2PM - New Memo: The Returns Coup

The eCommerce industry is a dance between partners, economic conditions, and balance sheets. Affirm, Shopify, Deliverr, Flexport, Returnly, and Loop have all had their moments on the dance floor this year – each striving to perfect their routine while keeping pace with the rhythm of market dynamics, consumer behavior, and technological progress. But of them all, Shopify is the key benefactor; Loop is the latest beneficiary. Effectively acquiring the chief competitor while bolstering its relationships with two of the most important software platforms in all of commerce.

It’s all one big give and take. Shopify’s divestment of its Deliverr investment may see Flexport benefit over the longterm. Shopify and Flexport deepened their alliance as a result.

Shopify and Flexport are deepening their alliance as Shopify seeks to compete with e-commerce rivals such as Amazon and Walmart. The companies announced a partnership in February that gives Shopify merchants access to Flexport’s freight services, including booking international shipments from suppliers to their warehouses. Flexport also counts Shopify as an investor.

Then, last week, it was publicly announced that Loop did a deal of a lifetime. In what was essentially an acquisition of Returnly, CEO Jon Poma structured a deal that may send a large number of Returnly’s clients from Affirm to Loop in exchange for Loop stock to Affirm (though this agreement is a partnership and not a bonafide acquisition). In line with what was explained above, Affirm counts Shopify as an investor. Loop also counts Shopify as an investor.

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Affirm to shutter Returnly

Excerpt: That focus on profitability has become more intense for BNPL providers such as Affirm as the U.S. economic environment has worsened on some fronts this year. Affirm executives have said the company aims to become profitable, on an adjusted operating income basis, by the end of the fiscal year ending June 30. Affirm reported a $205.7 million loss in its fiscal third quarter ending March 31. 

This partnership with Loop and the divestiture of the Returnly business will allow Affirm to take an even deeper focus on driving strong growth and profitability in our core business, serving our merchant and platform partners with world-class payments and technology solutions, accelerating our direct-to-consumer offerings, and building on our deep capabilities in underwriting and decisioning.

Lina Khan is coming for Amazon (FTC antitrust suit)

Bloomberg / Five years in the making: In the coming weeks, the agency plans to file a far-reaching antitrust suit focused on Amazon’s core online marketplace, according to documents reviewed by Bloomberg and three people familiar with the case. The main allegation is expected to be that Amazon leverages its power to reward online merchants that use its logistics services and punish those who don’t. 

Background: Amazon built its business around the belief that as long as consumer prices were low, antitrust laws wouldn’t apply. Lina Khan went on to say: “Due to a change in legal thinking and practice in the 1970s and 1980s, antitrust law now assesses competition largely with an eye to the short-term interests of consumers, not producers or the health of the market as a whole; antitrust doctrine views low consumer prices, alone, to be evidence of sound competition.”

June 2021: Amazon Will Face Antitrust Litigation (2PM) 
April 2018: The End of Conglomeration: Introducing Lina Khan (2PM)

Shein takes on Amazon in the business of selling everything

Excerpt: The shift, plans for which The Wall Street Journal reported in December, occurs as the fashion giant seeks new growth opportunities and puts Shein in more direct competition with e-commerce stalwarts like Amazon, which started out as an online bookseller, as well as another newcomer, Temu.

US eCommerce sales to exceed $1.1 trillion in 2023: report

Excerpt: FTI Consulting’s e-commerce sales prediction comes after years of high growth. A report from Forrester released in August 2022 predicted that e-commerce sales will reach $1.6 trillion in the U.S. by 2027. Last year, e-commerce sales exceeded $1 trillion in the U.S., a milestone primarily driven by food, pet, baby, clothing and accessories purchases, according to Comscore’s State of Digital Commerce report released in January.

Infographic: electronics, toys and fashion dominate eCommerce

Excerpt: Statista analysts see online food shopping becoming one of the segments with the highest growth potential, potentially doubling its revenue from $330 billion in 2023 to $620 billion in 2027. Even so, revenue from this segment won't come close to the big three in the near future. In 2027, sales in the electronics, toys, hobby & DIY and fashion categories are expected to cross the $1 trillion threshold. 

Retail reset: A new playbook for retail leaders

Excerpt: Nearly one in five retailers have posted negative economic profit since 2015.¹ And while the retail sector in aggregate has created value over that time, the gap between winners and losers is widening. The top 10 percent of publicly traded retailers now account for 70 percent of the sector’s economic profit (Exhibit 1). It’s a winner-take-most industry.

Updated For July 4: 802 brands covered. Today’s breakout is the top 20, there were massive changes throughout the database. Of them, Peloton jumped 61 spots and 5.11 Tactical rose 50 spots in just 30 days. Shopify is being used by a third of the list which underperforms in comparison to our data on platform penetration: Shopify 73.5% of the list, Custom is 18.2%, WooCommerce is 3.28%, Salesforce is 1.26%, Magento is 1.14%, SpreeCommerce is 1.01%, Squarespace is .5%, and BigCommerce is .379%.

Think retail is a thing of the past? Think again.

Excerpt: The optimal distribution approach will be different for every brand. But whatever mix of DTC and retail – and whichever collection of retailer partners – you decide to use at any given point in your lifecycle, the bottom line is that optimizing for customer acquisition cost is the name of the game. (By Joel Beal) 

A UPS strike? In this economy?

Excerpt: While competitors like FedEx and the US Postal Service could pick up some of the deliveries, experts said logistics networks are too strained to fill many of the gaps (2PM analysis) that would be created by a UPS strike. That means headaches and delays for many of the people relying on UPS, which is responsible for about a quarter of all parcel delivery volume in the US, according to Pitney Bowes.

'Buy with Prime' is helping small biz capitalize on Prime Day

Excerpt: Late last year, Amazon unveiled a surprising new service — Buy with Prime, which lets sellers offer all the benefits of Prime membership (simplified payment processing, fast delivery, easy returns) on their own DTC websites. (Importantly, sellers must use FBA, Fulfilled by Amazon, to participate.)

Also: "Amazon Prime Day isn't the catalyst that it used to be" (Seattle Times) 

A recent member brief: Why Haus has a better shot, this time around, thanks to the evolving industry that it tried to improve from the company's beginning.

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