Is it possible to recreate a “treasure hunt” shopping experience online?
Where did Shopify get that competitor conversion data from?
Are Chinese apps making a comeback in India?
Is cross-border commerce about to get a lot easier in the EU and SEA?
Answers to (some of) these questions and more in this week's 122nd Edition of Shopifreaks. Thanks for subscribing and sharing!
PS: I wrote an article on LinkedIn Pulse that you might enjoy about why Shopify seems to always dominate the news.
Stat of the Week 📈
Amazon Prime Air hoped for 10,000 drone deliveries this year — but so far has only done 100. – According to CNBC
Google's Wing said it's made 330,000 deliveries and Walmart's partner Zipline recently made its 600,000th commercial drone delivery.
1. Trader Joe's Knows No E-commerce
In Trader Joe's latest podcast episode, the company delved into why it is exclusively a brick-and-mortar business, and why it's saying “Trader No” to e-commerce.
Trade Joe's believes that e-commerce would disrupt the company's focus on value, and that it would have trouble replicating online the “treasure hunt” in-store shopping experience it offers customers.
The company also made note of the additional costs that come with offering e-commerce as a major reason for not wanting to invest in it.
Matt Sloan, who works in the marketing department, said, “Over time, a lot of the entities behind these marketplace changes have framed up those changes as moments of disruptions, and the entities themselves as being the disruptors. And what I think they’ve really upset is people’s understanding that there are actual costs from each of those things, and all of that work combined, meaning that free shipping doesn’t really exist.”
Trader Joe's tested e-commerce in the past, offering delivery in NYC for about 10 years, but it discontinued the service in March 2019 and has not rolled it out to new markets since.
The grocer feels that its prices, small footprint, and limited store space are what create a unique and interactive shopping experience for its customers, and they aren't interested in offering anything different.
Do you remember the story of Pirate Joe's?
Back in 2013, a Canadian guy spent $5,000/week buying food at Trader Joe's in Seattle and then resold it across the border at his Vancouver store, Pirate Joe's, for a profit.
Trade Joe's unsuccessfully sued him in 2013 for copyright infringement, but the store shut down anyway in 2017 (despite hitting record breaking sales months) because the owner, Mike Hallatt, became too financially strained by the ongoing legal battle with Trader Joe's, which still does not have any stores in Canada.
Since then hundreds (maybe thousands) of resellers adopted a similar model online, buying Trader Joe's products in-store at retail prices and marking the items up for sale on Amazon and Walmart. For example, Trader Joe's incredibly delicious bucket of Chocolatey Coated Chocolate Chip Cookie Dunkers retails for $5.99 in-store and sells for upwards of $19.99 on Amazon from resellers. This type of retail arbitrage is legal in the U.S. under the first sale doctrine which protects the right to resell purchased items.
Trader Joe's, which is now owned by German supermarket franchise Aldi, made it clear that they do not support these unauthorized resellers, but have not taken steps to stop them, other than occasionally banning resellers from their stores who drain their shelves.
Is Trader Joe's leaving money on the table by not selling their products online? Or do they have the right idea sticking to brick-and-mortar sales? Hit reply and share your thoughts.
2. Shopify's controversial conversion rate study
Shopify released a study claiming to have the best conversion rates in the industry when compared to top competitors like Salesforce, Magento, and BigCommerce.
Their study, which was performed by one of the Big Three global management consulting companies (although they didn't say which one), found that Shopify's overall conversion rate outpaces the competition by up to 36% and by an average of 15%.
PayPal and Amazon, which also offer accelerated checkout services, were not mentioned in the study.
Shopify launched its payment solution, Shop Pay, to merchants in 2017, and later made the payment method available to businesses outside of its ecosystem in 2021, extending the service to any organization selling on Facebook or Google. In this latest study, Shopify claims that Shop Pay can raise conversion rates by up to 50% compared to other checkout methods.
The claims created quite the uproar among experts in the industry, many who criticized Shopify for not releasing their data or recognizing which consulting company performed the study.
Essentially, folks want to know where / how they got the conversion data on competitors, and whether Shopify was comparing apples to apples with the data they chose to compare.
Thomas Mulreid, a member of the MACH Alliance Growth Council, noted that, “71% of [Shopify] sites operate in the US, 1 language, 1 currency, and one shipping policy. I'm not sure how many of these brands are requiring other complex features which I suspect are more common in competitors and would impact the conversion. So my big question is, was the survey apples to apples or instead small blueberries to watermelon? The small merchants vs the big retailers.”
Others made note that it's not statistically relevant (or ethical) to compare conversion rates across industries, company sizes, countries, and demographics. Meaning that the merchants and customers that Shopify stores cater to, along with where the bulk of their customers reside, may just intrinsically have higher conversion rates over international enterprise level stores, which Shopify's competitors have historically catered to, and Shopify only recently entered the playing field.
What are your thoughts on Shopify's conversion study? Should they release their data? Hit reply and let me know.
3. BigCommerce Strengthens Privacy and Business Continuity Management (Sponsored)
BigCommerce achieved two new certifications for compliance with privacy and business continuity standards issued by the International Organization for Standardization (ISO). These new certifications complement BigCommerce’s existing certifications for information security and reflect the company’s commitment to the security, privacy and resilience of its trusted enterprise ecommerce platform.
- ISO 27701 – outlines controls and processes for managing data privacy and protecting personally identifiable information. This certification reflects BigCommerce’s commitment to ensuring that the company does not use, disclose or retain platform personal data except as authorized by its merchants.
- ISO 23301 – based on the recognized international standard for business continuity management systems, which outlines controls and processes for managing business resilience.
Both certifications required verification by an external auditor to confirm that BigCommerce implements and maintains a comprehensive set of policies, procedures and controls that meet the stringent requirements issued by the ISO.
Brian Dhatt, chief technology officer at BigCommerce, said, “At BigCommerce, we take our duty to safeguard the data of our merchants very seriously. Our achievement of both ISO 27701 and 22301 certifications illustrates our unwavering commitment to ensuring the security, privacy and resilience of our platform.”
BigCommerce’s ISO 27701 and ISO 22301 certifications are the latest in a series of investments that the company is making to its information security, data privacy and business resiliency practices.
Learn more about BigCommerce's privacy and security practices at: https://security.bigcommerce.com/
4. Shein relaunches in India
Shein is relaunching in India after a three-year ban, partnering with Reliance Retail for its sourcing capabilities, warehousing, and logistics infrastructure to re-enter the Indian market.
In June 2020, Shein was banned in India along with 59 other Chinese apps to safeguard national sovereignty and integrity. The ban was a result of India's concerns about data privacy and security, believing that Chinese apps posed potential risks of unauthorized data collection and misuse.
A year later, Shein re-entered India indirectly — this time as a seller on Amazon instead of selling via its own platform. However that roundabout way to enter the market also faced scrutiny, leading to a notice issued by the Delhi High Court to ban the sale of Shein clothing on the platform.
Now Shein and India have worked out their issues through a collaboration with Reliance Retail, who as you might recall don't have the best history with Amazon, so I doubt you'll be seeing Shein clothes on Amazon again anytime soon.
Reliance Industries has not yet officially confirmed the deal, but reports indicate that the collaboration between the two companies will be mutually beneficial.
5. Border-free QR payments in SEA
Southeast Asian countries are beginning to successfully link their payment systems using QR code payments that can be used across borders without fees and at a reduced conversion rate.
The QR codes are part of a first-of-its-kind deal between banks in Indonesia, Singapore, Malaysia, Thailand, and the Philippines, who have been working for the past several years to connect their systems and allow residents to use QR payments for cross-border transactions.
Historically these types of cross-border transactions were facilitated by payment processors like Visa, MasterCard, and American Express, who set the payment processing and conversion fees fairly high.
Banks from the countries above sealed an official agreement in 2022 after running a set of quiet pilot programs, and now the system is beginning to catch on.
To further explain the system and its benefits, David E. Sumual, chief economist at Indonesia’s privately owned Bank Central Asia, told Rest of World, “It involves the central banks between two countries making a settlement agreement using their local currency, no longer through the U.S. dollar. So it loosens the local currency dependence on the U.S. dollar.”
The system is still in its early stages, with no official data available yet on the number or value of the transactions made, but public announcements show that it's now active between those five SEA countries, which make up around 85% of the region's economy. The payment method is mostly available in larger stores, as opposed to mom-and-pop shops, and currently only with banking customers from those particular countries. There is, however, the possibility that the system reaches banks in the West in the future, which could have a huge impact on Western travelers to this region.
6. Wix integrates with Google Ads
Wix announced a new integration with Google Ads that enables Wix users to create ads directly from the Wix platform. Using the new feature, users can streamline the ad creation process and drive traffic to their site through Google's ad platform.
Through the new Google Ads with Wix backend:
- Users can build their ad campaigns, customize settings, create ads, and set a budget.
- Google will suggest ad content and keywords or users can enter their own, just as they do in the Google Ads dashboard.
- Ad conversion tracking is automatically embedded into the Wix website, without the user needing to set up the data flow manually.
- Once the ads are running, users receive reports with campaign performance, along with suggestions on how to optimize it.
Two weeks ago I praised Wix for differentiating itself through its partnerships and integrations, and recapped its most recent milestones including its integrations with Meta, Square, Amazon India, Forter, Stripe, Hostme, SEMrush, and others.
This new integration with Google Ads is one more example of Wix selectively making deeper native integrations into their platform to create a powerful suite of tools for merchants.
7. EU to simplify customs system
The European Commission proposed a reform of customs rules to simplify and consolidate customs authorities into a single online data system.
Presently importers need to deal with 27 national customs authorities and more than 111 separate interfaces and IT systems.
The reformed system, which still needs backing from the European Parliament and EU governments, would enable traders to provide information on imports just once via a new EU Customs Data Hub.
The streamlined system would reduce paperwork and could save business €2.7B a year in compliance costs, while allowing customs authorities to focus less on processing each consignment and more on dealing with problematic imports.
In response to the news, import consultants across the globe collectively screamed, “No, no, no!” LOL. There's a very big business built around navigating the complexity of the current system.
What to know about the newly proposed system:
- EU countries could save up to €2B / year in IT development and maintenance costs.
- The customs hub would apply for e-commerce from 2028 and be open to other traders from 2023, becoming mandatory in 2023.
- An exemption from customs duty on goods valued at less than €150 would be abolished. The Commission estimates that 65% of parcels entering the EU were deliberately undervalued or split up to avoid paying duty.
- Platforms selling goods from non-EU countries would be responsible for ensuring customs duties and VAT are paid at purchase.
If the reform passes, this would create the largest unified customs authority system in the world, and could serve as a model for other country partnerships.
8. Shopify Entrepreneurship Index
The index, which will be updated quarterly, measures the economic impact of entrepreneurs in Shopify’s ecosystem on national economies, tracking the fastest growth and greatest contributions. In the future, the company plans on adding even more data aimed to “inspire smart policies and give leaders the insights they need to harness the power of entrepreneurship.”
A few highlights from the index:
- In 2022, Shopify entrepreneurs supported 5.2M jobs (+8.3% from 2021), generated $27.7B of exports (+7%), contributed $229.3B to GDP (+8.8%), and created $490.5B in economic activity (+8.6%)
- Top 5 countries for entrepreneurship are (1) US, (2) Lithuania, (3) Romania, (4) United Kingdom, (5) Czech Republic
- Top 5 U.S. states for entrepreneurship are (1) Delaware, (2) Wyoming, (3) California, (4) Montana, (5) Utah
- Japan ranked 10th in the world for entrepreneurship impact, with business activity increased by 24%, jobs supported are up 24%, and GDP impact is up 23%.
Shopify worked with Deloitte to calculate the GDP impact, business activity impact, jobs supported, and exports generated. To create the rankings, they compared that impact to national values for each country and state using public data from the IMC, OECD, ILO, and government statistical agencies. They share more about their methodology here.
9. Other e-commerce news of interest
Google, Meta, Amazon, Microsoft, and Salesforce have hired foreign workers just weeks after reducing headcount by thousands of employees. There were 780k applications for H-1B visas this year, up 61% from 483k last year.
Coinbase is launching its subscription service, Coinbase One, in 35 countries in an attempt to grow its recurring revenue streams. The service, which was originally introduced in beta in 2021, offers features like no trading charges, higher staking rewards, 24/7 customer support, and pre-filed tax return documents.
eDesk launched a new AI iteration of their e-commerce customer service software that uses generative AI to analyze and classify incoming customer messages and then generate a contextually relevant reply, which can be reviewed by an agent before sending. The goal of the new software isn't to replace human customer service reps, but make their jobs easier and more efficient.
Amazon began using AI to aid with predicting future product demand to ensure that inventory is being delivered locally, as opposed to shipped across the country. Putting the product closer to the customer will also help the company delivery items quicker during the last mile.
Meta is building a custom chip specifically for running AI models, which could prove to be critical tools for the company to compete against OpenAI and Google in the space. The new MTIA chip, which stands for Meta Training and Interface Accelerator, provides greater compute power and efficiency than CPUs and is customized for internal workloads.
France is finalizing a law that regulates the commercial activities of influencers and protects consumers from fraud and scams. The regulation forces influencers to state whether they have been paid to promote a product, if images have been retouched, or if a person’s figure or face have been created with the help of AI.
Yotpo introduced a new e-mail marketing solution for e-commerce brands that is integrated into its retention solutions. The new Yotpo Email also connects with its Yotpo SMS service, allowing brands to leverage both channels in one place.
Squarespace is launching a payment platform called Squarespace Payment in Q4 this year, which should unlock a new revenue stream for the company. Shopify launched its payment services in 2013, which now account for around 70% of its revenue.
Shopify is re-opening some of its offices in Toronto, Ottawa, and New York, and inviting employees to work from the office several days a month, although the invitation is not mandatory. Shopify's offices have been closed for daily work since the beginning of the pandemic, but teams have been allowed to use the spaces for team events.
Airbnb partnered with Klarna to allow guests in the US and Canada to pay for their bookings in four interest-free installments over six weeks, and for bookings over $500, guests in the US can apply to pay monthly. Installment payments was one of the top requests from Airbnb users.
Etsy launched new TV commercials as well as city-specific marketing campaigns in New York and Chicago, which focus on the variety of items that can be found on its platform. One of the commercials called Lamp showcases its new Search by Image Feature that allows people to take a photo of something in the app to view relevant items on Etsy.
Meta began issuing refunds to advertisers impacted by a glitch last month that resulted in the platform spending advertisers’ daily budgets in a matter of hours with poor CPAs. Some larger advertisers got their refunds starting on May 12, but many smaller advertisers are still waiting.
Amazon is testing a Small Business Search Filter to help bring attention to products offered by small brands and artisans. The new filter will appear under the Business Type category in their search filter options.
Shopee opened two more distribution centers in Brazil, which will serve as fast transit points for the redistribution of goods in its cross-docking model — by which goods collected from local sellers in first-mile hubs are reorganized and sent to last-mile hubs before reaching the customer. Earlier this month I reported that Shein is localizing its manufacturing in Latin America by creating a hub in Brazil.
Apple launched its online store in Vietnam, bringing its full range of Apple products and accessories to the country's largely untapped market. The store is available in both Vietnamese and English with shopping assistance from Apple Specialists, free delivery, a trade in program for iPhone sales, training sessions, and multiple local payment options.
Minnesota lawmakers became the third state congressional body in America to pass a law protecting warehouse workers from unfair quotas and allowing them proper time for bathroom breaks and meals. If the bill is signed into law by the governor, it would place a number of restrictions on Amazon and other companies operating large warehouses and ban companies from taking advertise employment action on employees failing to meet quotas they weren't made aware of.
US Supreme Court dismissed a case alleging Google, Twitter, and Meta should be held liable for “aiding and abetting terrorism” by hosting and recommending Islamic State videos and posts to their users. The court said that under a federal antiterrorism law, social media companies can't be held responsible simply for deploying algorithms that in some cases recommend harmful content.
Amazon is looking to sublease some of its Fresh stores in the Minneapolis / St. Paul area and one outside of Detroit. The locations are mostly in suburban areas and are located near other grocery stores including a Walmart and regional chains.
Amazon is also facing a lawsuit from its landlord at a planned Fresh location in Philadelphia. Federal Realty Investment Trust is seeking $180k in rent and other expenses on a location that Amazon signed a lease for in April 2020 but never opened.
Meta is planning for another wave of layoffs this week, according to its president of global affairs Nick Clegg. This latest round of layoffs is expected to affect workers in business-focused positions.
Facebook was fined a record-breaking €1.2B and ordered to stop transferring the Facebook data of EU citizens to the United States. EU courts believe that Facebook's data transfers expose EU citizens to privacy violations, a complaint which stems back to 2013 when Edward Snowden revealed information about US mass surveillance programs.
Amazon One scanner can now be used to verify your age at bars and grocery stores when buying alcohol. The feature is rolling out to the Coors Field baseball stadium in Colorado before expanding to additional establishments in the coming months.
Alex Marsh, the head of Klarna’s UK business, exited the company after nearly five years at the BNPL firm, where he was part of the team that grew the region's consumer base from 1.5M to 18M. Marsh's next step and successor at Klarna have not yet been revealed.
Amazon India announced the expansion of its grocery services Amazon Fresh to over 60 cities across the country. The service offers same-day and next-day delivery of grocery products such as fruits, vegetables, chilled items, personal care, baby, beauty, and pet products.
10. Seed rounds, IPOs, & acquisitions
Shein raised $2B in a round led by Sequoia Capital, General Atlantic, and Mubadala, at a $66B valuation, almost a third less than the $100B that the company was valued at a year ago. The company is rumored to be aiming for a U.S. IPO later this year
Emotive.io, an all-in-one growth platform for e-commerce brands, acquired Bloom Digital, a marketing agency specializing in SMS and e-mail marketing. The acquisition enables the launch of a new product, Emotive Attribution, aimed at helping merchants optimize their marketing spend across channels using a first-party pixel.
Jenfi, a Singapore-based growth-capital-as-a-service platform that provides online businesses with quick revenue-based financing, raised $6.6M in a pre-Series B round led by Headline Asia. Since inception four years ago, the company has deployed more than $25M in non-dilutive capital to over 600 companies. The funding will be used to grow its customer base and expand into new markets in SEA.
X Corp acquired Laskie, a San Francisco-based talent recuirtment tool that connects tech talent with employers for an undisclosed price reportedly in the tens of millions of dollars, marking the first acquisition since Musk bought Twitter in Oct 2022. The acquisition is part of Musk's plan to turn the service into an everything app.
Amazon Web Service announced that they will invest $12.9B in India by 2023 in response to the growing demand for cloud services in the country. The company estimates that the investments will support over 130k full-time jobs.
Azteco, a Bitcoin voucher service that enables unbanked customers to buy Bitcoin with cash or credit card at outlets across 195 countries, raised $6M in a round led by Jack Dorsey. The company will use the funds to refine their product and grow their reach in Latin America and Europe.
Sabi, a Lagos-based B2B e-commerce startup that brings together merchants, importers, exporters, and manufacturers and provides tools for inventory management, sales order management, and payments, raised $38M in a Series B round led by CommerzVentures, Norrsken22, and others at a $300M valuation .The company is currently recording over 1k, monthly orders and experiencing 20% MoM growth.
What'd I miss?
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See you next Monday,
Paul E. Drecksler
PS: Someone just called me, sneezed and hung up. I hate cold callers.