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Watching the wheels turn

Ashwin Ramasamy
Ashwin Ramasamy
Jul 31, 2022
5
Min Read

The pandemic was a black swan phenomenon. Taleb'ans will now come out of nowhere to call me out as an imbecile because it's not actually a black swan event. Be that as it may, COVID-19 has polluted the otherwise controlled scenario planning that retailers, eCommerce companies, and brands are used to.

Retailers bought cargo planes; Amazon bought space (the earth-kind); Melvin capital bought short positions on GameStop; We all bought whatever misinformation was sent our way – about COVID, vaccines, twitter's bot problems, and technoking's vitality. The pandemic may or may not be receding. We still have 125,000 new cases reported per day in the US. But people don't care. We are all out and about. Summer is here. In Europe too, people are enjoying the summer but just that tulips are getting fried with the extra heat.

Here's a round-up of pandemic-influenced reversals and related musings in retail:

1. Amazon adds people and sheds warehouse space

Amazon added nearly 1.6 million people to its workforce, mostly at their warehouses. That's twice as many people as they had the previous year. Lower labor productivity ensued, because there isn't as much work, as was anticipated. Cost? $2B in 2021. Q2 earning calls were all about labor productivity and operational efficiency.

'Fulfill by Amazon' and 'Buy with Prime' are short-term levers for Amazon to find a way out of the warehouse space glut.

2. Walmart, Target, and BestBuy have margin pressures

Walmart too is aggressively reducing inventory but states that, in the apparel category, this will come with heavy markdowns. Pandemic-era sartorial choices have led to G-7 presidents losing their ties for the first time. But that's not enough to convince the masses to stay under-clothed. People are back to tucked-in shirts.

Target is aggressively cancelling orders for discretionary categories. As the mothership for DTC brands expanding to retail, this means a lot of trouble for up-and-coming DTC brands.

Best Buy had to offer promotions on more products than the previous years and had to sell some products at higher discounts than expected, according to their Q1 earnings call. The promotional activity in the consumer electronics category had put more pressure on gross margins. Starting Q2, there has been greater pressure to increase the discounts.

3. Platforms are increasing prices or decreasing costs

Etsy revealed an 11% y-o-y growth in its Q2 revenue. Fool.com claims that the shoppers are less active on the site than last year, and the revenue growth is predominantly due to the 30% increase in Etsy’s seller transaction fee in April 2022.

Shopify recently had to lay off 10% of its workforce. Most of these employees were from the departments of recruiting, support, and sales that were expanded to accommodate the pandemic growth. Big platforms invested in customer support, ahead of the big eCommerce migration. The great serengeti migration was cancelled.

4. Unsexy markets and old foes are friends

Shopify is looking beyond North America by introducing localized subscription pricing plans to reflect local purchasing power in over 200 countries. Shopify has also extended Shopify Shipping to European countries like France, hoping that the slow and deliberate adoption is also stickier.

ShipHero, with its integration partnership with SPS Commerce, is scaling its DTC inventory and warehouse management software into B2B markets. We will see a lot more B2B push in 2023. Logistics companies that flocked eCommerce will be measured in their expansion approaches.

DTC brands too, are testing the wholesale waters. Glossier has entered into a partnership with Sephora through which Glossier products would be made available across US and Canada in Sephora stores and through Sephora’s site and app from next year. This is besides Glossier’s five own brand physical stores, with the latest opening just this Friday in Georgetown, DC.  Similarly, Allbirds has partnered with Nordstrom and Public Lands in the US and Zalando in Europe to win new customers besides 39 own brand physical stores across the world.

Someone recently wrote that we are at the end of the great DTC era. Sensational note but DTC is definitely reduced to a transient path for new brands before they gain broader distribution. The Honest Company’s partnership with Walmart and Parade’s retail partnership with Urban Outfitters are examples of the march towards the aisles.

The other un-noticed casualty of this economy is the vanishing of articles chronicling the end of retail. But what did happen is the end of standalone pop-ups and pop-up platforms.

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Predictable demand generation. Very precise segmentation & messaging.
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Slips poor jokes & gets away with a poker face. Carries a no BS attitude at getting things done. First to arrive at the office, Ashwin’s energy does not ebb through the day. Ashwin is one of the co-founders and he sets the tone for marketing, sales, design & culture.
Slips poor jokes & gets away with a poker face. Carries a no BS attitude at getting things done. First to arrive at the office, Ashwin’s energy does not ebb through the day. Ashwin is one of the co-founders and he sets the tone for marketing, sales, design & culture.
hm.com
HQ Location: Beaverton, Oregon, United States Of America, 97005
hm.com, operated by H & M Hennes & Mauritz AB, is an internationally-focused online store that generates eCommerce net sales primarily in Germany as well as in the United States and the United Kingdom. With regards to the product range, hm.com achieves the greatest part of its eCommerce net sales in the “Fashion” category.
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Slips poor jokes & gets away with a poker face. Carries a no BS attitude at getting things done. First to arrive at the office, Ashwin’s energy does not ebb through the day. Ashwin is one of the co-founders and he sets the tone for marketing, sales, design & culture.
Slips poor jokes & gets away with a poker face. Carries a no BS attitude at getting things done. First to arrive at the office, Ashwin’s energy does not ebb through the day. Ashwin is one of the co-founders and he sets the tone for marketing, sales, design & culture.
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