Sent Items #149: Tuesday, February 27, 2024

I’m off to San Diego, let me know if you are there too!

Been busy working on a new web platform over the last few months. We are about ready to launch - should have more info to share next week!

Listened to a podcast on my flight featuring Brad Jacobs, one of the most successful entrepreneurs in logistics, and one of the most successful of our generation. You can listen to it here (link). Brad shares his thoughts on leadership, management, technology in logistics, and how to run successful meetings. Brad has founded 5 separate multi-billion dollar publicly traded companies. When he speaks, thou shalt listen!

Now onto some stories…

Shopify Announced Fourth-Quarter and Full-Year 2023 Financial Results (link)

• Shopify is, quite simply, killing it! The stock market valuation is now back over $100 Billion - tripling off it’s post-Covid lows, and only about 50% off it’s Covid highs. I can’t think of any other $100 Billion business that is on the trajectory to $1 Trillion as clearly as Shopify 

• Shopify generated GMV of $75 Billion in the quarter (GMV is essentially sales generated on platform), and operating income of $396 Million. A few other notable stats:

• Shopify saw $9.3 Billion in Black Friday-Cyber Monday sales, with 61 Million consumers purchasing from Shopify-powered brands. 

• Over 17,500 merchants made their first sale during this period, and over 55,000 merchants had their highest-selling day ever on Shopify during the period.

• In 2023, the number of merchants that launched on the platform outside of North America increased 35%.

Don’t Build That E-Commerce Warehouse in My Backyard, More Communities Say (link)

• After years of national employment growth, many elected officials aren’t as enthusiastic as they used to be for the jobs these facilities created. Instead, they are much more attuned to resident complaints over increased traffic, noise, pollution and demands on local infrastructure from the large trucks rumbling through their towns to get to and from these warehouses.

• Retailers have been eager to grow their eCommerce operations and provide more shoppers with next-day or same-day delivery by adding distribution centers and other warehouses.

• But lately demand for new space has subsided as consumers returned to stores. Construction starts have dropped sharply as higher interest rates increased costs and leasing has slowed in some markets, in part because a building boom during the pandemic produced a space glut.

• Growing community opposition is the latest hitch. It has resulted in longer delays and higher costs in places such as New Jersey and the Inland Empire in southern California. 

• Market participants say expansion will continue as long as consumer appetite for shopping online remains strong. eCommerce requires 3x the amount of logistics space than bricks and mortar retail, and online sales are expected to keep growing an average 6.5% annually the next five years.

ShipBob’s TikTok Deal Spurs Growth, but Profits Remain Elusive (link)

• The company, which sells Amazon-like warehouse and shipping services to small online merchants, grew its revenue to roughly $500 million last year, according to sources, helped in part by a deal with TikTok’s fast-growing shopping service. But ShipBob wasn’t profitable in 2023 making it a tough sell for investors, who are pushing startups of all stripes to get themselves into the black. ShipBob has raised almost $300 Million.

• ShipBob stated last year that it operates 50 warehouses and said earlier this month that it will launch new facilities in Canada and Mexico this year.

• Executives have told employees over the past two years that the company is targeting an IPO in 2025. Reuters reported earlier this month that ShipBob executives have been looking to hire banks to work on an IPO, which could value it as high as $4 Billion.

• A $4 billion valuation implies eight times last year’s sales. That would be a feat never seen before. Public comps include GXO (a company founded by Brad Jacobs, see above) which has an enterprise value of $10 Billion and $9.8 Billion in revenue, or roughly 1x. It also generated $302 Million in free cash flow for 2023. 

• While it will not happen, I truly hope that ShipBob goes public next year at 8x revenue. Heck, even 2x revenue would be a tremendous sign of strength in the market. 

Amazon delivered to Prime members at the fastest speeds ever in 2023—and is working to get even faster in 2024 (link)

• A question I grapple with and am torn on is whether speed is the solution or a trend: is fast shipping (< 2 days) the future - a necessity - or a nice to have, or maybe, unnecessary?  Is 3 or 4 or 5 days sufficient if purchasing outside of a commoditized marketplace like Amazon, Walmart, or Chewy? I am hard pressed not to believe that faster is better (afterall, that’s generally what I chose when checking out on Amazon), but with more mindfulness shifting to the environmental and societal impact of speed (see NIMBY/warehouse article above) I’m not so sure how obvious the answer is. Sure speed matters on Amazon but that feels like more a function of expectation setting. “I pay for Prime, I expect it fast”  But increasingly I’m selecting a deferred delivery date in exchange for a nominal digital credit, or consolidating orders into fewer boxes and having fewer delivery drivers show up at my provoking my dog into reactive mode. But when I purchased a new iPhone, I wanted my case and screen delivered today. When I ran out of batteries for my remote, I wanted a replenishment today. 

• Last year, Amazon delivered to Prime members at the fastest speeds ever globally, with more than 7 billion units arriving the same or next day. In the U.S. Amazon invested in their Same-Day Delivery service, adding nine new dedicated sites and serving 18 additional U.S. cities over the course of the year. They are planning on doubling the number of sites in the coming years and currently operate more than 55 dedicated Same-Day sites across the U.S. In the fourth quarter of 2023, they increased the number of items delivered the same day or overnight in the U.S. by more than 65% year over year.

• For Amazon, speed is King. For everyone else, maybe not so much?

- Matt

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