Sent Items #166: Sunday, October 6, 2024

Shanah Tova to those who celebrate!

What a Saturday in sports! My New York Yankees won their first game of the best-of-five series against the Royals, and our hometown Vanderbilt Commodores upset #1 ranked Alabama in football. No doubt Vandy won because I was on campus on Thursday judging the MBA Launching the Venture presentations 😜

Sorry it has been a few weeks since you last heard from me. Been busy here, but I will have exciting developments to share soon about Third Person.

The biggest issue I still have my eyes and ears on is what will happen with Section 321/301 clearance which I’ve discussed ad nauseam this year here in Sent Items. I’m getting many calls from large brands asking what they should do leading up to potential changes. My answers to all of them is that I don’t know what will happen - no one does - and that’s what makes this rather unnerving.

I suspect any new updates will not be shared before November’s election, but then again, no one expected the initial announcement (link) to hit when it did just 3 weeks ago. It’s still unclear who this will impact and how significant it will be. Will the de minimus be simply reduced to a more reasonable level of $100, for all goods entering the United States (from Mexico, Canada, China, and all other countries)? Will only parcels entering from China (i.e. “drop shipped”) be taxed a surcharge or other punitive fees? Will product from China be able to enter MX/CA and avoid duties into the United States, a model popularized and encouraged by many 3PLs.

Who knows! (I wish I did!) What my friend Juozas Kaziukėnas from Marketplace Pulse rightly suggested is that what we will likely get is something either convoluted or ineffective in changing the behavior we seemingly are trying to regulate. Or it will hurt domestic retailers too, which is really what we should be working to avoid.

But let’s address a very positive update to a situation that could have been very very bad. East Coast and Southern port workers (45,000 workers across 36 ports) agreed on a deal with port operators to end a strike that had started 3 days earlier (link). The tentative agreement is for a wage hike of around 62% and are for 6 years.

The latest offer would raise the base hourly rate for ILA port workers to $63 from $39 over six years, the people familiar with the matter said. One of the people said the offer is being made on the condition that dockworkers go back to work and agree to efficiency gains. The offer is less than the union demand for an increase of 77% over the term of the contract but a far larger increase than most major labor contracts, including a contract reached last year covering the separate union representing West Coast longshore workers. Many U.S. dockworkers currently earn more than a $100,000 a year, with baseline hourly wages boosted by work rules and overtime requirements.

The International Longshoremen’s Association and port operators, in a joint statement, said the tentative agreement would extend the prior contract, which expired at the start of this week, through Jan. 15, 2025, while the two sides negotiate on other issues, including automation on the docks. So we’re not completely through all the mess. In the interim, it may be smarter to route containers to west coast ports to avoid any potential hiccups come January ‘25.

Of note, the ILWU (West Coast ports) renegotiated their contract in July ‘22 so theirs will expire 7/30/28., you have that much time to plan ahead.

Buy with Prime and Amazon Multi-Channel Fulfillment Expand with New Capabilities and More Brands (link)

• Buy with Prime orders through merchants’ websites are up more than 45% year-over-year; the service is also driving an average 16% increase in revenue per shopper for merchants offering Buy with Prime

• Amazon MCF gives merchants the option to have Amazon pick, pack, and ship their orders for channels beyond Amazon (e.g. if you sell on Shopify or through other channels).

• Amazon MCF has grown to serve over 200,000 U.S. merchants and seen a 70% year-over-year increase in total orders fulfilled by the service so far this year. I think it’s safe to say that MCF is among the largest and fastest growing 3PLs.

Amazon offers sellers ‘fully managed’ supply chain solution (link)

• I’m keeping my eyes on this one. Amazon will soon offer sellers a “fully managed” option using its existing Supply Chain by Amazon solution that automates logistics, warehousing and distribution decision making. Previously, sellers had to individually choose which services to use and manage all product movement decisions. Now, the company just has to specify product quantity and the desired pickup location. Once that seller information is processed, they pick the product up, move it across borders and customs, deal with the port and warehousing, and then optimize how much product to move, where and when to move it.

• Supply Chain by Amazon was initially launched in September 2023 as part of its end-to-end portfolio of supply chain services, but the addition of “fully managed” capabilities allows the company to further simplify its offerings to sellers.

• The solution will be made available to U.S. sellers for domestic pickup in October, with a full global rollout slated by the end of the year.

TikTok Shop's First Year in the US (link)

• TikTok Shop launched in the U.S. twelve months ago and sold billions worth of goods since. There are no major brands with significant sales on TikTok. All top sellers are brands that figured out a unique strategy for it or went viral early when the platform launched. Since content drives sales on TikTok, it is either the brands themselves creating it or, most often, a sea of influencers incentivized by a share of revenue.

• As Bloomberg has reported, TikTok had plans to grow TikTok Shop in the U.S. to $17.5 billion this year, its first full year. It is trending significantly below that — it will reach roughly a third of it (year-to-date GMV is estimated at $4.5 billion). According to TabCut, the top 20 brands sold roughly $70 million of goods over the past 30 days. Extrapolated to an annualized run rate that’s less than $1 billion. The inaccuracies in estimated sales volume and the long tail of smaller brands cannot account for the other $16 billion.

• According to Marketplace Pulse, to get bigger, TikTok Shop lacks the assortment customers want. Also, Western users are only now getting used to the social commerce paradigm.

Flexport Cuts Fulfillment Staff in Push to Reduce Costs (link)

• Flexport cut about 2% of its U.S. staff this week as the company looks to reduce costs and turn around a money-losing business targeting e-commerce.

• The layoffs of fewer than 40 people in the company’s fulfillment unit are part of a broader reorganization of its operations focused on storing and delivering goods for retail brands, which they’ve coined, “from port to porch”.

• The company is integrating its freight forwarding and fulfillment teams following its purchase of the logistics assets of e-commerce services provider Shopify last year, a deal that included fulfillment provider Deliverr and a network of warehouses.

• The company said it also is considering subleasing some of the warehouse space it acquired as part of the Shopify deal.

• Many of the changes at Flexport have come on the heels of declining freight rates that have hit revenue. The company operates as a middleman buying space on containerships from shipping lines and on aircraft, and makes its profit on the spread between the shipping lines’ list prices and rates it charges customers.

• Flexport in January cut 15% of its staff, months after laying off 20% of the workforce in October 2023.

• I am a huge supporter of Flexport’s flagship freight forwarding business. I’ve worked with many brands who actively use Flexport and love the experience, tech, account management, and service. But it continues to be difficult for me to grasp the potential when software companies buy (and seek to grow) physical operational assets. Particularly in this instance - the once Deliverr turned Shopify Fulfillment turned Flexport is a troubling game of hot potato.

Have a great week!

- Matt

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