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Sent Items #112: Thursday, January 14, 2021

Hi All!

Despite being two weeks into the new year this is the first issue of Sent Items of 2021 so I will take the opportunity to wish everyone a Happy New Year! 

The year is off to a fast start. Much happening in global ecommerce and logistics. Over at Second Marathon we are seeing a higher than normal cadence of brands seeking new fulfillment partners to help them scale through exciting growth plans in 2021. I am looking forward to sharing more insights on what I’m seeing in the market in ensuing issues of Sent Items.

Speaking of which, in the last issue I shared a quick survey seeking feedback so that I can best tailor Sent Items to readers interests. Since the last issue had less than average open rates (holiday week will do that!) I wanted to highlight it again so those of you who didn’t get around to completing it can have a chance. I would **greatly** appreciate if you took < 90 seconds to complete this form. No need to respond to all questions, but those that you do I would appreciate if you are sincere. I don’t ask for name and have no way of tracing so all info stays anonymous.  Thanks to those who have already completed!

Before we get into the meat and potatoes, here’s a great YouTube video on How Amazon's Super-Complex Shipping System Works. Worth a watch!

- Matt

The year shopping changed forever - Recode

  • When we look back at 2020 in the business world, we’ll remember it as the year online shopping stopped being the future of retail and became the present.

  • At times, government-mandated store closures in some parts of the country meant that if you needed to purchase something deemed nonessential, the only places to get it were “essential” big-box stores — or online. As a result, Amazon and other retail giants like Target and Walmart reaped the rewards, while retail chains and small boutiques that sold apparel or other “nonessential” merchandise were forced to close their doors and turn customers away. Nearly 10,000 stores in the US closed permanently in 2020.

  • There’s a reason people who previously shunned online shopping for stores are now sticking with it: It’s typically much more convenient than browsing through rows of aisles to track down what you need. But the acceleration in online shopping this year — which otherwise would have taken several years to happen — will have profound consequences on the way millions of Americans work; the way corporate power is concentrated; and the way local communities are reconstructed to account for the decline of retail store chains like department stores and the malls they’ve long anchored.

  • At the end of last year, only around 13 percent of retail purchases — excluding auto and gas sales — were made online, according to Mastercard. By the end of 2020, that figure stands at around 20 percent, or $1 out of every $5. During normal recent years, when e-commerce growth rates averaged between 12 percent and 16 percent, that kind of jump would have taken several years to happen. But US e-commerce sales will have grown more than 30 percent in 2020, and there’s no going back.

Amazon's Shopify Problem - Marketplace Pulse

  • Amazon has always operated as if no other sales channel matters. And as if none will matter. But 2020 was maybe the last year it grew its market share of e-commerce. Shopify came to represent that change.

  • Amazon is not building a clone of Shopify. It shut down its previous failed attempt called Amazon Webstore in 2015, and Shopify was the preferred migration partner. 

  • Amazon is in the business of getting more people to shop on Amazon. Building tools for brands to host independent stores could drive some revenue and maybe even provide benefits to Prime members, but it would not fuel the Amazon flywheel. 

  • Few shoppers that bought on Shopify-powered stores are aware of the Shopify name. The companies that directly interact with shoppers have the power to steer their decisions; Shopify is only an integrator. It might become more in the future, for example, through expanding its Shop app. However, today it is not a direct competitor to Amazon, Walmart, Etsy, or any other retailer. Shopify is a tool that signifies the viability of selling online directly to consumers.

  • In 2015, merchants on Shopify sold $7.6 billion worth of products. Five years later, in 2020, they surpassed $100 billion. A figure still significantly smaller than Amazon’s GMV, but proof that despite some calling Amazon the gatekeeper of commerce, different models of e-commerce can be successful at the same time. The non-Amazon market is growing faster than Amazon too.

Thrasio Grabs Another $500 Million To Fuel Shopping Spree Of Amazon Sellers - Forbes

  • Thrasio has raised another $500 million in debt, further cementing its status as the largest acquirer of Amazon businesses and giving it significant firepower to continue its aggressive deal-making spree.

  • The consumer products company has acquired some 100 businesses since it was started in 2018 and now sells 14,000 items—massage guns, hiking poles and everything in between—on Amazon. With each new acquisition, it works to goose sales and profits by upgrading operations, like making improvements in marketing and supply chain. Last year, Thrasio says it generated over $100 million in profits on $500 million in sales.

  • It plans to use the funds to acquire additional companies, including larger businesses with revenues of up to $200 million. It previously stuck to companies with revenues under $40 million. It will also invest further in its operational capabilities, with an emphasis on growing its sales presence in international markets and on channels outside of Amazon.

  • The company’s rapid success has helped to usher in a gold rush in the Amazon ecosystem, with entrepreneurs and investors rushing to roll up the small and medium-sized businesses that generate about 60% of product sales on Amazon. Over the last 24 months, 10 to 15 companies have raised $100 million or more apiece, totaling at least $1.5 billion, to buy up Amazon third-party sellers. The idea is that the roll-up companies can cut costs, boost sales and ultimately sell the entire portfolio for more than they paid for the parts.

Being an Amazon Seller in 2020; Year in Review - Molson Hart

  • An incredibly honest and detailed dive into a seller on Amazon who did $7.4 million in sales in 2020. The article described the differences in selling there in 2020 versus 2019 and breaks down revenue and cost implications. Great highly visual read.


Amazon, Walmart Tell Consumers to Skip Returns of Unwanted Items - WSJ

  • Amazon, Walmart and other companies are using artificial intelligence to decide whether it makes economic sense to process a return. For inexpensive items or large ones that would incur hefty shipping fees, it is often cheaper to refund the purchase price and let customers keep the products. Target gives customers refunds and encourages them to donate or keep the item in a small number of cases in which the company deems that option is easier than returning the purchase.

  • The number of e-commerce packages that were returned in 2020 jumped 70% from 2019, according to Narvar. More than half of the increase was due to higher e-commerce sales, Narvar estimated, while more than a quarter was the result of shoppers’ not wanting to return web orders to physical stores. 

  • UPS expected a 23% rise in returns the week of Jan. 4 from a year earlier (that’s almost 9 MM returns!) The carrier's single-day record is 1.9 million returns — set Jan. 2, 2020. FedEx said returns volume has set record highs for the past six months. But the percentage of items ordered being returned is a bit lower than normal because a big part of the increase in online shopping during the pandemic has been from purchases of essential goods.

  • As the need for reverse logistics grows tangentially with e-commerce, it serves to remember that ~30% of e-commerce orders are returned versus 8-10% in-store.

Amazon buys 11 aircraft to make deliveries faster - Reuters

  • Amazon bought 11 Boeing 767-300 aircraft, as it looks to further boost its transportation and delivery capabilities. Interestingly, these aircraft were purchased from existing commercial airliners and will join Amazon's air cargo network by 2022. 

  • This acquisition appears to bring Amazon’s total fleet (owned and leased) to over 90.

  • While this headline in and of itself isn’t overly material, my belief is it’s all part of the “big bang” they will announce in the coming months, which is a third party transportation and logistics network. That is, a viable end-to-end carrier similar to UPS, FedEx or the Postal Service. Just look at this living overview of Amazon’s global distribution infrastructure. Wow!

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© 2021 Second Marathon Consulting, LLC
Matthew Hertz is the founder of Second Marathon.

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