The world is polarized. The gifted Mr.Andreessen, the new meme-lord of Twitter, brought to my timeline the perfect unit of measurement of polarization. It's the number of current things the world is divided on. Unfortunately, the problem with the current thing thing is that there is always one current thing and on some days there are concurrent current things.
Blessed are the ones who support the current things. They crusade-jump from one topic to the next – as they doom-scroll Twitter.
eCommerce has its own current things now. As is the case with current things, the nuances are sometimes missed. Then there are future things that may legitimately become current things in the coming months and years.
Ryan Petersen of Flexport was making a point that ocean freight has to move 30% slower starting Jan 2023, to reduce carbon emissions. Well, he is trying to make it the current thing by sensationalizing the impact that cutting capacity by 30% will create. The world's inventory levels will factor in the slowness and we will move on from that current thing, but if you are in eCommerce, you need to know that your inventory models need more than a little tweak.
Now I get to play Ryan Petersen. There is an issue but I don't know if it will ever become a current thing, but let me put it out there. Asset-backed lending exists for a reason – to mitigate risks. But companies whose core business model is to lend money for specific actions of eCommerce, often don't have hypothecated assets or have the entire business as collateral. The world is turbulent. Lending to the long tail in an environment where product sourcing to customer acquisition to delivery is fraught with uncertainties is an underwriting nightmare. If the lending firms don't own the data flow or at least have multiple triangulation methods for lending risk models (that go beyond Google Analytics and Shopify access), they will have an underperforming portfolio inflicting huge pain. Not just that. There is BNPL which is a glorious poster-child of the 'money printing era'. It's over already, ain't it?
It's a genius framing by Shopify to say that they arm the rebels. But neither their fulfillment network nor their enterprise platforms are the best arms for the rebels. The numbers show. If you haven't read my previous essays on this, you can read them here and here. Amazon could just launch a Shopify-like platform. It's not an asset-heavy business. In a normal world, more entanglement with Amazon is bad news for brands. But in a turbulent world, between survival and long-term competitiveness, brands will adapt to an Amazon-centric world with just a few nudges and peace treaties from Amazon.
The millennial aesthetic sold DTC brands. The brands became props for the performative routines of the urban bourgeoisie who had not yet arrived but still needed to make statements (of virtue, if not luxury.) The direct fall-out of a turbulent world will be that they will all be returning their boxes with pastel-colored graphics and instead buy affordable and slightly tackily packaged brands from Amazon. It is a good thing if it leads to American manufacturing. Nonetheless, the power of the Amazon network will be on full display when America weathers a financial storm over the next half a decade. The next wave of eCommerce adoption will be powered by the 'need to save' than the 'urge to express.' That world suits Amazon and the seller better.
We have a much much larger, deeper study on the state of the DTC market. Our research team has been on it for months now, and the findings are truly fascinating. Here is Werner Geyser from Influencer Marketing Hub with his insights of DTC industry based on our research data.
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