Sent Items #162: Sunday, July 28, 2024

What a couple weeks in the world of e-commerce and fulfillment. It feels like Christmas in July with the volume of news: 3PL IPOs, 3PL acquisitions, UPS struggles, the underground pallet thievery industry, and fraud in the USPS label market.

But before we get into it, a couple quick headlines:

This coming Tuesday, July 30th at 2PM ET, I will be hosting an AMA with my friend Alex Yaseen (CEO and Founder of Parabola) and The SOP Community.

You can register and submit your questions here: https://parabola.io/blog/community-ama-ask-matt-hertz-ecomm-ops-expert-anything

Also wanted to share with this community that I have officially kicked off a friends and family fundraise for Third Person. If you are interested, and an accredited investor, please reply and I will follow up with more info.

Onwards…

It is unfortunate to see the illegal USPS label market is still humming. Freightwaves broke news last week (link) that NullShip is selling counterfeit postal labels. Counterfeit postage is a widespread issue, according to the Postal Service.

As of October, the agency had reduced the scheme by 50% since the start of its interception program, but said it continues to crack down on fraudulent postage. Efforts include shuttering websites and e-commerce accounts associated with the scheme.

Soon after this news, my friend Aaron Rubin tweeted that there are others committing similar fraud. I learned a long time ago there is no free lunch - as soon as it appears you’re getting one, the server comes around and leaves a chit on your table for more than you would have paid…

I love entrepreneurs who build in public. It’s transparent, vulnerable, informative and motivating. Check out this tweet my friend Paul Jauregui, co-founder of BK Beauty, on the shift in his brand’s sales channel mix.

Recall a few issues ago I shared some insights from ShipHero that TikTok’s share of their transactions had grown 6X in 6 months. It was near 0% in August 2023 and back in May represented 3.4%.

Amazon announces record-breaking sales for 2024 Prime Day event (link)

• Prime Day sales reached $14.2 billion in sales, 11% higher than last years $12.7 billion total.

• Prime Day 2024 was the biggest sales day for third-party sellers, whose sales outpaced Amazon’s retail business.

• Buyers spent $7.2 billion on day one of the 2024 online event, up 11.2% from a year prior.

• I set a personal purchasing record on Prime Day, placed 24 orders for 40 items #AMA

Why a Cold-Storage Company Just Delivered the Year’s Hottest IPO (link)

• The world’s biggest cold-storage operator by capacity, Lineage, is so deeply embedded in the U.S. economy that when it listed its stock on the Nasdaq exchange this past week, it was the largest initial public offering in the U.S. so far this year. At $78 a share, the IPO raised $4.4 billion and valued Lineage at more than $18 billion.

• The company operates nearly a third of the temperature-controlled warehouse space in the U.S. and more than 480 temperature-controlled warehouses around the world. The business handles logistics operations such as storing, picking and packing items and offers e-commerce fulfillment, transportation and customs-brokerage services.

• Over the past 16 years, Lineage has grown to become a giant in a sector where many warehouses are still run by family-owned companies. The largest cold-storage operator in the world by space managed, it has made 116 acquisitions since 2008.

• Lineage operates nearly 2.1 billion cubic feet of temperature-controlled space in the U.S. and Canada and about 860 million cubic feet elsewhere.

• Americold, its next-biggest rival, said it runs about 1.3 billion cubic feet in North America and about 204 million cubic feet elsewhere. Americold was founded in 1903.

Logistics Startup Stord Buys Part of Pitney Bowes’ E-Commerce Business (link)

• E-commerce logistics startup Stord is acquiring the e-commerce fulfillment services operations of Pitney Bowes. Exact terms have not yet been shared, but I’ve learned that this had been shopped around for $0.

• It’s the second acquisition so far this year, they bought ProPack in April in a deal worth tens of millions.

• Pitney Bowes had been exploring a sale of its global e-commerce arm after appointing a new CEO in May under activist investor pressure.

• Stord has remained in a position of relative strength, in part because of the $325 million in funding the company has raised from investors.

Brad Jacobs’s QXO Raises $620 Million (link)

• QXO, the construction-materials distribution business launched by roll-up specialist Brad Jacobs, raised $620 million in a new private placement and added investor Jared Kushner, the son-in-law of former president Donald Trump, to its board as an independent director.

• Brad Jacobs is one of the most successful serial entrepreneurs in modern American history. Jacobs has created eight corporations, six of which are publicly traded: QXO (2024); XPO Logistics (2011) and its spin-offs, GXO Logistics (2021) and RXO (2022); United Rentals (1997); and United Waste Systems (now Waste Management 1989)

• His newest company launched in June, QXO, provides technology solutions, primarily to clients in the manufacturing, distribution and service sectors. The Company provides consulting and professional services, including specialized programming, training and technical support, and develops proprietary software. As a value-added reseller of business application software, QXO offers solutions for accounting, financial reporting, enterprise resource planning, warehouse management systems, customer relationship management, business intelligence and other applications.

• QXO plans to become a tech-forward leader in the $800 billion building products distribution industry. The Company is targeting tens of billions of dollars of annual revenue in the next decade through accretive acquisitions and organic growth. If Brad’s track record is any indication, it will.

UPS Shares Dive on Weak Earnings Outlook (link)

• UPS cut prices to reverse a prolonged slump in package volume and lowered its revenue outlook for the year. UPS reported weaker profit and revenue for the second quarter, missing Wall Street estimates. Average revenue per domestic package fell 2.6% from a year earlier, the company’s second straight quarter of price cuts.

• There seems to be a shift toward value product choosing Ground over Air and SurePost over Ground.

  • Air daily avg volume was down 7.8%

  • Ground was up 2.3%

  • SurePost up 25%

  • Notably, SMBs made up 29.7%

• I must hand it to management for being adaptable and creating solutions for different cohorts. I do wonder if the shift to expansion (volume growth) vs margin growth is also a function of UPS' infrastructure expansion - as we all know, volume is critical in asset-based logistics. Are they looking to fill more trucks and buildings as they ramp their soon-to-launch USPS air partnership?

Finally I’ll leave you with this funky story: When This Supply-Chain Essential Goes Missing, It’s Time to Bring in the ‘Pallet Detectives’ (link)

• Wooden pallets turn up inside homes, on roadsides and in bonfires. Tracking them down is a full-time job; just watch out for the dogs.

• Wooden pallets keep global supply chains humming, carrying everything from soda cans to washing machines. Yet millions of these portable platforms go missing every month, either lost, stolen or broken. Finding them is an additional load for the multibillion-dollar industry. While the product costs only around $20 each and is typically made of sawed wooden planks held together with nails, certain suppliers like Brambles - an Australian company, which has a market value of about $14 billion - owns hundreds of millions of pallets. Replacement costs can quickly run to millions of dollars each year.

• A few pallets resurface as makeshift shelving or wall art. Some are repurposed as coffee tables. For thrifty households wanting to introduce a bit of industrial chic to their boudoirs, the humble pallet’s versatility lends itself to a bed base. Still more pile up on the side of the road, creating eyesores and irking neighborhoods. Others are targeted by thieves or used by organized crime gangs to move drugs.

• To help employees in the field, Brambles has screwed around 450,000 GPS trackers onto the blue-painted pallets leased by its CHEP business. The trackers, which cost $60 each, ping every hour or two to provide near real-time location data.

• Sometimes those repurposing pallets make little attempt to hide their endeavors. In recent years, a town in Northern Ireland has used thousands of pallets to build a roughly 200-feet tower each July in an attempt to claim the world record for the tallest bonfire. Dozens of the circular towers’ rings have been composed of pallets painted in the blue and red of rental companies CHEP and PECO.

Have a great week!

- Matt

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