Sent Items #156: Tuesday, May 21, 2024

Happy Tuesday!

I’m excited to speak on a panel this coming Thursday, May 23rd called “If you think it, you can build it” at 12PM ET/9AM PT. 

I’ll be joining six other ops leaders to talk about times when we were faced with challenges that we solved with creative solutions. I’ll be talking about my experience scaling fulfillment operations at companies like Rent the Runway, Birchbox, Hexclad and BRUNT Workwear.

Register here: https://parabola.io/blog/webinar-if-you-think-it-you-can-build-it

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In last week’s Sent Items (link) I wrote about Shopify’s earnings. In my daily perusing of Twitter I came across my friend Taylor Holiday’s deep dive into Shopify (link).

His view is that even inside of some of the largest companies in DTC, COGS and inventory is tracked in a complex web of spreadsheets, PDF invoices and even text messages. Systems to manage availability, purchasing and costs aren't connected to revenue reporting or media planning in any clear fashion. 

Pricing is often controlled by a different group of people than control costs and is changed without any updates to the underlying marginal expectations and undiscovered until reconciliation weeks after month end. Every silo of the organization has a different "home base" where they interact with data. 

Shopify's future is much less about the storefront and more about the backend enablement. Front end purchasing is going to get disintermediated across tons of different locations (Meta shops, tik tok shops, fermat style shops, retail, marketplace). Websites are an archaic idea. The most valuable thing a brand will need is a centralized business management system for handling inventory, finance, reporting and planning across a more complex web of distribution. 

The first wave was all the website plugin stuff... cart upsell, email capture, etc. The now wave is operations. The key is to bring it together within the home base of the other data in the organization.We are moving to a world that goes in reverse order of the previous generation...Until the tools are automated and connected, brands will struggle to create the clarity they need to make good decisions.

Very well said, Taylor, and brings a fresh outlook on a company I have once again turned bullish on (since they sold their 3PL business!)

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TikTok’s share of transactions at ShipHero has grown 6X in 6 months. It was near 0% in August 2023 and now represents 3.4%. 

While they don’t see Shein and Temu volume, they are ignoring Amazon FBA and 1P orders, they believe TikTok represents about 1.5-2% of U.S. e-commerce GMV. This is nothing short of remarkable.

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The other day I was pulled into this LinkedIn post (link) about Amazon and its fulfillment ambitions.

My response was that I don't wholeheartedly agree. This is not a winner take all market. 

Amazon is ~50% of U.S. e-commerce GMV yet there are 10,000+ 3PLs, many of whom support the fulfillment (and/or prep) of Amazon orders. We promote many of them on Third Person.

I don't think Amazon wants to own the fulfillment for every brand in the United States. They want to discover ways for others (i.e. 3PLs!!) to do the work for them, while adhering to their standards (e.g. Seller Fulfilled Prime).

As of Q1 2024, according to MWPVL, Amazon has 1,363 active facilities in the USA. ALMOST HALF A BILLION SQUARE FEET OF SPACE!!!

I don’t suspect that incremental units in their warehouses, at this scale, makes any one warehouse that much more efficient. Further, I don’t suspect they desire, in and of itself, to build warehouse 1,364, 1,365….2000.

There’s the other piece that a portion of sellers continue to have a fundamental mistrust of Amazon, and throwing more eggs in the Amazon basket is concerning. 

Fundamentally, we’ve seen that brands care about account management and connection with their fulfillment partner. Amazon, while terrific in many ways, doesn’t have that same “TLC” that collegial, entrepreneurial 3PLs can offer.

I do, however, believe that Amazon Shipping is a more obvious focus as incremental volume in their parcel network WILL make them more efficient, and unlock better pricing for sellers and consumers. 

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Global shipping rates starting to pick back up again - Shipageddon 2.0 is coming!

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Finally, while I’m not much of a cat person, I do appreciate happy resolutions. Did you hear about the stowaway cat that got from Utah to California in an Amazon Return package (link)?

Have a great week!

- Matt

Share this newsletter with friends and colleagues (link). Hit reply with any feedback and add me on LinkedIn and Twitter.

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