Sent Items #177: Sunday, February 2, 2025

I’m back from the Fancy Food Show. Lots of fancy food. I ate my weight in cubes of cheese, sushi and wagyu and 17 types of popcorn. About two dozen types of energy drinks and varietals of canned water to wash it all down.

I’ll be back in Vegas next week (February 10-12) attending Manifest. I’ve been to Manifest several times, they used to ask me to speak, but they’ve smartened and now ask for $$ in exchange which I politely decline. I do enjoy the show, it’s probably my favorite and most valuable because of those who also attend. As one friend put it, it’s sort of like a chaotic class reunion. My list of friends and companies I want to see is no less than 100. I won’t be there long enough to see everyone but I’ll make it work, somehow. I’m also triple booked for dinner both nights, so I hope to continue eating plenty of wagyu. Open to a 4th dinner if the menu looks good too.

Many of you reading this will be at Manifest - let’s get together!

Here’s what hit my radar over the last week:

• THE TARIFFS ARE HERE!! Yesterday evening Trump dropped a bombshell on us (link)! He issues three executive orders: (1) 25% tariffs on goods from Mexico; (2) 25% tariffs on goods from Canada ("only" 10% if energy); (3) additional 10% tariff on China. Also, the U.S. will suspend the “de minimis” loophole for Canada, which allows shipments valued under $800 to enter the country duty-free. Oh yeah, an these tariffs on imports from Canada and China will take effect Feb. 4. Wowzers.

• Fun seeing two of my favorite companies - Two Boxes and GoBolt - mentioned together in an article (link) titled, “The buy, wear, return days for shoppers could be over now that retailers and tech are catching on”.

• USPS continues to make noise (link). USPS Postmaster General DeJoy says consolidator changes will boost competitiveness, previous approach to shipping partners was “foolish” and limited utilization of its network.

• UPS is cutting their business by Amazon by 50% by 2026. (link). Imagine firing your biggest customer, and one that, for UPS represents ~12% of revenue. UPS has got some stones!

Let’s lead with the most important topic in e-comm and supply chain: TARIFFS.

Can we just be straight for a moment….. THESE TARIFFS WILL ADVERSELY IMPACT U.S. CONSUMERS. THESE TARIFFS WILL ALSO PUT MANY E-COMMERCE BRANDS OUT OF BUSINESS. PERIOD.

Okay, got that off my chest.

Here’s the source of what was just announced (link)

Trump announced three executive orders: One executive order places 25% tariffs on goods from Mexico, while another installs 25% tariffs on goods from Canada ("only" 10% tariff on Canadian energy). A third executive order levies an additional 10% tariff on imports from China.

The U.S. also will suspend the “de minimis” loophole for Canada, which allows shipments valued under $800 to enter the country duty-free, because of concerns that those packages were not being properly inspected under the exemption.

The tariffs on imports from Canada and China will take effect Feb. 4 (this Tuesday!) The White House has yet to confirm the timeline for duties on Mexico.

What's worse is those currently fulfilling out of Canada into the U.S. who have been taking advantage of 321, will now pay a % of the value of goods, not the cost of goods, which is obviously much more punitive. This will be catastrophic for some brands. There is no other option other than (a) moving fulfillment to the U.S. asap; (b) raise your prices to offset the margin erosion of these tariffs.

I thought this sentence was interesting: “President Trump promised in November to “sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders. This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”

——> With an impending election in Canada, and a Conservative candidate likely to win (link) - a friend of Trump’s, naturally - I suspect these tariffs on Canada, at least, will be short lived. But 🤷

• Fun seeing two of my favorite companies - Two Boxes and GoBolt - mentioned together in an article (link) titled, “The buy, wear, return days for shoppers could be over now that retailers and tech are catching on”. Great article, great companies - I’d be happy making intros to either one. [disclosure: I’m a Two Boxes advisor]

• One big problem online retailers are actively fighting is "wardrobing" (or "wardrobbing"). The survey in this article saw a 40% spike from 2023 of consumers admitting to wardrobing, a practice of buying items to wear once or twice before seeking a refund. This survey found that 69% of shoppers surveyed now admit to wardrobing - a nearly 40% spike from 2023.

• Over the past two years, innovative companies like Two Boxes have developed returns processing technology and data insights that helps brands recover more value from returns, while fighting the rise in fraud. Those companies are now using data to take note of these details in the returns warehouse and turn them into actionable insights, such as blocking those bad actors (imagine having an online/e-comm credit score!)

• The estimate is that returns cost businesses $890 Billion last year, with returns now making up 17% of all merchandise sales. Retailers and reverse-logistics companies are cracking down on the trend with new technology and subdividing shoppers to target excessive returns. In 2022, 9.5 billion pounds of returns in the U.S. ended up in landfills, in addition to transportation, shipping and packaging impacts.

• As my friend Mark Ang, CEO of GoBolt aptly stated, “As the returns landscape continue to evolve, leveraging the right tools and tech-enabled logistics partners will be the key to optimizing reverse logistics, and reducing waste—driving both cost-savings and sustainability.”

• Happy to make intros to either company [disclosure: I’m a Two Boxes advisor]

• USPS continues to make noise (link). USPS Postmaster General DeJoy says consolidator changes will boost competitiveness, previous approach to shipping partners was “foolish” and limited utilization of its network.

• Consolidators like DHL eCommerce and OSM Worldwide use the Postal Service for final-mile delivery of its customers’ packages. But two changes the Postal Service rolled out last year incentivized these companies to overhaul their longstanding business models in varying ways.

• For one, the Postal Service eliminated ounce-based rates for packages shipped via Parcel Select, spurring partners that used it to pursue heavier shipments. They also ended contracted rate discounts for consolidator volume going to its delivery units, or facilities closest to the end recipient. This has led more packages to be dropped off further upstream in the Postal Service’s network. Previous consolidator arrangements didn’t align with the agency’s aim to streamline its middle-mile operations and maximize the amount of volume its ground transportation network handles. Instead, consolidators were often handing packages off one step before delivery.

• The Postal Service’s strategic shift under DeJoy has sparked major changes throughout the parcel delivery industry over the past year. Consolidators are looking to deliver heavier packages due to ounce-based pricing changes. Alternative delivery providers are moving to compete directly with the Postal Service on lightweight shipping services. And UPS is now delivering all of its SurePost packages in-house rather than splitting up the work with the Postal Service.

• But the Postmaster General still views consolidators as competitors in the agency’s efforts to snag a larger share of the parcel delivery market. Key in that plan is to secure more direct contracts with shippers, including through its Ground Advantage service that offers its own ounce-based rates.

• UPS is cutting their business by Amazon by 50% by 2026. (link). UPS announced earnings last week and the market hated it, mostly because of the announcement that Amazon would be reducing its shipping volume with UPS by 50% by the end of 2026.

• I suspect a significant portion of this volume will be serviced by its in-house logistics platform, where Amazon has made extraordinary investments in its fulfillment and shipping networks over the past 5 years. According to reports, since 2020, Amazon has invested over $160Billion in its global fulfillment, logistics and transportation network.

• Back in 2023 Amazon re-oriented its U.S. fulfillment to focus on a regional logistics network. The move has helped them forward locate goods closer to customers. After converting to the regional model, Amazon worked to drive efficiencies to its outbound network in 2024, and are now focused on driving efficiencies to its inbound network.

Finally, later in the month I’m doing a webinar with a few friends hosted by Parabola, titled Navigating geopolitical uncertainty as a supply chain leader. Quite timely given what you read above. You can sign up here (link).

- Matt

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