Sent Items #155: Monday, May 13, 2024

One of the nicest and smartest people in e-commerce re-launched his newsletter Around the World in Commerce last night after a 2.5 year hiatus. Hendrik is an international e-commerce wizard, a great writer, a friend and mentor, and always chock full of opinions. In yesterday’s relaunch issue he writes:

“I have been quiet and have not written a newsletter in 2.5 years. Multiple readers, investors, and executives have emailed me and asked for the newsletter to be restarted. Well, here we are. I will write to you weekly as I have not seen the content I want to read from others. No offense, but we need context and opinions to help the sector make sense.”

You can read his post from yesterday (here) and subscribe for free (here). It’s way better than mine! [Disclosure: Third Person is a sponsor. I’ve been a reader of his newsletter since 2015 and he has been an inspiration for my own content.]

A few headlines to kick off the week…

Instacart, Uber Join Forces to Add Uber Eats to Instacart App (link)

• The two companies announce the partnership as they face competition from rival DoorDash. This headline sent my head spinning. 

• DoorDash has the leading share in the U.S. restaurant-delivery market, ahead of Uber Eats. The companies said the deal would bring more customers to Uber Eats and a new revenue source for Instacart, which will receive a fee from Uber for every restaurant order.

• In the coming weeks, Instacart will introduce a restaurants tab to its app that will let customers place Uber Eats orders without leaving the Instacart app. That gives Instacart’s customers more reasons to keep using its platform, pushing up order frequencies and totals. Meanwhile, Uber gets to access Instacart’s suburban customer base, an area that DoorDash has typically commanded. 

• I suppose your enemy's enemy is your best friend?

Fast-Delivery Survivor Gopuff Burned $400 Million Last Year (link)

• Sticking with the theme of delivery, yes, GoPuff burned $400 Million last year, totalling billions since its founding 10 years ago.

• Gopuff is now the last ultra-fast delivery startup left standing in the U.S. following news earlier in the month that Getir was pulling out of the US and European markets (link). Now it once again faces the wrath of DoorDash.

• Gopuff wants to start generating cash by early next year (IPO on the horizon??), likely necessitating more cuts. DoorDash, meanwhile, is generating $1.3 billion in cash a year overall.

• Like most other companies, Gopuff has seen its valuation fall sharply over the past three years. At the company’s peak in mid-2021, it was valued at $15 billion. Fidelity has since marked down its Gopuff stake by 88%, implying a valuation of less than $2 billion

• Gopuff has since pulled back on marketing and closed dozens of warehouses. Its number of customer orders essentially flatlined between 2022 and 2023, the people said. Revenue rose more than 10% over the same period, due in part to a new subscription offering (which I subscribe to).

• Gopuff also offers delivery through the Uber Eats app, which requires giving a cut of sales to Uber but helps Gopuff reach new customers. 

How Online Shopping Is Saving the Bricks-and-Mortar Store (link)

• Shoppers browse in person to see, touch or try on items before ordering them online. They are picking up or returning purchases in stores. And retailers are increasingly relying on their shops as fulfillment hubs, shipping items ordered online from store stockrooms in addition to warehouses.

• Overall, nearly 42% of e-commerce orders last year involved stores, up from about 27% in 2015.

• It is another example of how online-only retail has its limits, and why physical stores are making a comeback. After years of overbuilding that lead to a sharp contraction, retailers are on track to open more stores than they close in 2024 for the third consecutive year.

• Many retailers have found that it is too expensive and difficult to attract and retain customers without physical stores. And using stores as pickup and drop-off points helps lower the labor, packaging and shipping costs involved in online orders. 

• Kohl’s now fulfills more than a third of its online orders in stores, Walmart more than half, and Target nearly all its sales from its network of roughly 2,000 locations.

U.S. Postal Service Recommends New Prices for Parcel Select (link)

• The U.S. Postal Service filed notice with the Postal Regulatory Commission (PRC) for Parcel Select price changes to take effect July 14, 2024 that would raise rates by an average 25% for Parcel Select service. This is a huge headline if true.

• Parcel Select is a shipping solution for high volume shippers to enter packages for regional delivery through the U.S. Postal Service’s network. Many e-commerce orders are shipped via Parcel Select (DHL eCommerce, Pitney Bowes, OSM, Mail Innovations, even many Amazon shipments!)

• My assumption is these carriers - and therefore shippers/clients - will not see a 25% increase in spend. The base or published rates may increase accordingly, but most large volume shippers will see a discount in their Negotiated Service Agreement (“NSA”) that brings the cost increase back down to a more manageable level.

• No price increases for USPS Ground Advantage, Priority Mail, or Priority Mail Express. Assume that’ll come later in the year.

Shopify shares plunge 18% on weak guidance (link)

• Shopify’s stock tanked after they reported Q1 results where they beat on revenue and profit but provided downbeat guidance for the second quarter - or growth - really the only metric Wall Street cares about! Shopify said it sees second-quarter revenue growth slowing to a “high-teens percentage rate” year over year. The flip side is revenue guidance was perhaps slightly shy of expectations though primarily due to more Plus merchants opting to contract for discounted 3-year deals - a net positive, I believe. Shopify also raised Shop Plus pricing by 25%

• However, Shopify‘s Q1 results highlight how strong merchant migrations, particularly within Shopify Plus, is enabling the company to outpace overall e-commerce trends.

• Its GMV (i.e. combined merchant sales) grew 23% due to strong same-store sales growth, Shopify Plus (enterprise) traction and momentum with both point of sale and international. Momentum is expected to continue for the foreseeable future.

• Interestingly, cross border contributed to 14% of the total GMV and saw particularly high growth in EMEA at 38%. EMEA merchants represent <30% of Shopify's merchant base so it remains a huge opportunity.

Have a great week!

- Matt

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