Sent Items #160: Sunday, July 7, 2024

I hope y’all enjoyed your 4th of July holiday (at least the 85% of you based in the United States)! Mid-week holidays always seem to lend to more days off than a Friday or Monday holiday, don’t you agree? I think that’s a good thing.

I spent much of the week out in Napa. I used to go regularly when I lived in San Francisco, but hadn’t been in years. This week reminded me how much I enjoy that part of the country, drinking delicious wine and eating great food (we even sat next to Carl Icahn at dinner!) Wine country is a special place.

I spent Friday night back in San Francisco. Despite living there for part of the the 2010’s, my expectations was that it would be ridden with homeless, opioid abusers, trash, and I’d certainly be mugged. There was certainly a fair share of that (no mugging) - but it didn’t feel much different from the pre-COVID years I was living there. It was fine. Don’t trust everything you see or hear from the media. San Francisco won back some points in my books.

Onwards…

Now that the holiday is behind us we enter a traditionally slower time in our industry ahead of Labor Day and the beginning of peak season. But wait, next Monday-Tuesday (July 16-17) is Prime Day. So maybe not.

It appears Tradefull, a leading 3PL and end to end commerce solution, has abruptly shut down. Another one that closed its doors without warning to customers.

I am unsure why they closed down. I do know they went through management changes last year with a change in ownership. Whatever the reason, this was likely something that could have been seen with appropriate questioning and vetting. I won’t begin to speculate that it was a financial decision - that they were under water on pricing or in poor financial position - nor due to poor service or performance.

But what I will urge when vetting partners - particularly those that are as essential as a 3PL is to a brand - is looking for someone who can deliver a great customer experience and who believes in building long term relationships. You can get a feel for that by talking to them, by meeting them in person. It also helps to understand their financial viability. Don’t be shy to inquire!

Amazon Takes On Chinese Rivals Temu and Shein With Plans for New Discount Service (link)

• Amazon plans to launch a service focused on shipping cheap fashion wear, household goods and other products directly from warehouses in China, as it faces growing competition from low-cost e-commerce platforms Temu and Shein.

• In an invite-only meeting with Chinese merchants Wednesday, Amazon unveiled a plan to debut a new channel on its platform to sell unbranded fashion wear and household products from China.

• Amazon said it would ship the products directly from China to consumers in the U.S. within nine to 11 days of order placement, the slides showed. Until now, goods sold by Chinese merchants to Amazon’s U.S. customers typically have been routed through warehouses in the U.S.

Levi Strauss moves away from insourced logistics network (link)

• The brand’s shift to a hybrid model that includes 3PLs intends to cut costs and grow its direct-to-consumer channels.

• Levi Strauss & Co. is moving away from a primarily owned-and-operated distribution logistics network in the U.S. and Europe to one that includes third-party logistics providers, according to a June 27 earnings call.

• The shift to a hybrid distribution and logistics model aims to leverage third-party capital to invest in its direct-to-consumer channels while reducing fulfillment costs per unit

• In 2023 the apparel company noted that operating its distribution centers had been rough due to elevated inventory levels at the time. Since then, Levi’s has made significant progress on working through its stock.

• Last year, Levi’s also opened a more than 575,000-square-foot e-commerce fulfillment center in Kentucky to serve East Coast e-commerce orders. The opening was part of a larger effort to bring more of the retailer’s U.S. e-commerce business in-house while driving growth in its DTC business.

FedEx preps for $500M headwind after US Postal Service split (link)

• FedEx expects a $500 million hole in 2025 from the looming expiration of its U.S. Postal Service air cargo contract. Recall, negotiations to extend FedEx’s contract concluded on March 29 after the two parties were “unable to reach agreement on mutually beneficial terms” for an extension.

• USPS said in a statement the contract with UPS, its new partner, will begin September 30, after the FedEx contract expires, and run a minimum of 5-and-a-half years.

• FedEx is preparing to aggressively reduce Postal Service-related costs following the contract’s expiration to minimize the impact to its bottom line. FedEx has already permanently retired 22 Boeing 757 air cargo freighters in its U.S. network to match capacity with demand needs.

• Switching air cargo carriers is part of a larger USPS initiative to cut costs. The organization plans to cut at least $3 billion in costs in the next two years, including the $1 billion already saved in air transportation costs earlier this year by moving more packages through its ground transportation network.

Saks Owner to Buy Neiman Marcus, With Help From Amazon (link)

• The parent of Saks Fifth Avenue sealed a $2.65 billion deal to buy rival Neiman Marcus, creating a powerhouse in luxury retailing that seeks to hang on to wealthy shoppers.

• The combined company will have about $10 billion in annual sales and more than 150 locations, including Saks Fifth Avenue, Saks OFF 5th, Neiman Marcus and Bergdorf Goodman.

• Amazon is taking a minority stake in the new company, which will be called Saks Global, and plans to provide it with technology and logistical expertise. Salesforce is another minority shareholder.

Top 5 E-Commerce Marketplaces in 2024 (link)

• Amazon is the largest marketplace in the U.S., selling three times more than the rest combined. According to eMarketer and Marketplace Pulse projections, it will achieve $325 billion in sales this year. That’s sales by third-party sellers only and doesn’t include sales by Amazon as a retailer. With the first-party sales included, Amazon is likely the biggest online and offline retailer in the U.S.

• Walmart is a $10 billion marketplace, according to estimates. Walmart will make north of $100 billion in e-commerce sales in the U.S. this year after surpassing that number globally in 2023, but most of that will be its retail sales, often fulfilled from stores. eMarketer reports that Walmart’s third-party sales will reach $10.37 billion this year. Compared to Amazon, where the marketplace represents more than 60% of total GMV, it is at best 10% on Walmart. But, like on Amazon, the marketplace is growing faster than first-party sales on Walmart.

Shein, Temu Are Swamping Airfreight Capacity, Sending Rates Soaring (link)

• The explosive growth of discount e-commerce shipments out of China is transforming the air cargo market, and the busiest part of the year is still months away. The big volumes are coming from online merchants including Temu and Shein. They are eating space on aircraft and fueling double-digit gains in airfreight traffic this year.

• The volumes are also creating competition for capacity, with prices out of South China to the U.S. up 40% from pre-COVID levels. The surge in demand from diversions of ocean shipments because of the Red Sea crisis is adding to the squeeze—and to concerns over capacity to handle peak-season volumes later this fall heading into the holidays. That has freight forwarders and shippers weighing whether to lock in capacity early, a potentially costly decision if consumer demand falls short.

• TikTok aims to grow the size of its TikTok Shop U.S. e-commerce business to as much as $17.5 billion this year, its first full year, as Bloomberg has reported. That’s all from its willingness to aggressively promote shopping content and live streams. However, additional reporting by 36Kr said that TikTok eyes $12-$13 billion for the second half of this year, suggesting that it might be underperforming the $17.5 billion goal. Yet anecdotal reporting from sellers suggests that TikTok Shop has already exceeded Walmart for some.

Have a great week!

- Matt

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