart+ members, but the sale will be open to anyone on July 11th onward.
- Target will hold a sales event July 9-15 for Target Circle members, its free rewards program. Sale prices will be as much as 50% off on Target's white label brands, along with discounts on national brands like Dyson and Keurig. Deals will be available online and in-store.
- Best Buy is holding a holiday-themed sale event July 10-12 where customers can find sales on TVs, laptops, and other personal tech products. The sale will take place on their website / app and in-stores.
- Newegg will hold a sale July 10-14, with a presale beginning earlier on July 5th. The sale includes tech products like PCs, laptops, smart home devices, drones, e-bikes, vacuums, and home audio.
- Hasbro will sell Furby for the first time since 2016 during Amazon Prime Day, exclusively on Amazon until July 15th, in honor of its 25th Anniversary.
What'd I miss? Which other national retailers or marketplaces are running competing Prime Day events? Hit reply and let me know or comment on my LinkedIn post.Â
6. The rise of IP infringement lawsuits
During the past few years, many sellers have been hit with massive lawsuits for IP infringement filed in Chicago. The total number of cases has grown over 500% in the past 5 years.
Once hit with a lawsuit, sellers can expect to spend several months and thousands of dollars defending themselves, even if they're in the clear.
Here's what's happening:
- Plaintiffs claim that hundreds of online sellers infringed on their trademark, patent, or copyright.
- They ask platforms like Amazon to immediately freeze all the sellers' accounts.
- They ask the court to award them the account balance as statutory damage.
- Using a document called Schedule A that classifies the defendants’ identities, the lawsuits make it easy for IP holders to claim they are being exploited, whether true or not.
- The practices are lawful, designed to protect the rights of merchants, but are easily abused by IP trolls.
- Because it's easy and inexpensive to file these types of suits, law firms recycle the filing templates and put out hundreds of similar lawsuits every year, potentially getting millions of dollars from default judgements and settlements.
- Last year, 938 Schedule A lawsuits were filed in the U.S., each targeting dozens or hundreds of defendants, of which about 85% were filed in the federal court in Chicago, and about one-third by a single law firm. (That firm should obviously be investigated.)
- 70% of the sellers targeted are Chinese, and many feel that they are being targeted because they aren't familiar with the U.S. legal system and cannot easily defend themselves.
IP trolls are abundant in our industry, but the situation doesn't often get the attention it deserves.
A few weeks ago I reported that Shopify is fighting back against patent trolls with a motion that calls on the US District Court to require the disclosure of third-party interests in a patent troll case against the company.
Shopify's attorney explained that patent trolls quietly orchestrate hundreds of patent litigation cases every year with no accountability and that they are no longer willing to accept this as the status quo.
Hopefully Shopify will set some new precedents in this space that'll help protect independent sellers in the future from these types of IP trolls.Â
7. OpenAI app marketplace
OpenAI is considering launching a marketplace for customers to sell AI models they customize for their own needs to other businesses.
The marketplace would be OpenAI's version of an app store, offering businesses a way to access apps for sniffing out financial fraud or answering questions about specific markets with up-to-date information, among other things. The goal is to make advanced chatbots more useful across industries.
Such a marketplace could compete with app stores run by some of the company's customers and technology partners including Salesforce and Microsoft, while helping OpenAI reach a broader customer base.
Aquant, which makes software that manufacturers use to guide customers through device maintenance and repairs, and Khan Academy, an education app maker, expressed interest in offering their ChatGPT-powered AI models on the marketplace.
The Information reports that CEO Sam Altman told developers about plans for an AI marketplace, but the company says there are no active efforts to build one. So which is it Sam?!
Earlier this year, OpenAI launched ChatGPT plugins, allowing users to interact with websites such as OpenTable, Shopify, or Expedia, but the plugins haven't quite taken off. I've personally not used one yet. Have you?
On one hand, an OpenAI app marketplace could put the tech into more users hands and open up new revenue streams for the company. On the other hand, it could alienate its existing tech partners by competing with them. Tough decision. We should ask ChatGPT what it would do.
8. Purpose Bound Money
Amazon, FAZZ, an Asian business finance platform, and Grab, a Singaporean superapp, are collaborating on an e-commerce use case for Purpose Bound Money (PBM) that allows payment to be released to the merchant only when the customer receives the items purchased.
Singapore's central bank, the Monetary Authority, recently published a white paper explaining the concept of PBM which was co-sponsored by the International Monetary Fund (IMF). They wrote:
PBM contains “digital money as a store of value and programming logic denoting its use based on programmed conditions.” Once those conditions are met, “digital money is released, and it becomes unbounded once again.”
If PBM becomes a reality, it could mean that your credit card isn't charged for purchases you make online until the items are delivered to your door.
Another use-case of PBM could be improving interoperability between tokenized assets such as central bank currencies backed by governments.
The PBM whitepaper encourages greater research among central banks and fintechs to understand the design considerations in the use of digital money. The PBM source codes and software prototypes were released for public access, as part of the effort to support ongoing development and learning.
So this is where cryptocurrencies are headed! It was inevitable that at some point, the tech that cryptocurrencies spearheaded would be adopted officially by governments and banking institutions. No-one really thought that Dogecoin would play a real life role in banking, did they?
A few weeks ago I reported that Amazon was also working on a prototype for the digital euro, a proposed currency by the European Central Bank that would function alongside cash and offer a free and secure way to make digital payments.
9. Other e-commerce news of interest
YouTube is set to launch its first official livestream shopping channel in South Korea on June 30th, which will feature over 30 prominent brands including Samsung, LG, Baskin-Robbins, Dunkin' Donuts, and more. The launch will serve as a pilot project, with plans to potentially extend its operation beyond the initially planned 90 days.
Shopify is being asked by the Canada Revenue Agency to hand over tax records of more than 121,000 Canadian stores from the last six years. CEO Tobias Lütke tweeted, “This feels like low-key overreach to me. We will fight this.”
Amazon Web Services allocated $100M to its new Generative AI Innovation Center, a program that supports customers in developing and deploying generative AI solutions. Amazon believes the program will enable them to create and launch new AI products, services, and processes.
Deutsche Post DHL Group is changing its name to just DHL Group as of July 1st, to reflect the world's greater recognition of the DHL brand, except for in Germany where it will continue to run by its current name. The company noted that more than 90% of its revenue comes from the business trading under a DHL brand rather than the Deutsche Post name.
Sezzle launched a subscription-based service that lets shoppers use its Virtual Card anywhere Visa cards are accepted online or in-store to pay for their purchases in installments. The new Sezzle Pay Anywhere also allows shoppers to earn 1% back on eligible transactions and opt-in to build credit through Sezzle Up.
eBay is encouraging sellers to automated the rates they pay for Promoted Listing Ads based on its daily suggestions, but sellers are weary that it's just a ploy to extract more fee income from them. eBay says the feature is designed to help sellers keep the ads competitive without having to manually set the rates as conditions change — but “competitive” doesn't always mean “less”.
U.S. lawmakers proposed a ban on BNPL loans to finance semiautomatic weapons that would include levying hefty fines on companies that enable the transactions and dealers that accept them. Installment loans drew heightened scrutiny after the Uvalde, Texas school shooter was found to have purchased a gun manufactured by Daniel Defense, which offers financing plans.
Amazon pledged to hire more than 5,000 refugees in Europe, along with 40 other companies who collectively pledged to hire, train, or connect with 250,000 refugees, of which at least 13,680 will get jobs directly with the companies. Most jobs will be hourly roles at fulfillment and storage centers and in transport and delivery, which the company has been struggling to find workers for these roles. So should we pat these companies on the back for hiring desperate doctor refugees from Ukraine as underpaid / overworked warehouse packers? I'm not sure how to feel about that one.
FedEx Express upgraded its Ship Manager application, enabling customers to synchronize their Shopify, BigCommerce, or WooCommerce store with the service. The upgrade is live across 34 countries and territories in Europe and allows merchants to manage their e-commerce shipments, sync orders with their stores, automatically add tracking numbers to orders, create shipments and print labels for multiple orders in one click, and instantly generate commercial invoices.
The UK launched its first E-Commerce Trade Commission to support the more than 70k SMEs that could start exporting with the right support. The commission will run for two years and have three main objectives: simplification, perception, and promotion.
Shopify partnered with Adyen as a payment provider to support its international expansion into the enterprise sector. The app will allow large companies to accept and process payments instantly and will include a payments app that supports Apple Pay and Google Pay, along with other local payment methods later this year.
Jane Technologies launched a new POS platform for cannabis shops that integrates with its existing e-commerce and advertising solutions and includes a debit card payment system, custom hardware, and a personalized in-store shopping experience. When a shopper enters a dispensary, they must scan their government-issued ID, which then allows the POS to serve the budtender with a list of products previously purchased by the customer and a list of recommended products backed by verified reviews.
Alibaba Group named Eddie Wu as its new CEO, who will succeed Daniel Zhang in the role. Zhang, who currently serves as chairman of the company’s e-commerce group, will head Alibaba's cloud-computing unit, which has been approved to be spun off and is expected to be listed for trading within a year.
Walmart was the first retailer to test out TalkShopLive's new shoppable simulcast feature, which allows brands to broadcast live shopping events simultaneously across up to four different online platforms including the TalkShopLive platform, their own website, and Facebook (ie: multiple FB pages). Once a brand goes live on Facebook, a customer can type “BUY” as comment during the show and immediately receive the products in FB Messenger for checkout without ever needing to leave Facebook.
A critical security flaw has been disclosed in Automattic's Abandoned Cart Lite for WooCommerce plugin, which is used by over 30k websites. The vulnerability makes it possible for an attacker to gain access to the accounts of users who have abandoned their carts, and has been rated 9.8 out of 10 for severity on the CVSS scoring system.
Dow, a materials science company, announced its collaboration with Procter & Gamble China to spearhead an air capsule e-commerce packaging, which aims to protect products while avoiding excessive packaging. The air capsule packaging reduces material weight by 40% compared to corrugated boxes, requiring only 25% of original trucking and 75% less warehouse space.
Maersk unveiled a new e-commerce fulfillment solution in India called ‘One Country, One Price', which offers a flat rate of INR 80 ($1.00) per order. The solution will include 60 days of storage, delivery across India covering 18,000 pin codes in 48 hours, 20% returns to origin, and at no fixed monthly costs or minimum orders.
10. Seed rounds, IPOs, & acquisitions
DPReview.com, the 25-year-old Amazon-owned review site that was announced to be shutting down back in March during Amazon's round of layoffs, was acquired by Gear Patrol, an independently owned consumer technology site founded in 2007. The site will continue to operate as it was before, with all editorial coverage and site features remaining the same, and all historical content accessible. Woohoo!
Volt, a UK-based open banking fintech startup active in Europe and Brazil, raised $60M in a Series B round led by IVP, which also invests in Coinbase, Wise, Klarna, Robinhood, and other fintechs. Last week I reported that Shopify and Volt partnered up to offer a pay-by-bank checkout solution.
Amazon announced its plans to invest another $15B in India, bringing its total investment to $26B. CEO Andy Jassy said, “I had a very good and productive conversation with Prime Minister Modi. I think we share a number of goals. Amazon is one of the biggest investors in India.”
ChannelEngine, a Dutch marketplace and e-commerce management platform, acquired Vendiro, a fellow Dutch competitor in the space, for an undisclosed amount. The firms hope that their combined forces will offer the best of e-commerce and marketplace management as the companies combine their expertise.
RezKit, a London-based travel booking platform that integrates with a range of third-party applications including CRMs, payment processors, and marketing platforms, raised £250k in a round led by Jenson Funding Partners. The company aims to adopt a Shopify-like approach and simplify the establishment of online booking systems for travel companies by allowing SaaS providers to integrate with and enhance their offerings.
Render, a unified DevOps platform-as-a-service that enables developers to build and run all their apps in the cloud, raised $50M in a Series B round led by Bessemer Venture Partners, bringing its total amount raised to $76.8M. Render has more than 500k developers using its platform to launch more than 2B services through its cloud PaaS.
Zendesk, a customer service and sales software provider, acquired Tymeshift, an AI-powered workforce management solution, for an undisclosed amount. Zendesk said that the acquisition marks a new era in its progression toward Intelligent CX, which uses AI and machine learning to enhance and personalize customer interactions and provide real-time insights and predictive analytics to optimize its customer service engagement.
Robinhood acquired X1, a no-fee credit card startup that offers an income-based credit card with rewards, for $95M in cash. Robinhood noted that the move is an important step towards its journey in broadening their product offerings and deepening relationships with existing customers, who ran out of stimulus money to invest with. (I added that last part.)
FIS, a fintech that runs a wide range of payment, banking, and investment services, acquired Bond, a San Francisco-based startup that specializes in embedded finance, for an undisclosed amount. According to an internal memo, FIS is still in the process of determining how the two companies will work together, including how FIS will bring Bond's capabilities into its existing relationships.
Databrics, a US-based enterprise software company that develops a web-based platform for working with Spark, acquired MosaicML, an open source startup with neural networks expertise that has built a generative AI platform to compete with OpenAI, for $1.3B. The deal will see MosaicML become part of the Databricks Lakehouse Platform, and provide generative AI tools alongside its existing multi-cloud offering.
Shoppable, a Philippines-based B2B e-commerce startup that has more than 1,400 suppliers and 300 buyer companies on its platform, raised $1.5M in a pre-seed funding round led by Foxmont Capital Partners and Seedstars International Ventures. The startup's platform provides e-commerce and procurement technology, marketing, sales support, procurement outsourcing, logistics, financing, and payment infrastructure.
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PAUL
Paul E. Drecksler
www.shopifreaks.com
[email protected]
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PS: There's a new type of vandalism where people's cars are being covered in grapes. It's causing a lot of traffic jams.