The last 2 weeks has been full of news, so much has happened globally that is takes a while to make sense of all of the news. In terms of the importance of news – I am going to highlight a few stories that has big implications for the next 12 months.
The second biggest B2C ecommerce business in China, JD.com has gone public in the US. This is not a small matter and the fact that they were able to raise $1.2 billion highlights to me that Alibaba is in position to raise a lot of money. I definitely think that this IPO can be seen as a proxy for the mega IPO from Alibaba and it highlights the appetite that investors have for Chinese ecommerce companies.
Then the fab.com story took a step to the worse for their New York based staff. They were all told to “not report for work on Friday” and this just highlights to me that the business has fallen from grace completely. Jason Goldberg deleted his popular betashop blog and has said very little over this last round of downsizing. The irony for me is that fab.com has now become an online version of IKEA. The reality is that they grew too quickly, said way too much and have harmed an industry with their fall from grace. Is fab.com around in 2015?
The worst kept secret in Indian ecommerce has finally been announced. Flipkart has acquired Myntra in an all stock acquisition. This can be seen as the last stop before going public. The acquisition was driven by investors whom had interests in both companies and has nothing to do with consolidation. Quartz has a fantastic article written by Mahesh Murthy on this topic.
The stories that caught my attention over the last 2 weeks:
Pinterest Launches Paid Ads With Select Brands In Form Of Promoted Pins (TechCrunch) – ” Today, the company says that it’s expanding on these earlier tests with the rollout of a paid test of Promoted Pins. These pins will only appear on the search and category feeds, says Pinterest.” It was not surprising as Pinterest is in need of a revenue generation strategy, the question is when does this become available for normal users?
As China e-commerce basks in Alibaba IPO glow, ageing warehouses lure global investors (Reuters) - “The ageing warehouses that supply goods to customers across the world’s second-largest economy are already creaking under the strain, lacking the automation and state-of-the-art technology that has fuelled the rise in the United States and Europe of Amazon.com Inc. By 2020 China’s e-commerce sector will be larger than those of the U.S., Britain, Japan, German and France combined, KPMG said in a recent report.” I guess that means that investment from private equity investors are going to be targeted to property for new warehouses and warehouse technology..
Q1 web sales rise 35% for German shoe and apparel retailer Zalando (Internet Retailer) – “The retailer says its Q1 2014 sales rose 35% year over year to reach $689.48 million compared to $511.95 million in Q1 2013. Sales in Zalando’s core markets of Germany, Austria and Switzerland totaled $390.84 million, up 27% from $306.89 million in Q1 2013.” Zalando seems to be getting better results every quarter – when do they go public? My guess before the end of 2014..
Snapdeal wants a US IPO while eBay India is open to acquiring companies in India (MediaNama) – “If you thought eBay would acquire Snapdeal very soon, then here’s some disappointing news for you: Snapdeal is planning an IPO in the US within next 12-24 months instead. Snapdeal co-founder Kunal Bahl told Times of India, that an acquisition by eBay is an unlikely scenario. ”We’re building for the long term and, given our rapidly increasing scale, IPO is looking like a foreseeable path,” Bahl said.” Snapdeal I think will be a public company in which eBay will retain shareholding ala eBay’s relationship with MercadoLibre in Latin America. It will cost eBay too much money to become sole owner of Snapdeal but rather staying a shareholder ensures that they can access market information from a secondary partner.
Ain’t no Amazon — Groupon struggles to compete with the ‘everything store’ (Geekwire) – “Groupon said its shipping costs can be as much as two times comparable online retailers’ costs. It also mentioned that if it weren’t for its shipping and fulfillment costs, its North American gross margins — sales minus payments made to suppliers — would be more than 30 percent. But with those debilitating expenses included, margins ring in at only 5 percent.” The evolution away from daily deals is going to be painful for Groupon as inventory and logistics are capital intensive..
Do you know what’s going in your Amazon shopping cart? (WallStreet Journal) – “The phenomenon doesn’t just reflect a problem with unsavory sellers. It is also a result of the way Amazon manages inventory in its network of warehouses across the U.S. As more third-party sellers have signed up to offer products through Amazon and use its order-fulfillment services, the Seattle-based giant has allowed many to pool their inventory with supposedly identical items supplied by other sellers—in essence commingling products from third-party merchants with those supplied directly to Amazon by the brands themselves.” The size, scale and need for speed to getting purchases to customers are causing secondary effects such as counterfeit items are becoming seen more. Amazon will fix this but increasingly I suspect brands wont allow marketplace selling of their items.
Alibaba’s 11Main.com Remains an Enigma to Sellers (EcommerceBytes) – “Sellers are puzzled by the products 11 Main is rejecting, and some say that while the customer service is top notch, it’s more difficult to list items than they would have expected.” It seems that 11Main is aiming to be a niche marketplace for collectibles but the manner in which they are operating is confusing sellers. Is this marketplace to compete with Amazon and eBay?
Vente-Privee invests in merchandising, not marketing (Internet Retailer) – “Vente-Privee doesn’t spend on paid search ads or invest in search engine optimization to move up in natural results on search engines. It instead spends ample time and money on fine-tuning what it sells and how it presents those products, says Ilan Benhaim co-founder of Vente-Privee.” Vente-Privee is a unique ecommerce business and uses its merchandise to drive conversion to sales. The article is a great read.
China Top B2C Websites Market Share in Q1 2014 (China Internet Watch) – “China’s total online shopping revenue in B2C market reached 181.92 billion yuan (USD 29 billion) in the first quarter of 2014, up by 44.6% compared to the same period in the previous year, with much faster growth than C2C market (up 18.3%) according to data from Chinese research company iResearch.” Tmall is double the size of JD.com in terms of market share..
Alibaba: The Other 550M Gorilla in Payments (Pymnts.com) – “Alibaba, with AliPay, is able to basically export one very powerful asset to the rest of the world – billions of increasingly well-heeled Chinese consumers with digital accounts and money to spend.” One of the best looks at Alibaba I have seen that has implications for everyone with an ecommerce business.
Alibaba’s Money Market Fund Poses a Dilemma for Chinese Policymakers (Institutional Investor) – “At the end of March, just nine months after it opened, the fund boasted 541 billion yuan, or $87 billion, in assets. Yet the business didn’t get a single mention in the 341-page prospectus that Alibaba Group Holding filed with the U.S. Securities and Exchange Commission last week.” The money market fund that Alibaba is an enigma that could change an entire industry in China. Fascinating article on something that is not getting a lot of press..
These Charts Show How Alibaba Became The World’s Largest E-Commerce Company (Business Insider) – “Alibaba will soon be a publicly traded company in the U.S., but many observers still don’t have a solid understanding of how the Chinese company grew to be the largest e-commerce company in the world.” Business Insider created a must see article that contains the magnitude of what Alibaba is in charts.
Boxed is not a Costco-killer, it’s a Costco reseller (Geekwire) – “GeekWire has learned that the start-up is not the threat it is being made out to be — rather, it is generating additional revenue for the Issaquah, Wash.-based warehouse club.” Costco which potentially had Boxed as a competitor actually has partnered with the startup and are thus creating additional revenue.
MercadoLibre Keeps Booming: Time to Buy? (The Motley Fool) – “MercadoLibre presently seems to be relatively well protected from competition from big U.S players. This does not mean competitive pressure won’t increase in the medium term, but it won’t be easy for Amazon or eBay to displace the regions’ e-commerce king.” MercadoLibre is without a doubt the leading B2C ecommerce business in Latin America but they will be getting competition from OLX, Amazon and eBay in Brazil. The point is this company has steadily returned good results on a quarterly basis..
South African ecommerce player uAfrica raises $1.5million funding round (Ventureburn) – “South African ecommerce outfit uAfrica has closed a US$1.5-million funding round led by online auction site Bidorbuy and the company’s own managing director, Andy Higgins.” Some good news for the South African ecommerce industry.
How Amazon’s new Bay Area warehouse plays into same-day delivery strategy (Bizjournals) – “Amazon.com’s choice of Newark for its first Bay Area distribution center reflects a shift in where the e-commerce giant puts its warehouses: While the company once chose locations in less expensive areas, it’s now nestling closer to major population centers as same-day delivery becomes a competitive mandate.” Amazon is getting closer to their customers but they are now starting to move their warehouses to expensive real-estate areas.
Amazon U.K. Brings Standalone Shoe Website, Javari, In House Under Amazon Fashion Brand (TechCrunch) – “A spot of brand consolidation is in the works at Amazon U.K. The online retail behemoth is planning to migrate users of its standalone shoes and accessories website, Javari.co.uk, over to Amazon U.K.” Not surprising at all as something similiar happened in the US. Clearly fashion is a category that Bezos wants Amazon to be a factor in. Amazon is the gloabl brand that Bezos wants to spend marketing money on..
eBay enters Latin America (Internet Retailer) – “EBay Inc. continues its expansion to emerging markets and launches localized sites in Latin America. Consumers in 18 countries throughout the region will now be able to shop eBay’s online and mobile marketplaces in Spanish and Portuguese using local currencies, eBay announced today.” eBay has engaged in becoming a bigger factor in global ecommerce. This move puts the business in direct competition with their MercadoLibre investment.
Today ecommerce saves customers money and time tomorrow it will accelerate discovery (The Equity Kicker) – “I think this theme has some way to go. Buying high value items online, especially ones with emotional drivers, is still painful, largely because it’s hard to know if the purchase is right for me. Free and streamlined returns processes have helped a lot, but the real prize comes from gathering more information about the purchase and purchaser and being smart with matching. Artificial intelligence has a large role to play, as do social signals and other new sources of data, including wearables.” Nic Brisbourne hits the nail on the head on a theme that will drive ecommerce for the next 18 months.
Will Kaymu Be The eBay Of Africa? (Ventures Africa) – “Kaymu, a subsidiary of Africa Internet Holding (AIH), hopes to take its online marketplace for retailers and entrepreneurs continent-wide, on a model already established in North America by eBay, in China by Alibaba Group’s TAOBAO and in Latin America by MercadoLibre.” Kaymu has a long way to go to be mentioned in the same breath as eBay, Taobao and others. Why? Kaymu is battling pureplay online retailers in their home market unlike the other regional super powers that has become a defacto starting points for certain online shoppers.
How Alibaba invented the world’s biggest online shopping holiday (Quartz) – “Every November, on the eve of one of China’s most quirky holidays, Singles Day, groups of unattached young Chinese get together and celebrate their singleness with a night of online shopping.” The power that Alibaba has over the Chinese ecommerce market. They have created an online shopping holiday which did not exist prior to them creating it.
Why Fashion is the Next Big Thing in Venture Capital (Business of Fashion) – “But as a former fashion designer turned venture capitalist, I see dollar signs — and lots of them. Let’s take a quick look at the numbers: a $1.2 trillion market size, expected to grow to $2 trillion by 2018. To put that into perspective, the global SaaS market is around $20 billion. Cloud services is $131 billion. And enterprise software is $120 billion.” If you are an ecommerce executive or have an interest in fashion this is a must read.
Ozon acquires stake in LitRes, the leading Russian e-book store (EWDN.com) – “Yesterday Ozon Holdings, one of Russia’s most established e-commerce players, announced that it acquired a stake in LitRes, the leader in Russia’s fast growing – though still embryonic – domestic e-book market.” The story makes a ton of sense and ensures that Ozon is the dominant ecommerce business in Russia.
Nordstrom’s and Wal-Mart’s e-commerce growth ‘outpace’ Amazon (Ecommerce facts) – “The American retailers Nordstrom and Walmart, ‘en route’ to transforming their businesses from traditional brick-and-mortar store chains to multi-channel merchants, have seen their online sales grow faster than that of arch rival Amazon.com. Amazon said in April that its first-quarter net sales increased 23 percent.” Amazon’s growth has somewhat slowed in comparison to Nordstrom and Wal-Mart.
Amazon Invests $20mn in Chinese Online Food Vendor Yummy 77 (TechNode) – “Amazon has invested $20 million of funding in Shanghai-based online food vendor Yummy77. It is the first time for the U.S. e-commerce giant to invest in a Chinese company after entering Chinese market for ten years.” Interesting move by Amazon to invest into Yummy 77. I am almost sure that Yummy 77 has some proprietary technology or something and that is why Amazon invested in them.
Exclusive: Flipkart & Myntra Merger Is a Done Deal; Flipkart To Raise Another Round of Funding (NextBigWhat) – “The great Indian e-commerce wedding we’ve all been hearing about for long is done. The two companies have kept it under the wraps so far but according to our sources, the deal has been completed and integration between the two has begun.” This is in my mind the last stop for Flipkart before they list in Singapore or the US.
Amazon’s Junglee.com now lets you buy products (NextBigWhat) – “Amazon-owned price comparison site Junglee.com has started enabling direct purchases via its website, which means that Amazon now has two marketplaces in operation in India: Amazon.in, and Junglee. The option to make payments is available for several items including books and electronics.” This news went rather below the radar but it has significant impact for Indian ecommerce.
Angela Ahrendts’ plan for the future of Apple Retail: China emphasis, mobile payments, revamped experience (9To5Mac) – “Ahrendts’ résumé is certainly impressive, and so is the growth of Burberry product sales under her leadership. But does she have the ability to take Apple retail into the future? Her colleagues throughout Apple seem to believe so.” Angela Ahrendts has alot of work to do but mostly her greatest task is to ensure that Apple moves into more countries.
Korean Retail Giant LOTTE Adds Alipay onto Its Shopping Site to Meet Growing Demand from China (TechNode) – “Alipay, the leading online payments service in China, announced today that it has supported LOTTE’s website with its cross-border payments solution.” This is big news and potentially could lead to more new business for Alipay.
Naspers buys remaining shares in Markafoni [Updated] (Webrazzi) – “Naspers, a multinational group of media and e-commerce platforms, announced that it has agreed to buy the remaining stocks in Markafoni, the leading flash sales website in Turkey. At the same time, Naspers announced the appointment of Ilker Baydar as CEO. Baydar, who resigned from his General Manager position in Hepsiburada.com last month, is expected “to lead Markafoni through the next phase of growth, bringing a wealth of global retail and e-commerce experience.” Baydar is replacing Sina Afra, the co-Founder and outgoing CEO of Markafoni. He’s said to pursue his next entrepreneurial endeavours.”
eBay previews what’s next for Magento (Internet Retailer) – “At the Magento Imagine users’ conference last week, eBay Enterprise executives pulled some covers off of Magento 2, which many anticipate will be a major upgrade of the Magento Enterprise Edition. Meantime, the recently released 1.14 version features a more effective level of responsive web design, experts say.” The bigger news that occured at Magento Imagine or just prior to it is that Roy Rubin current CEO of Magento is leaving the company. Magento continues to be be far ahead of its is software competitors..
Snapdeal on a roll, raises $100 million from five investors including Premji Invest (ETRetail.com) – “The entry of Amazon last year has intensified competition in the industry. The global ecommerce major’s strategy of quickly expanding its product categories, growing its last-mile delivery capability and heavy marketing has pushed the home-grown online portals to invest in innovation and advertising.” Snapdeal continues to grow and remain focused on their end goal – going public in the US.
In first Malaysia flash sale, Xiaomi sells 4,000 Mi3 smartphones in 17 minutes (TechInAsia) – “Xiaomi sold 4,000 units of its flagship Mi3 smartphone in 17 minutes during the company’s inaugural flash sale in Malaysia, according to a Xiaomi spokesperson representing the company in Southeast Asia.” Xiaomi is using supply and demand to ensure that wherever they have a sale it leads to a sell-out in minutes. The interesting thing for me is that they are slowly moving into emerging markets to ensure that they are less reliant on being only found in Chinese retailers and online shops.
If eBay Was Breached, What About PayPal? (WallStreet Journal) -”When eBay nudged its 145 million registered customers to change their passwords because of a security breach, one of the first questions to pop into people’s heads was: What about PayPal?” There has been little communication from eBay over this breach yet it seems it was known since March 2014..
Amazon plans to expand online sales in Brazil (Internet Retailer) – “Amazon.com Inc. plans to expand its e-commerce site in Brazil to sell printed books, sources tell Internet Retailer. Amazon.com.br currently only sells Amazon’s Kindle electronic book readers and e-books that can be read on the Kindle.” Not surprising and I think Amazon will be driving more category launches in Brazil..
EBay Partners With Dostami to Make Deliveries from U.S. to Russia Easier (Moscow Times) – “EBay has signed a deal with Russian online store Dostami.ru that will increase the American Internet auction giant’s deliveries from the U.S. to Russia and the former Soviet republics, Lenta.ru reported Tuesday, citing representatives from both companies.” eBay has identified that Russia is a market in which they want to accelerate growth but Russian ecommerce provides challenges with regards to shipping and payments.
Everything you always wanted to know about Rocket Internet, courtesy of its biggest investor (Tech.eu) – “Rocket Internet calls itself the world’s largest Internet incubator, with companies like Zalando and others growing fast under its wings. But how big is Rocket, really? Investor Kinnevik spills the beans …” Excellent feature on Rocket Internet full of interesting facts about Rocket Internet.
Amazon Lending: Insights from the Trenches (Appeagle) – “You might think that Amazon would make the details of this kind of program very public, but thus far, as with other pilot programs, it hasn’t published the ins and outs of Amazon Lending. We explore the experiences of sellers who’ve used Amazon Lending thus far, and consider the possible benefits and detriments to the program.” Absolutely fascinating article on a part of Amazon that is very closely shielded from the public spotlight.
Google’s New Update Has Stripped eBay Of 80% Of Its Best Search Listings (GOOG, EBAY) (Business Insider) – “Google’s latest update to its search engine ranking algorithm, dubbed “Panda 4.0,” has stripped eBay of up to 80% of its best search results, according to Larry Kim, CEO of search marketing company Wordstream.” This is a manual algorithm change made against eBay due to door pages that are weak on content. Cant be a coincidence that eBay is one of the biggest PLA spenders right?
The Trouble with Flash Sales (Business of Fashion) – “But the investment is curious, not least because several once-hyped flash sales sites have run into serious trouble in recent years, failing to meet investor expectations and calling into question the sustainability of the business model.” A fascinating read about an ecommerce vertical that is causing certain businesses (ideeli, Gilt Groupe) headaches..
Amazon Escalates Its Battle Against Hachette (New York Times) – “Seeking ever-higher payments from publishers to bolster its anemic bottom line, Amazon is holding books and authors hostage on two continents by delaying shipments and raising prices.” Amazon is doing exactly what they have always done with publisher – aggressive negotiating on margins. Hachette seems to be getting a lot more negative attention from Amazon that what has been seen in the past..
South African E-Commerce Giant Takealot Raises $100M From Tiger Global (TechCrunch) – “Takealot, a South African e-commerce site, has raised a whopping $100 million from Tiger Global Management. The company is still relatively young, launching in 2011, post the acquisition of an existing e-commerce business called Take2 by Tiger Global Management and CEO Kim Reid.” A billion Rand was raised by Takealot at the current exchange rate. More good news for the South African ecommerce industry.
The Rise and Fall of an E-Commerce Golden Child, Fab.com (Slate) – “More bad news hit the struggling e-commerce startup Fab Wednesday night: The company sent an email telling many of its employees not to show up to work, likely ahead of the extreme New York City layoffs rumored last week.” Fab.com is going to be a case study for ecommerce entrepreneurs on how not to do things. I feel for the staff who always seem to be getting the brunt of these changes.
Till next week. Onwards.
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Amazon misunderstood, Fab buying and changing, China ecommerce grows – Ecommerce stories of the week
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Fab Continues With Layoffs, Russia is not China or Brazil and the Kindle Arrives In Australia – eCommerce Stories Of The Week