Have you ever virtually tried on an article of clothing or a pair of sunglasses? What if you could mix and match accessories and apparel from multiple brands to see how they looked together before you made a purchase?
Has BNPL gone too far when consumers start using it to pay for their healthcare and energy bills?
If Google was left unchecked by regulatory agencies, would it push out all its competitors without remorse?
While other tech companies are closing down their retail stores, should Meta start opening new ones?
All this and more in this week's 68th Edition of the Shopifreaks newsletter. Thanks for being a subscriber.
Stat of the Week
51% of Gen Z workers fully expect to eventually undertake at least some of their work in a metaverse setting. — According to Microsoft's WorkLab. –> [RETWEET IT]
1. CFPB's new regulations
The Consumer Financial Protection Bureau (CFPB) is putting new rules in place and becoming more aggressive about rule enforcement. In Biden's first year alone, the CFPB approved 18 final and interim rules, in comparison to Trump's approval of 22 rules during his first three years in office. (That isn't a political statement. LOL. Just making a comparison to put the quantity in to perspective.)
New rules are on the horizon for lenders, banks and other financial services providers including in the following areas:
- The use of artificial intelligence by financial institutions in assessing loan risk in lending.
- The collection and reporting of lending data for small businesses owned by women and minorities.
- The offering of buy-now-pay-later products.
- How financial companies use big-tech payment platforms.
The CFPB was established in response to the 2008 financial crisis with a mission to ensure fair treatment of consumers by banks and financial institutions through the enforcement of laws.
Their recent probe into BNPL products couldn't come at a better time, as the unregulated lending medium is entering industries that could prove dangerous for consumers. For example, people are now using BNPL to pay for necessities including health care and energy bills. What's next? A BNPL firm that lets you pay off your credit card debt in installments?
2. E-commerce + POS = Lightspeed Retail
Lightspeed has launched its new Lightspeed Retail, an offering that combines POS, payments, and e-commerce into one platform. The new platform pulls features from the platforms of other companies that Lightspeed previously acquired.
In June 2021, I reported that Lightspeed bought the e-commerce platform Ecwid for $500M and and the wholesale software business NuOrder for $425M. Lightspeed also invested $200M into the London-based instant grocery delivery startup, Zapp, and $17M into Seel, an underwriter of e-commerce returns, earlier this year (among other investments).
Lightspeed Retail leverages headless commerce technology so that merchants can turn any website into an e-commerce store, sell and advertise products on Facebook, Instagram and TikTok, as well as marketplaces such as Google, Amazon, and eBay.
Retailers can also customize their POS and back-office workflows through the Lightspeed Retail app, as well as manage inventory across physical stores and their digital sales channels. Lastly the platform supports analytics and loyalty functions that can be integrated across the merchant’s POS and retail systems.
The product is available on all platforms in North America, Australia, New Zealand, Singapore, Hong Kong, the U.K. and South Africa.
3. Snap now offering virtual try-ons
Last month, Snapchat unveiled new e-commerce capabilities during its Snap Partner Summit including software tools to create augmented reality (AR) shopping content.
Companies like Puma, Goodr, American Eagle Outfitters, and Zenni Optical are currently using Snap AR Shopping to offer virtual try-ons of their products on Snapchat and their own apps. And now a new in-app feature called Dress Up brings together those fashion try-ons to give users a place to experiment with new looks and share them with friends before making a purchase.
Carolina Arguelles Navas, head of AR business strategy at Snap, said in the presentation, “For the first time, you can try on a new outfit without having to change your clothes. Ultimately, we’re going from ‘this looks good’ to ‘this looks good on me.”
To use the new features, users take a full-body picture of themselves (while fully clothed) and computer vision technology analyzes the image and overlays digital renderings of apparel in different poses. More than 250M users have used AR Shopping Lenses since Jan 2021.
TikTok is also looking to get into the AR shopping game. The company signaled its intention to make AR a bigger part of its offering with its recent integration of Camera IQ’s tools which allow brands to create AR effects, however, commerce isn’t currently part of the Camera IQ features, so TikTok has some catching up to do.
4. Google's share of Shopping ads on the rise in the UK
Five years ago, the EU Commission fined Google €2.4B and ordered it to open up Google Shopping to external competition. In 2017, the EU ruled that Google was giving itself an unfair advantage by promoting its own ads on the platform over those from rival comparison shopping websites.
Initially Google complied with the rules. Google’s share of UK shopping ads was around 68% in 2018 and then brought down to 51% by 2019.
However since Brexit happened, Google's share of ads in the UK has started to rise again, reaching 53% in 2022. Experts are concerned that after Brexit, the EU Commission's demand for more competition no longer applies to UK search results in Google's eyes.
There are also signs that there is even less real competition on Google Shopping than before, even though the percentage of Google Ads are less than the 68% where they began.
Of the 47% of Google Shopping ads in the UK which are not placed directly through Google, only 19% came from rival price comparison websites. The other 28% come from performance marketing agencies that exclusively sell ads on Google Shopping's auction system. Many of these agencies were formed after the Google fine in 2017. In other words, they exist as a middle man to artificially dilute Google's perceived market share.
In Germany, for comparison, 33.6% of Google Shopping ads originate from Google, down from 50% in 2019 and 67% in 2018, indicating that Google is containing to work towards reducing its own participation within the EU, however they seem to have ‘Brexited' their attempts to do so within the UK.
5. Stripe Financial Connections
Stripe has launched a new product called Financial Connections which will let their merchants connect directly to their customers' bank accounts to access financial data that will speed up or run certain kinds of transactions.
These include verifying accounts for payments and payouts, checking balances ahead of a payment being made to avoid overdraft, and confirming account ownership. Details like these can in turn be used to help underwrite risk for loans, track spending patterns, and automatically pay bills. The services will help mitigate risk and run safe transactions over their other services including Stripe Connect, ACH payments, and Stripe Capital-powered loans.
Online shoppers will be asked to input their bank account details after being given specific instructions on how the info will be used. It's currently, however, TBD how consumers will react to those financially intimate requests.
The service is going live in the U.S. first, where Stripe says it will work with 90% of bank accounts.
Merchants and financial services will be charged on a pay-as-you-go basis. For example, bank account verifications and account information will come at $1.50 per API call and account balance retrieval at $0.10 per API call. Bigger customers will be able to buy on an enterprise contract.
Account to account payments and transfers is the future of online commerce as fintech companies look to upset Visa and Mastercard's collective 80% market share and monopolistic stronghold over credit card processing. Two weeks ago I reported on Visa and Mastercard increasing their interchange fees, which gives more reason (and margins) for disruptors to enter the market.
This week in the seed rounds, acquisitions, and IPOs sections of the newsletter I profile Kevin, an account to account payment system, raising $65M in a Series A. I've previously reported on Volume and Zepto, other account to account payment startups, who have raised significant capital.
As mobile app wireless payments become common-use, it's just a matter of time before account to account payments will enter POS hardware in small businesses, and customers will have the option of bypassing Visa and Mastercard within stores (instead of just online like those startups offer).
And I say… good! The fact that businesses have to still spend 3-4% to accept credit card payments in 2022 is absurd. And now that the technology and consumer adoption is here, it's time to officially upset the credit card processing industry's transactional tax on American businesses and consumers. This is one race to the bottom that I look forward to seeing.
6. Meta is opening a Meta Store
Meta is opening its first brick-and-mortar retail store dubbed Meta Store in Burlingame, California, on the campus of its 17,000-employee Reality Labs arm.
In this new retail store, you'll be able to purchase the Meta Quest 2 VR headset, Portal, their video calling device, and Ray-Ban Stories camera-enabled sunglasses. (I have a pair of those!)
In the past few years, Microsoft has closed their 83 retail stores, Sony closed their last retail store, and Amazon has shut down dozens of its Amazon 4-Star locations, bookstores, and Amazon Fresh stores, as well as a few Whole Foods locations.
So while other tech companies are shying away from brick and mortar presences, Meta is looking to grow theirs as a way to let customers try their products.
Meta's new 1,550 sq. ft. space is about a fifth the size of its nearest Apple Store and left many Meta employees and members of the media a bit claustrophobic when they toured it. However, given that the store is tucked away on Meta's premises instead of a positioned in a high-trafficked mall or shopping district, crowded stores might not be a problem.
On one hand, I can understand why Meta would want to open a physical presence so that customers can try out their products. VR is one of those things that you've really got to use to appreciate. Last week I reported that TikTok's parent company, ByteDance, is following Meta into the Metaverse. The company bought the Chinese VR headset maker, Pico, last August, and are rumored to be opening stores in the thousands this year. So I understand that Meta needs to keep up or risk getting left behind.
However opening their own stores is not the way to go. For the cost of opening and staffing one store, Meta could send thousands of their VR devices out to retail partners who would gladly display their demo stations in exchange for the traffic that it'd bring into their store.
Or an even better idea is that Meta could go the network marketing route and offer a commission to a team of salespeople who would host home parties for their friends to try out the devices. After all, VR is best enjoyed in your home, so a home party is the most natural way to sell the product.
7. Instagram's new “Get Quote” button and Facebook's new business messaging tools
Instagram is testing a new “Get Quote” button with select business on its app. The new button allows users to setup custom questions to ask customers prior to starting a conversation, which the customer can fill out to request a quote. The new feature is rolling out as part of National Small Business Week.
Meta also introduced other new features including:
- Messenger capability that will allow businesses to send promotional message campaigns to customers who opt-in
- Facebook and Instagram ads that open up to a WhatsApp chat
- Messenger, Instagram Direct, and WhatsApp centralized into one dashboard (which has been on the radar for quite some time)
Facebook is now also allowing businesses to download lead info directly into their CRMs to follow up with questions.
8. USPS introduces e-commerce focused shipping service
The United States Postal Service is introducing its new USPS Connect eCommerce service to simplify the process for e-commerce platforms to work directly with USPS.
The new program offers an accelerated agreement process, integrated Postal Service or PC Postage software, and access to special benefits designed for eCommerce customers.
For e-commerce platforms, USPS will provide discounted rates to offer merchants through their APIs and PC Postage software, with no minimum volume commitments. The service will also include free package pickup service, free Saturday delivery, no fuel surcharges, and no delivery surcharges.
It's wild times when the USPS has to innovate to compete with Amazon! They had a good thing going for a while with UPS, FedEx, DHL and other carriers in that they were all terrible so no-one had to innovate. 😂
9. Other e-commerce news of interest this week
- Squarespace launched its second Australian ad campaign including “The Ideas Man” and “The Gunna Do It” spot, following creative people who had amazing ideas but had not yet made them a reality.
- In honor of Mental Health Awareness Month, L.L. Bean has gone dark on social media and wiped clean its Instagram account. The company has linked to a landing page on its website with content that encourages self-care and the benefits of outdoor activity.
- After 15 years, Amazon is finally adding support for the ePub format to its Kindle devices. At the same time, Amazon will no longer allow users to buy Kindle books via their Android app, due to Google's Play Store policies
- Starbucks is launching an NFT collection later this year. Their digital collectibles will also provide owners with access to exclusive content experiences and other benefits.
- Amazon pledged that it will export $20B worth of locally made Indian goods by 2025, doubling its initial goal of $10B. Amazon is aggressively going after the Indian market, but the new government sponsored open network may disrupt their growth. Growing their export business feels to me like they're growing their leverage to negotiate with the Indian government in the future.
- BizPay, an Australian B2B firm, cut 30% of its workforce due to volatility in the tech sector and a challenging market ahead for fintechs. The company says that it is undergoing an “operational transformation”, which sounds to me like they're running out of capital runway.
- Squarespace users can now sell NFTs directly on their own sites through the ARC plugin, currently a beta release by the ARC platform, which was built to simplify the process for retailers and shoppers to sell / buy NFTs.
- Victoria's Secret has started selling 120 of its beauty products on Amazon, including moisturizers, fragrances, and products from its Pink line which targets younger customers.
10. This week in seed rounds, IPOs, & acquisitions….
- Flyp, a platform that provides resellers with enterprise-grade e-commerce tools, raised $10M in a funding round led by Asymmetric Capital Partners. Flyp's algorithmic matching software pairs consumers, liquidation companies, and donation centers with power resellers to offload their inventory of used goods.
- Scalapay, a European BNPL firm, raised $27M in a Series B extension from Poste Italiane, Italy's largest service infrastructure network. The funding is an extension of the company's $497M Series B round announced in Feb 2022.
- BuzzFeed has named Squarespace's finance chief, Marcela Martin, as its new president. Her responsibilities will include supporting the digital media company's acquisitions strategy.
- Publicis Groupe, an agency holding company, is acquiring Profitero, an analytics platform that helps brands optimize e-commerce ad spend, for around $200M. Thousands of brands including L’Oréal, General Mills, KraftHeinz and Henkel use the platform.
- Walnut, a BNPL platform for healthcare expenses, raised $110M in a Series A round led by Gradient Ventures. The company claims that it alleviates the financial burden for patients to afford health care, while helping healthcare providers capture more revenue by removing price as a barrier for their patients.
- Swiftline, a data-science backed e-commerce software, acquired Charm.io, a DTC e-commerce intelligence platform that tracks insights on 5.9M online retailers and 200M products. Charm will be integrated into the Swiftline data and technology platform, adding core IP around data collections, natural language processing, and computer vision models.
- Mashgin, a touchless self-checkout system powered by AI and computer vision, raised $62.5M in a Series B round led by NEA, valuing the company at $1.5B. Mashgin is already profitable and is the most vetted computer vision-based self-checkout system on the market today with more than 35M transactions completed to date.
- Zepto, a 10-minute grocery delivery app (not to be confused with Zepto the Australian account to account payment platform), raised $200M in a Series D round led by Y Combinator Continuity, valuing the company at $900M. The company will use the funding to expand its service to more cities in India and grow its network of dark stores.
- RECON Labs, a South Korean augmented reality startup which enables e-commerce customers to create 3D models of their products, raised $4.4M in a Series A round. The company will use the funding to increase its headcount and enhance its platform PlicAR, which helps turn a 2D image into 3D model.
- Kevin, a startup account to account payments platform, raised $65M in a Series A round led by Accel, bringing its total amount raised to $77M at an undisclosed valuation. The company currently has 6,000 merchants in 12 European markets and plans to be available as a payment option across 35% of European POS terminals by end of this year.
- Point, a startup that lends money to homeowners in exchange for a share of the future value of their homes, raised $115M in a Series C round after a year of rapid growth. Since launch, Point has invested in more than 5,000 homes. Its funding volume was up 5x in Q1 2022 compared Q1 2021.
- Brainlabs, a digital media marketing agency, acquired Fanbytes, an influencer marketing agency, in an attempt to strengthen its client engagement offer across TikTok, Instagram, YouTube and Snapchat. Brainlabs will add the business to its own influencer offer across U.S., LATAM and APAC, and the three founders will take up new roles within the company.
- Neo Financial, a Canada-based digital bank, raised CAD $185M in a funding round, just as the bank got past the 1M customer mark. Neo's offers include cash back and savings accounts, private wealth management, co-branded cards, BNPL, subscription loyalty services, and soon to be mortgages.
- Paymob, an Egyptian merchant financial services platform, raised $50M in a Series B round led by Kora Capital, PayPal Ventures, and Clay Point, bringing its total amount raised to over $68.5M. The company will use the funding to expand its product range, reinforce its leadership in the Egyptian market, and expand into new markets across the Middle East and Africa regions.
What'd I miss?
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Paul E. Drecksler
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