Hendrik's ecommerce Newsletter

This is a weekly newsletter of what I've seen in ecommerce and thought was interesting and has market impact.

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Marketplace news

Why China’s new e-commerce law will be bad for grey market sellers. i believe that China is taking the lead in managing marketplaces to ensure that customers are not able to receive products that are counterfeit. The fact that platforms and sellers are now being held responsible by legislation to ensure that customers can purchase on marketplaces and potentially do not have to worry about counterfeits is a huge move. I have privately said that I believe that the Chinese legislation on marketplaces is potentially the blueprint for other regions to provide legislation on marketplaces which are increasingly a nightmare for customers. Tech In Asia

MercadoLibre leads
Brazilian e-commerce market (I would argue that MercadoLibre dominates in Latin America and have a moat via payments and logistics). Argentine e-commerce giant MercadoLibre remains the best performer in the sector in Brazil, according to new research. According to the survey conducted by website Mobile Time in partnership with polling firm Opinion Box, the company - which operates locally as MercadoLivre - is the first choice by Brazilians when it comes to buying online. ZDNet

China’s Alibaba and in
grey area with online drug sales. I suspect that the initial Financial Times article will lead to action as this loophole is very dangerous and undoes all the hard work these marketplaces do to sell safe products legally. Sellers on two of China’s largest online retail sites are reportedly taking advantage of a legal loophole to sell thousands of prescription drugs through their sites. Alibaba and have been found to list swathes of prescription drugs, including antidepressant Zoloft and anti-inflammatory medication Celebrex, on their platforms. Many of these drugs can be bought without submitting a prescription, as sellers take advantage of a payment loophole.  Financial Times (unlocked), Retail Gazette

How Walmart is building a defence against Amazon with a network of exclusive brands. Can exclusivity become a moat in competition with a low priced competitor? I
dont believe so.  Walmart has a web of acquired, incubated and private-label brands, the retailer is building out a multi-pronged merchandising approach. The idea: An umbrella of exclusive brands will give customers a reason to shop with Walmart, instead of other competitors, including, and perhaps most importantly, Amazon. Digiday

eBay Demands Amazon Reveal Sales Haul From Alleged Poaching. I would not be surprised if this leads to a legal battle between eBay and Amazon. eBay has demanded that Amazon reveal the sales gained in an alleged global multiyear operation to infiltrate eBay and lure merchants away to the e-commerce giant’s marketplace, according to documents reviewed by Bloomberg. Bloomberg, Seattle Times, The Verge

Alibaba’s Jack Ma is giving up ownership of Chinese entities – here’s what that means. Alibaba reported in a July filing that executive chairman Jack Ma as well as Simon Xie, a former Alibaba employee and one of the 18 co-founders, would be giving up ownership in four of the VIEs they own, transferring ownership to a Chinese investment holding company. South China Morning Post

Analysts value LeBonCoin at €2.5 billion at IPO. Once Schibsted concludes the IPO for its international classifieds division Marketplaces International (MPI), — which constitutes the largest part of MPI — could be valued between €2.5 billion ($2.9 billion U.S.) and €3 billion ($3.5 billion U.S.). This is based on analyst estimations. Aimgroup, Journal Du Net (French)

'Amazon has all the power': How Amazon controls legions of delivery drivers without paying their wages and benefits. The company instead employs these drivers indirectly through contracts with smaller third-party companies, called delivery service partners, or DSPs. Amazon's DSP network is like its version of UPS and FedEx, carriers Amazon also uses to deliver its packages. Business Insider, Webretailer

Amazon quietly launched a new 'accelerator' program to create more exclusive brands for its website. As Amazon revs up its private label business with new household goods and clothing brands, the company is quietly rolling out another way to get more exclusive products onto the site. Amazon is inviting outside companies to "join the Amazon family of brands," according to a web page for "Our Brands." At the bottom of the page is a link where manufacturers can sign up to make products that become part of Amazon's own collection of private brands. CNBC, Quartz

Indonesia Set to Tighten Noose on Online Sellers Evading Tax. Indonesia plans to require online merchants to own tax identification numbers starting this year, part of efforts to boost revenue and improve compliance in the fast-growing e-commerce industry. Tokopedia and will be among e-commerce companies which will ask sellers for identification numbers, known as NPWP, as a condition to operate on their platforms, according to Robert Pakpahan, the Finance Ministry’s director general of taxes. These platforms will submit a monthly report of transactions to the government, he said.  Bloomberg

No End to Marketplace Opportunities (a good read on the huge opportunities that are still available with marketplaces - I am long marketplaces.).  Sometimes people challenge me on the focus with something to the effect of “all the good marketplaces have already been built.” The theory is that the great big markets have been built and have strong network effects so any new startups will be stuck going after tiny markets or hopelessly competing for big ones. They are wrong. Josh Breinlinger

In Early Markets, Services Can Be a Competitive Advantage. Companies that provide services and education often win the early market. They develop customer relationships, reinforce their expertise with a strong brand, define the purchasing criteria in their favour and ultimately grow faster. Tomas Tunguz

Amazon Fraud Case Underscores Problem with New eBay Policy. An Amazon buyer has been indicted after Feds accused him of committing fraud using 501 allegedly false Amazon accounts to place approximately 1227 orders. The government alleges he obtained over $200,000 in merchandise, replacements, and refunds by falsely claiming the merchandise had not been delivered or was damaged. EcommerceBytes, U.S. Department of Justice

Amazon Is Working on Brazil Logistics Pilot Project. Amazon is working on a pilot logistics project in Brazil with Goldman Sachs-backed CargoX, a person familiar said. The e-commerce giant is partnering with the trucking start-up to use bulletproof trucks for the delivery of high-value goods, including electronics. Because the heavy-duty trucks are slower and tend to reduce the pace of deliveries, predictive data and other technology will be used to speed things up, the person said, asking not to be named because the talks are private. Bloomberg

Flipkart-Walmart Deal:  National Company Law Appellate Tribunal (NCLAT) To HeaConfederation of All India Traders (CAIT’s) Petition On November 12. The “cancerous deal for Indian retail industry” — Walmart’s acquisition of Flipkart— is continuing to cause ripples in the industry as the National Company Law Appellate Tribunal (NCLAT) hears the petition filed by Confederation of All India Traders (CAIT) against the said acquisition. Inc42

5 Things You Need To Understand About Amazon To Protect Your Brand.  Far too many brands appear to think that when Amazon Retail reaches out to buy their product, a partnership is being formed. However, according to James Thomson, Partner at Buy Box Experts, in fact, Amazon’s incentives rarely align with the incentives of the brand. The following are his five tips for successfully selling on Amazon in what can actually be a hostile environment.  Forbes

Amazon Stops Giving a Free Month of Prime if Your Order Arrives Late -
How To Geek

Amazon Loads Amazon Pay With $79.8m, Plans To Offer Huge Cashbacks To Customers in India - Inc42

Flipkart expects small appliances to drive growth during Big Billion Days - The Economic Times Retail

Lazada and Alibaba Introduces LazStar Academy with a Year-End Great Sale - Netral News

Amazon Fires Employee for Disclosing Customer Email Addresses - Bloomberg, CNET

Jeff Bezos Isn’t as Generous as You Think - Bloomberg Opinion

Blockchain Marketplaces that could decentralize - The Block


Weekly Marketplace Insights

Amazon working on a pilot logistics project in Brazil with CargoX
According to Bloomberg, Amazon has partnered with an on-demand trucking service to provide an opportunity for safe deliveries of high-valu
e items in Brazil. CargoX has 7000 drivers that can move cargo between locations.
1. Let me be clear Amazon has a lot to do in Brazil to grow its market share. In Brazil Amazon's business currently focuses on Books and eBooks. In general terms, these categories are
 normally the first lever that Amazon uses to enter a market.
2. Amazon has used different strategies to scale businesses in Singapore, Australia and Brazil. Essentially, it can use an on-demand mobile business, Prime or a logistics pilot to grow a market speedily.

3. I still believe that Amazon has not completely discovered and operationally become aware of dealing with emerging markets. Yes, they are in India and China but Brazil is very different in comparison to their traditional developed markets. Brazil on a very high-level shares similarities with China as Amazon has to battle a dominant local marketplace. As I said earlier, I believe that MercadoLibre has a moat in most Latin American markets through their payments and logistics solutions.
4. CargoX is going to require considerable patience as the trucks will be initially a slow process - an armoured truck or a large truck is still needing to use public roads that are highly used. Surely using scooters in large Brazilian cities should make more sense?
5. Amazon's international business is still heavily loss-making and as their US business has plateaued - the importance of non-US markets become more critical
6. Could this partnership be the starting point of Amazon acquiring CargoX to scale its Brazilian business?

Is Amazon on its way to becoming the dominant fashion marketplace in the US?
If I look globally - the big markets have vertical or horizontal marketplaces that are leading in the fashion space. Zalando, Alibaba, Flipkart and Souq are fashion leaders in their markets. I mention this as I am thinking my way through the rumoured Spring acquisition by Shoprunner. 
1. Why is a dedicated fashion marketplace in the US still not clearly visible? Is it a case that a secondary market such as Poshmark, The RealReal etc are the leaders in a market that is not ready to spend large amounts to purchase fashion online?
2. When I look at Zalando, Alibaba and they have been able to recreate the fashion experience online and thus they have partnerships with fashion and luxury businesses?
3. Am I not adequately valuing the impact that Yoox-Net-A-Porter, Farfetch and Matchesfashion have had on the US market? 
4. Is it a case of fashion and luxury brands being in so much trouble financially in terms of their retail businesses that they have not invested adequately into digital?
5. I don't see Amazon as providing luxury brands with the same premium experience that I see on Alibaba. Amazon is a transactional platform and Alibaba being both a discovery and transactional platform due to it being a mobile-first market that provides brands access to a huge market that is being accelerated by Alibaba's New Retail strategy and platforms like the Tmall Luxury Pavilion.
6. I thought that Spring had the potential to be North-America's version of Zalando as it has an experienced team, great selection yet I keep reading that they struggle to grow their customer base. 
7. Is Amazon going to use it private-labels and some partners to win the fashion market in the US?
(this is the question I can't get my head around)

Vertical marketplaces that focus on a specific category I believe have an opportunity to withstand a horizontal marketplace due to experience and category knowledge. As I said earlier I wish I understood the reasons for the potential acquisition of Spring by Shoprunner.


B2C (Business to customer) news

How three Americans founded an award-winning start-up in China. The company, Baopals, is an e-commerce platform that allows foreigners in China to buy products in English from Chinese e-commerce sites Taobao and Tmall. The site works by pulling data from the two Alibaba-backed platforms and translating the info to English. Baopals also offers a customer service centre to help facilitate transactions and logistics. It adds a service fee starting at 5 percent for each product.

Hershey is dealing with an impulse buy issue. Expanding digital initiatives is an important strategy for companies like Hershey, especially as the retail landscape continues to shift. In addition to the growth of e-commerce, other factors are influencing the way consumers shop. Business Insider, NetBigWhat

To Reach Chinese Consumers, Brands Market in Australia. Unilever wants its Australian instant-soup brand to be a top-seller in the lucrative Chinese market. But instead of launching an advertising campaign in Beijing, it is offering free samples to Chinese residents here, hoping they’ll buy and ship the product to family, friends and other consumers back home. The Wall Street Journal

German retailers leave Russia. Westwing, a German online store of furniture and designer home accessories, is leaving Russia after six years of operations in the market. The company is also selling its affiliates in Kazakhstan and Brazil. EWDN, DW (Russian)

Future of world trade is small businesses, e-commerce: Jack Ma. "In the next 30 years, 80
percent of small business will benefit from globalization. In 2030 more than 85 percent of business will be e-commerce. Ninety-nine percent of trade will be online and less than one percent of trade will be offline," Ma said. Chinadaily

Final tweaks in North American trade deal keep
lid on e-commerce. Last-minute changes to a new North American trade deal sank U.S. hopes of making Canada and Mexico allow higher-value shipments to the countries by online retailers, such as, a top Mexican official said on Friday. Reuters

Delivery Services Take Subscription Cues From Amazon Prime. Customers may love the convenience and perceived value of a subscription plan, but it’s also good for restaurants on the platforms. According to the company, Postmates Unlimited members spend over twice as much annually compared to non-members. Skift Table

Ahead of holidays, FedEx leans on special bonuses to keep pilots from retiring. With the peak holiday shipping season fast-approaching, global package delivery giant FedEx Corp is paying retirement-age pilots bonuses of $40,000 - and potentially as much as $110,000 - to keep them flying into next year, according to two sources with knowledge of the matter and a contract seen by Reuters. Reuters

Lightinthebox reprimanded by ASA for ‘misleading’ prices. A complainant argued “£19.74” was “misleading and could be substantiated” because they were required to pay additional duty tax fees and that “Process time 2-5 business days Shipping Time: Expedited Express 2-5 business days” was “misleading and could be substantiated” because they understood that the product was shipped from China. RetailSector

Subscription marketplace Cratejoy downsizes. Subscription marketplace Cratejoy has restructured, reducing its 43-person workforce to 25 full-time employees, a company spokesperson confirmed to Retail Dive. Retail Dive

Blue Apron is now selling its meal kits on Grubhub and it 'seems odd. Blue Apron is now available on Grubhub — if you live in New York City. The meal kit company, which has struggled to hold onto customers amid growing competition and distribution issues, said Tuesday that it is testing selling its kits through the on-demand food service in select areas of the five boroughs. CNBC

Promofarma experiments with one-hour delivery.  Spanish pharmacy network Promofarma wants to deliver products to customers a lot faster than it currently does and is thus testing one-hour delivery. The new service will initially start only in Spain, but expanding to other countries in Europe is something they are thinking about. EcommerceNews Europe

‘Overboxing’ Becomes Enemy No. 1 in Amazon-Led Web-Shopping Boom - Bloomberg BNA

Amazon captures 30% of online grocery spending - Retail Dive

Walmart demands smart home vendors support Google Home - Stacey on IoT

BuzzFeed is opening a quirky toy store in NYC this fall - New York Post

Why the Future of Online Shopping Is Multi-Device, Not Mobile - American Marketing Association

Amazon gets in the pre-holiday spirit with private label grocery promotions - Food Dive

Bezos-backed Convoy seeks office elsewhere to avoid 'Seattle office Tetris'  - Puget Sound Business Journal

How logistics firms can solve a multibillion-dollar issue for retailers - Business Insider

D2C (Direct To Customer) news

How Casper drove Mattress Firm into bankruptcy.Casper believed that shoppers had grown weary of the traditional mattress-buying experience: going into a store, testing out a handful of mattresses for a few minutes, and rushing to a decision about an expensive item designed to last for years. Customers were also turned off by complicated and expensive delivery options.  CNN

Inside upscale furniture brand Mackenzie-Childs’ DTC strategy. Furniture and home decor brand Mackenzie-Childs is focused on building a direct-to-consumer model to grow its customer base. While the company isn’t cutting off wholesale partnerships, it’s realizing, like many consumer retailers, that digitally acquired customer data through a DTC model is an engine for growth. Digiday

Why ads for bedding startups are all over the subway. And how the brands paying for them are different from legacy companies. The strongest tailwind for new bedding brands is a cultural shift in how people think about bedding and home decor. Since the advent of Pinterest, consumers are thinking about their bedrooms in a more fashionable way. While in the past people would stay with one decorative theme all year long, people have started changing their bedroom decor along with the seasons. Curbed

Kylie Cosmetics and the industry's quest to decipher its growth (a good read - I think that sales have plateaued and the partnership with Ulta is evidence of the need for additional distribution to grow sales.).The holiday season will be telling, especially as the brand opens up in Ulta, and tries out what a dual channel business can offer—both the positives and the negatives. At the same time, Fenty’s department store-first distribution strategy turns one, as Rihanna tours the world promoting the brand’s first birthday. Kylie Cosmetics’ strategy is growing closer to Fenty’s by the day. Loose Threads

Walgreens takes a stake in Birchbox and will begin selling its products online. When shoppers think of high-end cosmetics, the local drugstore probably doesn’t come to mind. Walgreens Boots Alliance Inc. aims to change that as it teams up with beauty subscription service Birchbox Inc. Digital Commerce 360, Fast Company, Retail Dive

Why You’re Buying Products From Companies You’ve Never Heard Of - The Wall Street Journal

PHLUR has launched on Amazon - PHLUR

Where Direct-to-Consumer Brands Are Winning Consumer Confidence - eMarketer

Brandless bringing pop-up to NYC - Retail Dive

Madewell, Le Labo, Drought, Good Neighbor coming to Shinola Hotel - Crain's Detroit Business

Fashion e-commerce news

Michael Rubin’s ShopRunner plans to acquire the e-commerce startup Spring. Recode broke the news that Shoprunner is planning to acquire Spring. For ShopRunner, Spring could give it a large pool of brands to try to lure into its two-day delivery network. If ShopRunner has real aspirations of becoming an alternative to Amazon Prime for the fashion industry, it needs to be available in more places where customers shop. Spring will potentially get access to a larger customer set but this is a potential acquisition that contains parties that for me makes little sense. As a fan of Spring, this feels like an admission that is unable to build the largest fashion business akin to Zalando in the US and validates for me that Amazon is growing fast in fashion. Recode.

Worldnet Is FedEx for the Fashion Crowd (A fascinating read). The latest collection from Gucci has to get from the runway in Milan to the showroom in New York. The Valentino gown for the A-list actress better
be in Los Angeles in time for the big awards show. Any logistical snafu creates that oxymoronic but highly volatile condition known as a “fashion emergency.” To ensure safe and smooth transit of luxury goods, houses, stylists, publicists and editors have long relied on one strategy: call Worldnet. The New York Times

The Big Surprises in Tencent/BCG’s Report on Chinese Luxury Shopping (Good Insights). Boston Consulting Group and Tencent
predicts China’s personal luxury goods market (including overseas purchases) will grow by 6 percent annually, from now through 2024, to become a $187 billion market. Chinese luxury consumers will account for 40 percent of the global buyers (in numbers) by 2024, driving 70 percent (in dollars) of the growth. Jing Daily

Zalando expands its beauty offer to men and two new countries. Germany-based Zalando is expanding its beauty business to Austria and Poland and adding men’s grooming products, the online specialist fashion retailer said on Thursday. Reuters

Nike Partners Up for Online Sales While Protecting Its Brand in the US. Nike management’s recent discussion of the Jet and Amazon partnerships, meanwhile, highlight the way the company is trying to craft deals that yield some of the same branding and data benefits of direct-to-consumer selling. Barrons

Calvin Klein to launch interactive NYC Market with Amazon Fashion - TheCurrent Daily

Chinese fashion etailers ready for festive sales in India - The Economic Times

How Retailers Like Mr Porter And Nordstrom Are Curating Shopping For Male Consumers -

Why Fashion Stores Shouldn't Join Amazon's Data Behemoth - Forbes

Mobile commerce

Cost Per Like Is the New Cost Per Wear. The Impact of Instagram is underappreciated by e-commerce executives. We used to talk about cost per wear when justifying purchases. $200 for a pair of pants might seem like a lot. But if you wear them to work one day a week for a year, that's $4 each wear—a bargain compared to spending the same amount on, say, a cocktail dress you'll wear only four times ($50 per wear).  Elle

eBay rolls out Apple Pay on eBay Managed Payments (Apple Pay is a huge opportunity for me for Apple. Apple needs to take its pride and drop transaction costs and adoption will skyrocket from customers.). eBay has confirmed that for the first time ever, buyers can use Apple Pay on eBay to pay for purchases. eBay has also revealed that they are allowing a few sellers to opt back out of eBay Managed Payments after saying that no opt-out was possible.

Business Insider compared Whole Foods' grocery delivery from Amazon Prime Now and Instacart, and it was clear which service does it better. There is one big downside to Instacart, however. If you're ordering on a frequent basis, the service and delivery fees do add up if you aren't an Express member, and it's hard to justify a $149 annual fee when Amazon Prime is not only cheaper but grants you access to more perks. Business Insider

Guzzle launches
B2B app for retail SMEs in South Africa - BizCommunity

Apple adds student ID cards into Apple Wallet to access buildings, buy food and more - TechCrunch

Disney invests in HQ Trivia’s parent company amid direct-to-consumer push - Digiday

Webrooming: How South Africa really shops with smartphones - Gadget

More consumers are using their smartphones to shop this holiday season - Business of Apps, Retail Dive

Digital goods can now be purchased using Google Assistant - Business Of Apps

How Progressive Web Apps are Affecting Mobile Commerce in 2018 and the Future - WebProNews

The controversy around Kenya’s proposed tax on mobile money services - VenturesAfrica

Stats and other interesting news

Debunking China Myths: Is China continuing a consumption upgrade or experiencing a consumption downgrade? - CGTN (video)

Kroger and Walgreens team up to test a joint omnichannel concept - Digital Commerce 360

South Korea's online shopping jumps on summertime food delivery - Xinhuanet

The Next-Gen Drive-Thru Is About AI, Not Mobile Ordering - The Spoon

Sedano’s to Introduce ‘Robotic Supermarket’ - Progressive Grocer

Takeoff: One Of The Most Innovative Grocery Technology Companies You've Never Heard Of - Forbes

Total Digital Maturation in Online Grocery Shopping Is Only Five to Seven Years Away - FMI

Mattress Firm never understood how much Americans hate mattress shopping - Quartz

Banksy Self-destructs after Selling for $1.3 Million at Sotheby’s - Artsy

The untold story of Stripe, the secretive $20bn startup driving Apple, Amazon and Facebook - Wired UK
This is issue 190, sent 7 October 2018.

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