Hello, it’s Alexandre from Spring Invest, a European investment fund that is shaping the future of commerce. Welcome to the latest edition of Unpacking Commerce, our newsletter about emerging trends in retail, brands, and new commerce.

🏪 The CAC crisis is the best thing that has happened to physical retail

The standard narrative around DTC brands opening stores treats it as a maturation story - digital-native brands “growing up” into omnichannel. That framing misses what’s actually driving the movement, and why it matters now more than it did five years ago.

The real explanation is structural. Digital customer acquisition costs have been compounding upward for the better part of a decade, but something shifted qualitatively over the past two years. Meta CPMs are up. Google search is fragmenting toward AI-driven answer surfaces that don’t send traffic anywhere. TikTok’s content algorithm has decoupled further from its commerce layer. For a generation of DTC founders who built their unit economics on a $15–25 CAC via paid social, the math has quietly broken. The store isn’t a strategy choice anymore - for brands with strong identity and repeat-purchase potential, it’s the cheapest acquisition channel available.

Skims is the cleanest data point. The brand raised $225 million at a $5 billion valuation in November 2025, led by Goldman Sachs Alternatives, with a stated intention to become a “predominantly physical business.” It currently operates 18 stores in the US, with a 12,000 sq. ft. flagship on Regent Street in London slated for summer 2026 - its first standalone European location, beyond existing concessions at Selfridges and Harrods. The trajectory is deliberate: Skims CEO Jens Grede has said explicitly that stores are “probably our single biggest growth lever,” and that the biggest barrier to consumer acquisition is simply not being physically available where people live.

What Skims understood before most is that the store is a media asset, not a retail asset. A flagship in a high-traffic location generates brand impressions at a cost-per-touch that no paid channel can replicate at scale. When Skims opened its Sunset Strip location in Los Angeles in April 2025, it generated press coverage and social amplification that no equivalent budget in Meta ads would have produced. The launch of NikeSkims - a full brand, not a collaboration - deepens this logic. Nike’s own decade-long experiment with digital-first DTC ended in a well-documented correction: digital sales fell 15% in 2025, and new CEO Elliott Hill’s first major move was to rebuild wholesale relationships and reinstate physical distribution. The company that built the DTC thesis is now systematically dismantling it.

Skims isn’t alone. Alo Yoga, FP Movement, Mango, Tecovas, Mejuri - across categories and price points, the pattern repeats: brands that built audiences digitally are converting that attention into physical presence, and finding that stores improve online conversion too, not just add to it. Foot traffic data from PassBy shows Skims doubling in-store footfall year-over-year in 2025, driven by new openings but also by higher repeat visit rates than the DTC-to-store conversion curve would predict.

However, this pivot swaps variable marketing spend for heavy capital expenditure. While a Meta campaign can be paused in minutes, a lease on Regent Street is a decade-long commitment. For brands born in the cloud, the challenge isn't just securing the real estate; it’s mastering the operational grind like hiring, training, and maintaining a human workforce that can consistently deliver the brand’s digital promise on the sales floor. In other words, the “cheapest media” only remains cheap if you can manage the crushing complexity of the medium.

The European dimension is where this gets interesting. The Skims Regent Street flagship opening this summer will be the first real test of whether the DTC-to-physical conversion playbook travels across the Atlantic. The UK is Skims’ largest market outside the US, which provides a demand base - but European retail real estate economics, footfall patterns, and omnichannel infrastructure (POS, clienteling, inventory) differ enough that the same store model doesn’t simply port over. Several other US brands, including Lululemon, have had to materially adapt their physical formats for European markets.

➡️ The store is back because the unit economics left no other choice. Physical retail is now the most efficient media spend in the mix, provided you can handle the structural shift from variable clicks to fixed bricks. In ten years, will we look back at the DTC era as nothing more than a temporary arbitrage window?

🎬 Netflix House and the IP commerce model

Netflix opened its first two permanent venues - 100,000 sq. ft. each in King of Prussia Mall outside Philadelphia and Galleria Dallas - in November and December 2025. Time Magazine named it among the World’s Greatest Places 2026. The format: free entry, paid experiences ($40 per session) built around Stranger Things, Squid Game, Wednesday, and other IP, plus a restaurant and retail shop. A Las Vegas location follows in 2027.

The mainstream read is experiential retail meets fan engagement. The more interesting read is that Netflix has cracked a monetization model that content companies have been searching for since Disney built its first theme park: converting passive subscribers into active commerce participants, without cannibalizing the core subscription. Each Netflix House is simultaneously a retention tool (fans who engage physically renew more reliably), a merchandise channel, and a marketing asset for new content launches.

The structural implication extends well beyond Netflix. What Netflix is doing is establishing that IP - whether from streaming, gaming, sports, or fashion - can generate commerce revenue independently of a traditional retail model. The department store boxes that Netflix is occupying - former Lord & Taylor and Belk locations - aren’t chosen accidentally; they’re the exact format that traditional anchors have abandoned, now repurposed into destination entertainment.

➡️ Netflix House is a further reminder that physical retail was never just about selling: Apple Store runs workshops, Nike started running clubs, Rapha built cafés, Patagonia hosts repairs, Alo Yoga opened meditation studios, Aesop makes every store a design destination, Glossier made the store the product. The transaction is still there, but it's no longer the point. The brands getting this right are building places people want to be in, not just shop at.

📱 TikTok Shop Europe: from impulse to intent

A single data point from Rithum’s February 2026 analysis stopped the social commerce conversation in its tracks: in the UK, products priced above £100 now account for 41% of TikTok Shop revenue. The global average for the same metric is 2.8%. “The era of the TikTok trinket is over,” Rithum’s MD for Europe wrote in the release - and for once, the headline wasn’t hyperbole.

The timing matters. TikTok raised its seller commission from 5% to 9% across Germany, France, Italy, Spain, and Ireland in January 2026 - the same rate already in place in the UK. Fee increases at this stage of a platform’s development signal a transition: TikTok has moved from subsidizing merchant adoption to extracting margin from a proven channel. In parallel, it launched local fulfillment infrastructure across European warehouses, enabling faster delivery and unlocking categories - home goods, premium fashion, electronics - where delivery speed matters more than price.

The category shift matters most for brands that dismissed TikTok as a low-AOV impulse channel. A platform where home appliances and premium clothing are outpacing global norms on high-value purchases is a fundamentally different commercial surface than one optimised for £5 accessories. The conversion rates remain structurally higher than traditional e-commerce - TikTok Shop’s live shopping sessions drive 16% of total European platform revenue, with 860 live sessions per day across Europe - but the brand-safety and margin constraints that kept premium brands away are beginning to dissolve as the audience matures.

For European merchants and brands, the operational challenge is no longer whether to be (or not) on TikTok Shop, but how to structure for it: creator economics, content production at the cadence the algorithm requires, and integration between TikTok Shop inventory and existing fulfilment. The 9% commission, layered on typical e-commerce margins, makes product selection and pricing architecture non-trivial - particularly for brands that also sell on Amazon or through their own DTC.

This evolution is particularly critical when viewed through the lens of agentic commerce. As AI agents begin to automate our “low-intent” utility purchases, platforms like TikTok Shop and experiential venues like Netflix House (see above) become the final frontiers for serendipitous discovery. In a world where your AI assistant handles the toothpaste and the detergent, brands must win on the surfaces where consumers still want to be surprised. In a way, TikTok is building a moat against the automation of shopping by remaining the premier destination for human impulse.

➡️ TikTok Shop has successfully transitioned from a low-cost experimental channel to a high-AOV commercial engine that demands professionalized operations. For brands, the channel is no longer the story. The margin stack, the content infrastructure, and the brand positioning on a maturing platform - that's where the work actually now is.

📚 What we’re reading

• Skims: From digital darling to physical retail powerhouse - Internet Retailing - The clearest breakdown of how Skims is constructing its omnichannel model, with detail on the UK Regent Street flagship strategy and what it signals for other DTC brands eyeing European physical expansion.

• Netflix House: Can Streamers Turn Their IPs into Successful Experiential Retail? - RetailWire - A sober panel discussion on the sustainability questions behind the format: repeat visit dynamics, operational cost structures, and whether the Disney/Universal LBE comparison holds at Netflix’s current scale.

• TikTok Shop Europe 2026: Data and Seller Strategy - 10XCREW - Granular breakdown of TikTok Shop’s fee structure, fulfillment expansion, and market-by-market dynamics across the six live European countries. Useful operational reference for brands evaluating entry.

• Agentic Commerce Impact Could Reach $385 Billion by 2030 - Morgan Stanley Research - Still the most rigorous structural framing of where agentic commerce intersects with physical retail and social commerce. The question of which channel benefits from AI-driven discovery versus which gets disrupted by it runs through all three topics above.

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  About us

  Spring Invest is a European investment fund dedicated to companies that are shaping the future of commerce. We champion doers who build innovative companies making commerce better, from enabling technologies to new commerce models and everything in between. More info about our investment thesis 👉 here.

  

Hello, it’s Alexandre from Spring Invest, a European investment fund that is shaping the future of commerce. Welcome to the latest edition of Unpacking Commerce, our newsletter about emerging trends in retail, brands, and new commerce.

🫧 The mirage collapses: OpenAI retreats from checkout, and agentic commerce reveals its true shape

Six months ago, OpenAI launched Instant Checkout inside ChatGPT with the ambition of turning the world’s most popular AI chatbot into a transactional commerce platform. Last week, The Information reported that OpenAI is scaling back the feature. Purchases will now be routed through third-party retailer apps - Instacart, Target, Expedia - rather than completed natively in chat. The numbers are damning: out of Shopify’s millions of merchants, roughly a dozen had actually gone live with ChatGPT checkouts.

The timing matters as much as the decision itself. This retreat arrives less than one week after OpenAI announced a $50 billion strategic partnership with Amazon, part of a record $110 billion funding round at a $730 billion pre-money valuation. The deal includes custom AI models for Amazon’s consumer products, 2 gigawatts of Trainium compute capacity, and AWS as the exclusive third-party cloud distributor for OpenAI Frontier. Eric Seufert, whose Agentic commerce is a mirage analysis has been the sharpest structural critique of this space, argues that the Amazon partnership likely sealed the coffin. If OpenAI is aligning with Amazon’s advertising stack, an affiliate checkout model becomes strategically redundant.

The economic problems with Instant Checkout were structural, not incidental. OpenAI’s 4% transaction fee was destructive for merchants running on 3–8% net margins - typical for mid-market Shopify CPG sellers. Unlike advertising, where a merchant controls the margin they forfeit through a bid, a flat commission is an exogenous cost imposed on an unpredictable volume of sales. Advertising allocates demand ex ante through pricing mechanisms; affiliate models capture it ex post through static percentages. One scales; the other breaks.

The market’s reaction was immediate. Booking Holdings and Expedia shares jumped roughly 10% on the news. Mizuho moved its top internet pick to Booking, explicitly citing the ChatGPT pullback. Travel - which seemed like the most natural vertical for conversational checkout - turned out to illustrate the problem most clearly: real-time pricing, complex inventory, regulatory compliance, and entrenched consumer trust in existing checkout flows all conspired against native AI transactions.

Two parallel developments reveal where value is actually accruing. On March 2, Criteo announced it is the first ad-tech partner integrating with OpenAI’s advertising pilot in ChatGPT, activating $4 billion in annual media spend across 17,000 advertisers. In parallel, Amazon is reportedly exploring technology to help third-party apps sell ads within chatbot interfaces, extending its $68.6 billion ad business into conversational AI surfaces. The direction is unmistakable: the monetization of AI-driven commerce is converging on advertising, not transactions.

Amazon’s own numbers frame the gravitational pull. Ad revenue grew 22% in Q4 2025 to $21.3 billion. Rufus, its on-platform shopping agent, was used by 300 million customers last year, with users 60% more likely to complete purchases. Amazon has no incentive to let third-party agents disintermediate this flywheel - and every incentive to push its advertising infrastructure outward into the chatbot ecosystem it now partly owns.

Morgan Stanley estimates agentic commerce could represent $190–385 billion in U.S. e-commerce spending by 2030, capturing 10–20% of market share. But who captures the economics? If the transactional model is failing and the advertising model favors incumbents with first-party data, the investable surface area may be narrower than the headline suggests.

➡️For European commerce founders and investors, the question is worth sitting with: where in this stack does value accrue outside the walled gardens - structured product data, discovery optimization, retail media enablement? Or is the entire value chain destined to consolidate around a handful of platforms?

🏗️ Shopify’s quiet platform shift: from storefront to commerce protocol layer

While the checkout retreat grabbed headlines, the more consequential structural move may be Shopify’s. In January, Shopify and Google co-launched the Universal Commerce Protocol (UCP) at NRF 2026 - an open standard that allows AI agents to discover products, negotiate checkout flows, and complete purchases across any merchant. The protocol is already endorsed by over 20 partners, including Walmart, Target, Visa, Mastercard, and Zalando.

Shopify’s layering strategy is deliberate. It activated a default MCP endpoint on every store on its platform; launched Agentic Storefronts in December to manage presence across ChatGPT, Perplexity, Copilot, and Google AI Mode from a single admin toggle; and critically, opened its product catalog to non-Shopify merchants through a new Agentic plan. Brands on WooCommerce, Magento, or custom stacks can now list products in the Shopify Catalog and sell through AI channels - without running a Shopify store.

This is a repositioning from storefront provider to commerce infrastructure rail. The Catalog, powered by specialized LLMs that categorize and enrich product data, is the moat. According to data shared at Shopify’s agentic commerce webinar, orders originating from AI searches increased 15x between January 2025 and January 2026, with higher average order values than direct site traffic.

The contrast with Amazon is instructive. Amazon restricts agentic access at the point of discovery - it wants to retain advertising primacy. Shopify restricts at the point of purchase - it wants to retain transaction primacy through Shop Pay. Both protect their core economics, but Shopify’s approach creates a more porous surface for third-party agents, which is why it has emerged as the default infrastructure partner for ChatGPT, Copilot, and Gemini commerce integrations.

➡️The practical implication is that an AI-mediated discovery layer is forming fast, and the tooling between a brand’s catalog and an agent’s recommendation engine - data enrichment, protocol compliance, attribution - is where new infrastructure gets built. Restructuring product data specifically for LLMs (enriching feeds with FAQs, sales arguments, and visual variations) is one illustration.

📢 ChatGPT ads go live: the predictable arc from affiliate to advertising

On January 16, OpenAI officially launched advertising in ChatGPT for its Free and Go tiers. At the same time, it walked back in-chat checkout. The juxtaposition tells the story: OpenAI is deprioritizing commerce transactions precisely as it ramps up commerce advertising.

The early signals are worth tracking. Criteo’s analysis of 500 U.S. retailers in February 2026 found that users referred from LLM platforms convert at approximately 1.5x the rate of other referral channels. Early advertiser sightings include Expedia, Best Buy, Target, Ford, and Adobe. An Adthena analysis of over 500 prompts found ads in approximately 0.8% of responses - a deliberately conservative density, presumably to protect user trust while the format matures.

Criteo has moved first as an ad-tech intermediary. But Amazon’s reported exploration of powering chatbot ads via its Publisher Services suggests the real competition may pit established ad infrastructure providers against each other, not AI startups against incumbents. OpenAI itself projects $46 billion in revenue from non-paying users by 2030 through ads and commissions - a target that only makes sense if the advertising model works at scale, where the affiliate model could not.

The 1.5x conversion premium on LLM-referred traffic, if it holds, will draw ad budgets fast. The open question is therefore: does this new surface become an extension of existing performance marketing playbooks, or a fundamentally different channel that rewards different capabilities? And in the ad-tech ecosystem, where does the margin sit - with the AI platform, the demand-side intermediary, or the commerce data layer that makes the recommendations actually work?

What we’re reading

• Agentic commerce is a mirage (part 2) - Eric Seufert, Mobile Dev Memo - The sharpest structural analysis of why OpenAI’s Instant Checkout retreat was inevitable, and why Amazon’s advertising flywheel dictates the shape of AI commerce.

• Building the Universal Commerce Protocol - Shopify Engineering - The technical architecture behind UCP: layered protocol design, merchant-agent negotiation, and why Shopify modeled it after TCP/IP rather than building a monolithic standard.

• Agentic Commerce Impact Could Reach $385 Billion by 2030 - Morgan Stanley Research - The bull case for agentic commerce as a $385B U.S. market by 2030, with grocery and CPG as the first major category to tip.

• OpenAI is killing Instant Checkout. Don’t dance on the grave of agentic shopping yet - Kiri Masters, The Drum - Alibaba’s Qwen app already completes purchases at scale inside a single conversational interface because it owns the full stack. The behavior works in China; the question is infrastructure ownership, not consumer appetite.

👍 If you like Unpacking Commerce and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

Partager

About us

Spring Invest is a European investment fund dedicated to companies that are shaping the future of commerce. We champion doers who build innovative companies making commerce better, from enabling technologies to new commerce models and everything in between. More info about our investment thesis 👉 here.

➡️ Whether you're a startup or a large organisation, it's up to you !

🙏 Many thanks in advance for your collaboration !

How do startups and large organisations collaborate to solve challenges? And why do so many collaborations fail, when there is such a significant potential for value creation? INSEAD Business School and Sopra Steria are once again diving into these questions. Building on the 2023 report Surviving the Storm, this major European study aims at uncovering the keys to successful collaborations and to solving challenges related to AI, digital solutions, business models and sustainability.

Here is Your opportunity to make your mark. Click the link below to get started and let your voice be heard! Your answers are of course anonymous, and it will only take 6-8 minutes of your time to answer the survey. Links are secure and provided through Ipsos.

• If you are a startup, have your say here: Survey for startups

• If you are an incumbent organisation, have your say here: Survey for incumbent organisations

What's in it for You?

• Be Heard: Your voice matters!

• Make a Difference: Your feedback will influence the report.

• Exclusive Insights: Be one of the first to get a sneak peek at the report in Q1 2025.

• Power of Sharing: Be part of something bigger - your insight will provide lessons learnt for the European innovation ecosystem

Thank you for your participation. Together, we can achieve great things!

About us

Spring Invest is a European investment fund dedicated to companies that are shaping the future of commerce. We champion doers who build innovative companies making commerce better, from enabling technologies to new commerce models and everything in between. More info about our investment thesis 👉 here.

If you read our newsletter, you know our culture. We don’t talk much about ourselves. But after all, why not talk about the entrepreneurs we work with?

So, for this pre-summer edition, we have decided to open the book of our portfolio by sharing some recent news and figures and adding a little energy to the ambient weather… ☀️ Let’s go!

🚀 Mediarithmics [SaaS - Data Marketing] : The seasoned duo of entrepreneurs composed of Gilles & Stéphane just reached 12m€ ARR through a combination of organic growth, acquisitions, and product development, including Audience Extension (the use of retailers' data within media sites) and CRM Onboarding (enabling an advertiser to match its database with that of an advertising space vendor). What’s next? CEO’s answer here: “We will be making several acquisitions, aiming for annual revenues of €50 million”.

📉 Dataïads [SaaS - Martech] : Don’t get me wrong, the emoji on the left is not the company’s trend (3x in 12 months) but the outlook of the acquisition costs after customers implement the Dataïads post-click solution. One recent example is the success story with Fnac-Darty: +28% ROAS! What’s even more impressive is the fact that Fnac-Darty is one of the more sophisticated and tech-savvy leaders in the industry.

🥖 Tranché [Consumer - New Retail] : Augustin & Marie, the founders of Tranché, have opened their 3rd store in the heart of Paris near La Place des Vosges. Very chic. They know the recipe: Tier-1 location, beautiful shop, good and fresh products, organic bread, local sourcing, and always a big French smile! And this is just the beginning…

♻️ Smala [Consumer - Second Hand] : The company just reached profitability, hats off to the team! Like Vinted (who announced similar news last month), Smala is the first French player in the second-hand market to reach profitability. Of course, they don’t exactly play in the same league, but Smala has shown that a fully integrated model in the second-hand market is viable, bringing great value to consumers with first-hand customer experience while still turning a profit.

📦 Acolyt [Logistics] : Some investors call it an “unsexy” business. Well, I can tell you that the numbers are anything but unsexy. The company is in a profitable growth mode (above the famous “rule of 40” - coined by Brad Feld in 2015) and is now accelerating further. The logistics market isn’t for the faint of heart, it doesn’t forgive wobbly execution but rewards excellence immensely.

📱 Easypicky [SaaS - IA] : Not a day goes by without crazy news about AI, and not a day goes by without skeptics begging for a “real business use case, please 🙄”. Well, Easypicky is a good one. Working with world-class leaders (L’Oréal, Nestlé, Unilever, Mars, Henkel,…), they have just released a success story with Nestlé. Results are clear at every level of the organization from field operators to top management: easy-to-use, reliable, and a huge boost in productivity. Bonus: you can track your competitors’ products. When AI meets business needs, magic happens.

📊 Datahawk [SaaS - Data Analytics] : Following its upmarket repositioning, Datahawk has deepened its partnerships with the ecosystem, including Debt, one of the leading tech and marketing agencies (team of 4,000 digital specialists in 30+ locations). They are organizing a webinar in June to explain how an advanced analytics dashboard can transform an ecommerce strategy. If you are considering selling on Amazon, this is a must.

🤖 Ouidrop [Robotics] : After successfully installing their first “click & collect” machines in Paris, the company has recently demonstrated a second use-case by signing multiple deals with top French food retailers to automate their “drives”. If, like us, you live in a city, you may not realize how profound (>7,000), growing (11% annual growth for the past 10 years), and important (12bn€ in sales) is this retail channel. Another French exception.

⭐ Bonus: Cabaïa (one of the first French ONVBs). Even though we exited in 2023, we’ll always love them. We’re still impressed by their growth (from 0 to 100m€ in sales) and the commerce rockstars they are. Last week they opened a 34th store in Le Touquet!

Many THANKS and CONGRATS to all the founders and teams putting in so much energy and hard work 💪

10 RESSOURCES ABOUT COMMERCE (But not only)

➡️ Marketing isn't the only way to revive a brand

➡️ Xiaohongshu (the Chinese Instagram) deep-dive

➡️ TikTok Aims To Create 1 Billion Shopping Influencers

➡️ A glitch in the matrix of online shopping

➡️ YCombinator: here are the 21 consumer AI companies of the last batch

➡️ The Two Laws Of Startup Physics

➡️ LLMs: Introduction for “dummies” + an investing framework

➡️SaaS Valuation Multiples: 2015-2024

➡️ Consumer Trends 2024 by Dan Frommer [PDF]

➡️ Galion : “Guide des procédures collectives” [PDF]

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a European investment fund dedicated to companies that are shaping the future of commerce. We champion doers who build innovative companies making commerce better, from enabling technologies to new commerce models and everything in between. More info about our investment thesis 👉 here.

📰 Two weeks ago, Thrasio, the leading Amazon Aggregator which raised $2.3Bn in equity and $2Bn in debt to acquire more than 200 Amazon businesses, filed for Chapter 11. That prompted me to re-read the Retail Chronicles we published two years ago when Aggregators were the darlings of the investment community.

✅ We correctly called that selling on Amazon was a matter of operations and that Aggregators were overpaying assets.

But while it’s tempting to brag about how right we were for dismissing the Amazon Aggregator as an investment thesis, it’s far more interesting to dwell on what we got wrong, and why.

In that issue of the Retail Chronicles, we also talked about the impact of Apple App Tracking Transparency (ATT) on online advertising, and this was our conclusion :

❌ The really bad take is the first bullet point.

Let’s have a look at Meta’s stock price. When we published that post in January 2022, Meta’s stock was priced around $325. It then quickly collapsed and reached a low point at $90 in November 2022. Afterward, it rose steadily and just passed the $500 mark. Revenue-wise, Meta experienced a decline in Q2, Q3, and Q4 of 2022 but then turned around and closed 2023 with a 24% year-on-year growth rate.

So we were right in the short term but wrong in the long term.

Sure Meta took a big hit, but they quickly recovered and are now stronger than ever.

So, what happened?

ATT de facto prevented iOS apps from sharing info with third parties. Concretely, Facebook or Instagram could no longer match users who had clicked on their ads with users who had made a purchase. This killed Meta’s deterministic model of advertising performance. What followed was a drop in ad performance hence the decrease in revenue. That’s what we anticipated and why we thought ATT was going to be very bad for Meta.

Meta had to react and they did.

They cut costs.

They increased impressions through various means including pushing for Reels adoption.

They completely rebuilt their advertising model, scraping the deterministic model that was no longer working and building a new probabilistic model on the fly.

Two years later, we’ve come full circle and Meta post-ATT is once again operating a highly-performing advertising platform.

Their competitive position is stronger than ever for two major reasons.

➡️ First, Meta managed this transition better than its competitors. ATT struck everyone identically and Meta suffered the most because they were the largest player. But they also were in the best position to recover. They had the most resources and a massive audience to help train their ML engines to build their probabilistic model. Their smaller competitors lack that audience and are lagging in the new post-ATT world. For instance, Snap’s revenue stagnated in 2023 (compared to Meta growing by 24%) and their stock price dropped by 30% in early February and didn’t recover.

➡️ Second, Meta is in a stronger position to negotiate with advertisers. To them, Meta’s new probabilistic model is a complete black box. They no longer decide to target this or that market segment, they ask for an amount of performance and Meta guarantees a level of ROAS (Return on Ad Spend). They have far less leverage and Meta can keep for themselves any excess performance. And to add insult to injury, Meta also keeps any learnings and the advertisers get none.

So where is this going? How is the market going to evolve from here?

➡️ Meta’s competitive position is very solid, anchored in a unique and massive audience that is not going anywhere;

➡️ Advertisers are facing a strategic risk, losing control of the way they address their customers and communities;

➡️ We believe they will welcome any tool allowing them to somehow see through the black box, to better understand how their ads are working and give them leverage on their ad spend;

➡️ We already invested in that broad domain and are actively looking for more opportunities.

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a European investment fund dedicated to companies shaping the future of commerce. We champion doers who build innovative companies making commerce better, from enabling technologies to new commerce models and everything in between. More info about our investment thesis 👉 here.

Chers Investisseurs, Chers Entrepreneurs, Chers Partenaires, Chers Lecteurs,

Non, vous ne rêvez pas, c’est bien une newsletter SPRING INVEST. Alors que nous souhaitions reprendre la plume depuis quelques temps déjà, nous avons toujours eu une (très) bonne raison de reporter 😇. Finalement, quoi de mieux que le début d’année pour nous y remettre ?

✨ Tout d’abord début d’année = vœux.

C’est le dernier jour pour le faire, ne nous privons pas. Nous avons le plaisir de vous souhaiter à tous une belle année 2024. Bon, on ne va pas se cacher qu’on a connu des contextes un peu plus évidents et offrant plus de visibilité. Mais comme nous aimons être contrariants, on ne va pas cacher non plus que les environnements incertains ne sont pas pour nous déplaire. Cela nous maintient éveillés et ne fait que renforcer notre manière d’appréhender les choses avec le bon dosage de pragmatisme et d’anticipation. Rien n’est acquis et rien n’est facile, mais nous allons continuer à appliquer cette discipline stricte qui nous caractérise pour accompagner les entrepreneurs de la transformation du commerce.

🔙 Ensuite, début d’année = rétrospectives

L’année 2023 a été particulièrement riche sur tous les fronts : investissement, accompagnement, exit. Certes, c’est un peu l’excuse facile pour expliquer la rareté de notre newsletter. Mais, comme ce n’est pas totalement faux, c’est un peu vrai. 😊

Au-delà du dealflow, c’est avec plus de 160 entrepreneurs que nous avons passé du temps cette année pour comprendre en profondeur leur modèle et la manière dont ils viennent transformer le marché du commerce ou résoudre une problématique clé.

De plus, c’est avec plus d’une centaine de représentants de retailers, d’e-commerçants, de marques, de foncières d’immobilier commercial que nous avons interagis pour comprendre les enjeux auxquels ils font face afin d’identifier les sociétés susceptibles d‘y répondre et dans lesquelles investir.

🎯 Retail Media

C’est ainsi que nous avons mis un pied dans le retail media cette année, capacité donnée à des retailers de monétiser leurs données clients et transactionnelles en définissant des segments très fins, activables simplement, pour des besoins internes ou externes pour le compte d’annonceurs. Cette donnée qu’on appelle First Party Data possède une valeur stratégique croissante avec la disparition à venir du cookie tiers. A noter que chez Amazon, le retail media est dorénavant le premier contributeur à la profitabilité du groupe, devant AWS ! De quoi donner envie à quelques retailers possédant des centaines de millions de data points de se lancer. Nous avons ainsi misé sur Mediarithmics fournissant la stack technique permettant la centralisation, la gestion et la segmentation de ces gigantesques volumes de données hétérogènes offrant ensuite une manière simple de les activer à des fins marketing interne ou pour d’annonceurs dans le cadre de campagnes de communication ciblée.

🚚 Last mile, click & collect

Nous avons également poursuivi notre travail d’analyse du marché du last mile. Avec l’augmentation des volumes et la multiplication et la complexification des flux (livraison domicile, point retrait, casiers…), nous nous interrogeons depuis longtemps à la manière dont ce segment va évoluer, partant du principe que la succession de livreurs à un instant t pour une même adresse n’est pas tenable. Nous sommes ainsi de plus en plus convaincus que les solutions permettant la simplification et la massification des flux sont amenés à se développer rapidement dans un futur très proche, cheminement que de nombreuses villes américaines ont déjà entamé, suivi par quelques villes françaises depuis peu.

Pour ces raisons (et bien d’autres), nous avons investi dans la société bordelaise Ouidrop, dont les systèmes robotisés de click&collect apportent une solution de massification de tout type de flux, du colis simple traditionnel comme le frais ou le surgelé, ouvrant le marché à la distribution alimentaire et notamment les drive et les drive piétons.

🛍️ Acquisition, transformation client

Enfin, nous sommes très fiers d’accompagner Dataiads adressant le jeune marché du Post Click Experience avec une solution SaaS permettant de booster considérablement le ROI des campagnes publicitaires des e-commerçants. Fondée par un trio de repeat entrepreneurs exceptionnels, la société suit une trajectoire remarquable depuis notre investissement.

🌱 Un portefeuille très actif

Du côté des sociétés de notre portefeuille, l’année fut également intense.

Le « néo-logisticien » Acolyt continue sa trajectoire remarquable et pousse les murs pour répondre à la demande croissante tant de ses clients existants que des nouveaux arrivants. Ouverture d’entrepôt, recrutement, optimisation des flux, les chantiers sont nombreux avec une qualité d’exécution et un service client toujours de très haut niveau à la hauteur des exigences de son binôme dirigeant.

Smala aussi doit pousser les murs pour répondre à un marché de la seconde main en pleine ébullition. 2023 fut une étape majeure du développement de la société avec le franchissement d’un pallier important faisant aujourd’hui de Smala un acteur de poids de la seconde main aux process robustes et efficients.

Sous l’impulsion de son nouveau CEO fraichement arrivé d’Oracle en 2023 pour accompagner les fondateurs, DataHawk vient bousculer les acteurs historiques de la data analytics en fournissant des outils toujours plus pointus, avec la juste dose d’IA, pour optimiser leurs ventes sur les marketplaces.  

Moins d’un an après notre entrée au capital, Mediarithmics absorbait Easyence, permettant de renforcer son empreinte sur la gestion de la donnée des retailers et franchir le pallier symbolique des 10M€ d’ARR.

Enfin, nous avons cédé notre participation dans Cabaia, après une trajectoire de croissance rentable exceptionnelle. Nous avons eu l’immense plaisir d’accompagner une équipe aussi solide sur tant de sujets et qui est parvenue à construire en partant de 0 une société en passe de réaliser 100 millions d’euros de chiffre d’affaires, rentable, et tout cela en très peu de temps et avec peu de moyen. Bastien, Emilien et toute votre équipe, nous vous disons simplement Bravo et Merci !

📜 Enfin, début d’année = bonnes résolutions.

Et donc, oui, nous avons décidé de reprendre la plume de notre newsletter que nous souhaitons plus régulière et interactive, mais toujours authentique et sans filtre. En effet, dans un marché qui se transforme aussi rapidement, ce ne sont pas les questionnements qui manquent. Nous vous partagerons ainsi plus régulièrement nos réflexions du moment, nos échanges internes au-delà même de nos convictions.

Impact réel de l’IA générative sur le commerce, transformation du commerce B2B, transition du marché de la logistique, commoditisation des marketplaces, renouveaux des enseignes, transformation des DNVB …nous aurons l’occasion de revenir très vite sur tous ces sujets.

Enfin, nous allons continuer à travailler comme nous l’avons toujours fait en nous appliquant une discipline stricte à l’investissement. Sans précipitation, prenant le temps de décortiquer les marchés, les propositions de valeur, les tendances, les signaux faibles, de confronter nos convictions… Bref, vous l’aurez compris, 2024 sera peut-être Rock’n Roll ou pas, mais nous sommes prêts 💪.

Bonne année à tous, et à très vite ! 🥰

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a European investment fund dedicated to companies that are shaping the future of commerce. We champion doers who build innovative companies making commerce better, from enabling technologies to new commerce models and everything in between. More info about our investment thesis 👉 here.

For this summer period, we will be a little lighter than usual. While the tech ecosystem is currently coming to its senses, we found it interesting to present some data on the retailtech sector. In this newsletter, we will focus on the operations of the first half of the year, both in terms of investments and exits. As you will read, the market has not slowed down…yet.

Have a nice holiday !

📈 Number of investments and amounts raised by the French Retailtech companies are rising

Thanks to a historical retail culture that is well anchored in France and a deep market of French retailers and brands, French retailtech companies have benefited from an ecosystem that is particularly favorable to their development, regardless of the pandemic.

The amounts raised by French Retailech startups have considerably increased in recent years. In the first half of 2022, they raised over € 2 billion, up 27% compared to the first half of 2021.

While the amounts raised have multiplied by 7.4 between 2017 and 2022, rising from €275 million in S1-2017 to €2 billion in S1-2022, the number of deals has only increased by 20% to reach 90 deals in the first half of 2022, compared to 75 in the first half of 2017.

📊 Deal size: A heterogenous market

As a consequence, the average investment size has considerably increased over the past few years, going from € 3.7 million in the first half of 2017 to € 22.5 million in 2022 (+20% compared to the first half of 2021).

This can be explained by the increased VC dry powder over the last years leading to a rising number of deals above € 50 million (1 in S1-2017 compared to 7 in S1-2022, of which 6 raised more than € 100 million. The growing average deal size also reflects the greater maturity of the sector with an increasing number of series-B and above deals.

Average deal size actually hides the heterogeneity of the market. Indeed, the median deal has not changed that much over the last years standing at € 3 million in the first half of 2022 (vs € 2.5 million in 2021 and € 1.4 million in 2017).

♊ Even Score for Disrupters and Tech-Enablers

B2C has been neglected for a long time by investors. With the proliferation of marketplaces, new brands (DNVB and ONVB) and new models of consumption (short circuits, second hand…), B2C has become trendy again.

In the first half of 2022, the market is evenly split between Disrupters (B2C companies based on new distribution or consumption models) and Tech-Enablers (B2B companies offering solutions to retailers, e-merchants and brands) in value (€1,010.9 million and €1,010.7 million respectively), with 40 and 50 deals respectively.

The distribution between the different categories of disrupters has been globally stable for 3 years with the exception of marketplaces which have captured an increasing share of financing in recent years to reach +40% in volume and 75% in value. This trend has mainly been driven by the last financing round of BackMarket (€450 million) and Ankorstore (€250 million) in the first half of 2022. This can be explained by the initial attractiveness of these new distribution models for VCs, and the high capital intensity of the marketplace model based on weak margins requiring to reach very large volumes. The main platforms that have achieved substantial volumes have now to demonstrate their ability to generate positive cash flow.

DNVBs had their best days and are now facing a tough B2C market where increasing customer acquisition costs have severely impacted their business model and even made them unviable for some companies. ONVBs (Omnichannel-Native Vertical Brands) have proven the robustness of their native omnichannel model, but the number of players is still limited in the market as this model is harder to pull off.

Other distribution models such as second hand have thrived in recent months. However, as we pointed out in our previous newsletter, players will have to demonstrate the viability of their business model which cannot be easily replicated across different markets.

Since 2020, investments in Point-of-Sale management and animation solutions have decreased considerably, a trend that is confirmed in the first half of 2022.

With the considerable increase in logistics flows and the complexity brought by omnichannel, logistics startups (aka LogTech), have bloomed throughout the value chain (upstream, intra and downstream) and have captured a significant amount of financing like the French flagship Exotec which raised €296 million this semester.

Finally, companies tackling commerce data have considerably multiplied in recent years, capturing large amount of capital. Despite a relative slowdown this semester, the segment remains active, particularly driven by the complexity brought by omnichannel commerce.

🎯 What about Exits ?

VCs have often favored trade sales rather than financial sales, corporate buyers being more eager to pay for the strategic value of startups. This trend has been confirmed over the last few years, with trade sales accounting for more than 80% of exits.

With the growth of giga deals both in terms of number and amounts raised, a new trend has emerged with the increase in exits made by Tech startups.

Financial exits mainly concerned B2C companies, especially those that were able to reach profitability while still generating strong growth.

🔮 What’s coming next ?

Even if it is always very difficult to predict the future, especially in such a changing environment, we can imagine some major trends for the coming months:

🦄 From Unicorns to Centaurs to ?

It's not a bad word anymore. It is now accepted that the tech bubble has burst (read the great post of our colleague Xavier Lazarus explaining the genesis of the bubble) and that the market is being rationalized. What will be the impacts for the ecosystem?

As a sign of this rationalization, symbols of the startup ecosystem are changing. We have gradually moved from valuation-based metrics (symbolized by the Unicorns for companies valued $1+ billion) to revenue-based metrics (symbolized by the Centaurs for companies generating $100= million ARR). We can hypothesize that the next step will involve margin-based metrics and a reconciliation between valuation, growth, revenues, and margin. To date, it is no secret that most of Unicorns have not claimed the Centaur status yet ^^

📉 Investment strategy will adapt

It is not that easy to predict the investment trend as the dry powder is still at a very high level: $2.300 billion were available WW by the end of June 2022, three times more than 10 years ago; in France, funds financed by BPIfrance totalized €23 billion of dry powder by the end of 2021.

As the VC market is driven by the dry powder, funds will be still investing over the next coming months. But, with market valuation going down and the lack of exits for some over-valuated startups, investment strategies will certainly adapt with a greater focus and attention to the balance equity/growth/burn rate. Difficulties to refinance and to exit their late stage portfolio will probably bring VCs to target earlier stage companies with lower valuation.

📈  Increasing trade sales

VC market is also driven by exits which should accelerate over the coming months.

Many corporate acquirers have been out of the game for a while because of skyrocketing valuation they could not afford. Most of them started to acquire companies at an earlier stage. This trend should accelerate. But corporates are also likely to come back into the late game as valuations fall and startups struggle to refinance.

➕ Buy and Build strategy by Tech companies

As we have seen, acquisitions by tech companies is increasing.

Because of the macroeconomic environment, majority of companies reduced their burn rate. Organic growth can no longer be achieved at any price and will therefore be impacted. Many tech companies that have raised significant amount of capital are now working on buy and build strategies looking for companies offering additional revenues and/or additional technological offering a new exit route to startups.

🛍️ What about RetailTech ?

While acquisition costs are increasing, the focus on healthy economics for new distribution models or new consumption models will increase. B2C investments and exits will probably fall down in the coming months putting light on the best players. This trend has already begun as described by the investment bank Silverwood Partners.

B2B distribution is an emerging trend in our dealflow over the last few months ; this should accelerate as professionals are looking for solutions similar to those they are using in their daily life. Moreover, KPIs for B2B distribution are often much better than the actual B2C KPIs.

On the tech-enablers side, VCs will likely gain interest with e-commerce tools, especially those enabling unified omnichannel commerce. Tech companies have already started aggregating or consolidating the market, this trend is expected to amplify.

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Spring Invest is a European investment fund dedicated to companies that are shaping the future of commerce. We champion doers who build innovative companies making commerce better, from enabling technologies to new commerce models and everything in between. More info about our investment thesis 👉 here.

As you may have read in our previous editions, we have been closely following the second-hand market for some time now. Even though the space is still largely dominated by major marketplaces, there are good reasons to believe that sellers’ and buyers’ expectations have changed since the early days of marketplaces (I know it hurts but yes, Vinted is 14 years old, LeBonCoin is 16 years old and eBay is 27 years old). Adapting to consumers’ higher expectations requires creating new models as traditional marketplaces start to show their limits…

♻️Enters the Fullstack Second-Hand Model.

We like to think about this fullstack model as an orchestra composed of 3 core blocks: SUPPLY (how to source products), OPERATIONS (how to re-cycle products), and DISTRIBUTION (how to sell products).

Operating this trio is surely not new for any first-hand commerce, but is completely game-changer for second-hand commerce, as there are much more complexity and specifics to address on all three fronts : how do you access product supply at scale while dealing with individuals, which product should you be ready to buy and at what price, how do you run re-cycling operations for mass-market products while being profitable, where do you find the cash to build an inventory that has no value for bankers, how do you process single-SKU products at scale, how do you provide the seller a first-hand experience with second-hand products, how do you manage pricing for unique products, etc…

The list is long but you get the point: THIS IS HARD. So hard that any company trying to operate such a model has to reach excellence on the 3 fronts to win.

So, what does it take to start building a fullstack second-hand operator?

👚 Proprietary supply. Access to proprietary supply is the start of everything, the fuel of the model. The job here is to convince individuals to sell their clothes in batches (>15 products) by paying them with cash. The incentive is quite appealing for sellers: they receive cash and they don’t have to go through the hassle of taking pictures, writing a description, negotiating the price with multiple buyers, and packing the items to finally ship products. In exchange, they agree to sell at a discount. In order to scale, a company can make online acquisitions but can also build a network of “ambassadors” (freelance paid on commission) responsible for marketing the offer to local communities while bringing additional services (picking, sorting). What’s even more interesting with the fullstack model is the ability to secure partnerships with brands as they are eager to offer a second-hand model to their customers. For a brand, working with a fullstack second-hand operator guarantees that the service is operated professionally in terms of buying capabilities, operational efficiencies, and ability to protect everything about the brand’s image, from merchandising to customer experience.

📟 Pricing model and data. As there are no barcodes on clothing, a fullstack second-hand operator must be able to work on a real-time database to identify, categorize and price each clothing item that they can buy. The dataset must include millions of unique items across thousands of brands. The company must also work on data, both own and public, to improve its sales prediction model. They can thus optimize economic decisions, such as pricing, seller payouts, item acceptance, merchandising, and sell-through.

📦 Operational excellence. A fullstack operator has no other choice than to reach excellence at operating centers that collect, re-cycle, store, pack, and ship items. An unprecedented challenging part is that the entire flow is composed of single-SKU products that are not fungible. That is why a company must build the entire logistics flow from the ground up: single-SKU tracking, sorting products, running re-cycling operations, taking product pictures, creating product pages, finding the right pricing, building single-SKU inventory,… Reaching excellence means optimizing every single touchpoint, product move, so that the entire flow takes less than a few minutes from the moment the item is received until it is ready to be shipped.

🖥️ Second-hand native technology. Operational excellence cannot realistically be reached without technology. There are no off-the-shelf software solutions. Therefore an operator has to design its own suite of custom-built applications from the WMS to the CMS that are specifically designed for running second-hand facilities: identifying a product among millions, creating thousands of unique product pages per day, evaluating the right pricing to optimize margin and sell-through, and lean integration of the single-SKU specifics into the CMS, OMS, and WMS.

What are the unique benefits of running such a complex fullstack model compared to any other traditional models?

▶️ Delivering a first-hand customer experience. Being able to address the complexity and specifics of second-hand allows operators to offer a first-hand experience to buyers: product quality, professional pictures, personalized product description, homogenous product offering, beautiful packaging, dedicated customer service, fast and professional delivery, and most importantly a brand that deeply cares about its customers with its reputation at stake.

▶️ Offering a unique alignment between Price, Environment, and Experience. When shopping, buyers usually have to choose between expensive eco-friendly products or cheaper products that come with a poor experience. A fullstack second-hand operator can offer products at a decent price as they are sold at a fraction of their original value, a responsible consumer path, while delivering an outstanding purchase experience. Having this combination is unique in the market and is everything today’s customers are asking for.

▶️ Achieving strong unit economics. The recurring problem of second-hand is that the value of each item is very low by design as products are sold at a fraction of their original value. For the past 15 years, startups have tried to address this economic issue by being either a “don’t-touch-the-product” marketplace like Vinted or a “high value-added-product” marketplace like Vestiaire Collective. We believe the fullstack model is opening a third economic path by solving the paradox of selling mass-market second-hand products at a low price while still achieving strong unit economics. In that model, the margin is the consequence of the value created both for the seller and the buyer. The sellers receive cash and aren’t required to do anything, therefore they agree to sell at a discount. Conversely, the buyers are being offered an outstanding experience and are ready to pay a premium. Consequently, while marketplaces’ commission rates now typically range from 5% to 20% (with a strong downward pressure due to marketplace commoditization and increased competition), a fullstack second-hand operator can generate 50%+ gross margin, leaving enough value to run outstanding operations and distribution while making a healthy profit.

▶️ Cracking the working-capital issue. As with any distribution-like model, one of the critical issues of building and scaling physical product inventory is cash. An efficient fullstack second-hand operator can reach negative working capital by optimizing the buying process, reducing the duration of the recycling process to minutes and making sure the inventory has the fastest sell-through possible. Even better, some operators are using a system of “credits” (with an additional incentive) on the sellers’ accounts, which is both a great way to incentive sellers to become buyers and an additional working-capital improvement.

📌 For all these reasons, we are proud to back Il Etait Plusieurs Fois, the first fullstack second-hand operator dedicated to children’s clothing by leading their €4M Series A round. In addition to its amazing team led by Aude Viaud and Caroline Laycock and their unique fullstack second-hand model, we were convinced by the specific market addressed by the company. Indeed, we do not think that the second-hand model is adapted for all product verticals. Children’s clothing has great properties that are empowering the fullstack second-hand model like a high repeat rate, products that are of very good quality when they become second-hand as they have not been used for a long time, almost no return as sizing is way more simple than for adults, and higher buyer’s expectations in terms of experience.

Read more in the press here (Le Figaro), here (Challenge), and here (LSA).

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About us

Spring Invest is a European investment fund dedicated to companies that are shaping the future of commerce. We champion doers who build innovative companies making commerce better, from enabling technologies to new commerce models and everything in between. More info about our investment thesis 👉 here.

Hello, it’s Alexandre from Spring Invest, a European investment fund that is shaping the future of commerce. Welcome to the latest edition of Retail Chronicles, our newsletter about emerging trends in (e-)retail, brands, and new commerce.

🛍️ French e-commerce in 10 numbers

1. Total spend on ecommerce in 2021 : 129bn€ (+15,1% vs. 2020).

2. Growth is driven by services (+24% vs. 2020) vs. products (+7% vs. 2020).

3. Online commerce represents 14,1% of total commerce (vs. 13,4% in 2020).

4. Total number of transactions in 2021 : 2,1 billion (5,7 million a day).

5. Average basket remains stable at 61€ in 2021 (-0,8% vs. 2020, +1,8% vs. 2019).

6. Transaction frequency is accelerating : 51 transactions in a year (almost one every week!) vs. 44 in 2020, 43 in 2019.

7. Average spend per buyer is at 3 089 € (vs. 2 694 € in 2020, 2.577 € in 2019).

8. Active e-commerce websites: 200k (vs. 180k in 2020, 163k in 2019).

9. Top 5 most active product categories (number of e-shoppers who made at least 1 transaction in that category) : fashion (60%), gaming (47%), toys (45%), shoes (45%), beauty (43%).

10. Top 5 e-commerce websites (by monthly unique visitors) : Amazon (37 million), Le Bon Coin (27 million), CDiscount (23 million), Fnac (19 million), Vinted (17 million).

Read more from the FEVAD here.

⚔️ Big players (SHOP, AMZN, FB) vs. Startups

"The battle between every startup and incumbent comes down to whether the startup gets distribution before the incumbent gets innovation." Alex Rampell (a16z)

When something new is emerging in an industry, most of the value created is not necessarily captured by early-stage startups. Sometimes it just makes sense that established players do it, and do it better (because of their historical model, user base, infrastructure, distribution deals, technology, or whatever). Commerce is no exception, that’s why we are closely following what big commerce players are up to and try to understand how it impacts what early-stage startups are building and how they would win (or not). Here is a quick update :

SHOPIFY

➡️ Building the ecosystem : Shopify announced two major partnerships, one with JD.com (here) to make it easier for Shopify merchants to sell into that platform and one with Stripe (here) to offer its merchants dedicated bank accounts. It’s clear that the company is trying to strengthen its ecosystem, create network effects, and moats to move beyond the pure software provider model. That’s also why they have recently increased incentives for developers to build Shopify apps and shop themes as developers will now pay 0% revenue share for the first 1m$ they earn annually (down from 20%). As $ incentives grow (lower commission) and barriers to entry lower (simplified API, open-source app models,…), it has created an intense competition on the Shopify store for apps that now range from simple cart design apps built by one developer as a side project to full-stack marketing tools built by extremely ambitious startups. Therefore, whereas the 2015-2020 era was mostly driven by the quality of apps shipped (reviews, organic growth, search in the store…), 2020-2025 is clearly going to be driven by the quality of distribution. At Spring, we are seeing more and more Shopify-enablers startups and while the product remains important, distribution is the key : how do you build a profitable acquisition machine while selling a 10-300$/month tool ?

➡️ Moving closer to brick&mortar : It’s a clear trend that most indie and DTC brands are moving closer to the offline commerce world whether by operating their own stores or by dealing with wholesalers. Following their client’s needs, Shopify is now providing a set of solutions for brick&mortar (Shopify PoS, dedicated hardware, payment solutions, retail staff permission, unified CRM, Click&collect,…) putting pressure on independent SaaS providers in each space. Last month, Shopify filed a patent (here) for a system of sensors that can measure traffic in retail stores, density and behavior of shoppers. By building a complete brick&mortar offer, Shopify is pushing to be the most relevant solution for omnichannel merchants. However, it does not mean it will be relevant enough for brick&mortar-only merchants (as they don’t see the “unified” value of the tools). Besides, there is also competition from all verticalized SaaS-enabled marketplaces offering everything to run a business (back-office, calendar, payment, CRM, marketing, staff planning, etc.), while also solving the acquisition problem by building a user-facing marketplace on top to generate demand for merchants. A lot of verticals have been well addressed for the past 5-7 years (real estate, education, services, construction, health,…), but interestingly retail has lagged a bit. It’s becoming more clear now that a new generation of brick&mortar-only merchants (restaurants, independent grocery stores, hairdressers, bakeries, concept stores, retail franchises,…) is looking for full-stack enabling tools. We are ready to back entrepreneurs in that space.

➡️ Reorganizing logistics : After more than 2 years of testing (Shopify Fulfillment was launched in 2019 with a 1bn$ investment announcement for the next 5 years to build the network), Shopify announced it was terminating or reducing contracts with warehouses and fulfillment partners. Rumors say that Shopify may be moving away from its initial "asset-light" approach and making more aggressive moves in fulfillment soon, whether that means acquiring 3rd-party logistics companies or moving to operate warehouses on its own. Such a move would be surprising as the challenge seems huge and immensely transformative for a (software) company. It would take billions and years to build anything close to what Amazon has built for the past decades. As a reminder from Shopify’s CEO Tobi Lütke himself (2020), "Logistics is hard, you will hear it from everyone in the industry”.  

AMAZON

➡️ Pricing power : Amazon is raising the price of its annual Prime membership (200 million members worldwide) to 139$ from 119$. The company’s last hiked the price of Prime in 2018, when it increased to 119$ from 99$. Four years before that, it raised the subscription fee to 99$ from 79$. If you are looking for an example when discussing the hot topic of pricing power in our inflation times, here it is.

➡️ Ad power : "Advertising is the price you pay for having an unremarkable product or service” famously said Jeff Bezos. Well, 10 years later, Amazon is one of the fastest-growing advertising businesses in the world. Indeed, it has just disclosed its ads revenues for 2021 : 31bn$ (+48% vs. 2020 at 21bn$). As a comparison, Google ads business is generating more than 200bn$ of revenues (80% of its total revenues), while Meta stands at 115bn$ (98% of their revenues). All together they accounted for 74% of global digital ad spend (and 47% of all ad spend - not only digital) in 2021. However, all $ are not being equal. Indeed, as Amazon's ad business is tied to search (and not social media), it's not as vulnerable to anyone’s will and certainly not to Apple's privacy changes that are having a big impact on Meta's ad business. What’s interesting is that Amazon has proven once and for all the power of the ad revenue channel for marketplaces. Knowing that (i) marketplace is the first distribution channel with 62% share of total e-commerce in the world and that (ii) most of them are not equipped with an ad bidding system, the opportunity for entrepreneurs to build a retail media solution for marketplaces is becoming quite clear. We are ready to back them.

META

➡️ Powering creators : A few months after announcing that Instagram is no longer a photo-sharing app (here) as now “the number one reason that people say they use Instagram, in research, is to be entertained”, the head of Instagram announced two weeks ago the launch of the “Subscriptions” feature (here), helping creators/influencers to monetize their audience as fans will pay them a monthly subscription to have access to private and exclusive content. If it turns out to be the new standard, it’s still unclear how this would impact the relationship between brands and creators/influencers. We would probably switch from a purely transactional relationship (brand pays X to the influencer to get Y reach on social media) to a more collaborative one (brands provide everything they can - products, context, high-value content, storytelling - so the influencer does the best to satisfy a paying fan). Interests seem more aligned to provide value to customers. More generally, the (re)emergence of social commerce is an opportunity for businesses to take back control of their brands in digital channels, especially in a product-centered marketplace world (first distribution channel with a 62% share of total e-commerce) in which brand identity is largely overlooked.

➡️ Stock crash : The company’s stock plunged 26% on the back of disappointing earnings results, losing more than 250bn$ in market value. That’s the biggest wipeout in market value for any U.S. company ever (interestingly, the day after, Amazon gained around 190bn$ in market value, being the greatest ever one-day increase in value). A lot has been written about Meta, here is an excellent summary. RIP.

🚢 About freight costs

You have probably read a lot about supply chain issues for the last 24 months : congested ports, extended lead times, freight costs. Sometimes a picture is worth a thousand words, especially to keep in mind the order of magnitude of this problem in economic terms. To make it clear : this is not a 30% problem, this is a 5x problem.

And consequences are quite dramatic for merchants that are heavily exposed to Asian importations. In terms of P&L impact, we are talking about a reduction of 1 to 5 points of gross margin. When you know that these same merchants are already fighting on the acquisition costs front, 2022 is going to be decisive…

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a European investment fund dedicated to companies that are shaping the future of commerce. We champion doers who build innovative companies making commerce better, from enabling technologies to new commerce models and everything in between. More info about our investment thesis 👉 here.

Hello, it’s Xavier from Spring Invest, a European investment fund that is shaping the future of commerce. Welcome to the latest edition of Retail Chronicles, our newsletter about emerging trends in (e-)retail, brands, and new commerce.

📈 DTC Dynamics

The Direct To Consumer (DTC) landscape is facing some headwind.

🛑Market is not growing as fast as expected.

When Covid-19 struck, everybody thought it had propelled ecommerce 2-3 years into the future.

We were wrong.

It was just a bump. We reverted to normal. US numbers show that ecommerce penetration is now back to where it would have been without covid-related lockdowns.

According to Fevad, French numbers tell the same story: ecommerce fell back to the pre-covid growth curve.

The market is still growing healthily, but we left the exuberance of spring 2020, we’re back to the realm of bean counters, where unit economics such as margins and average baskets are paramount.

💥Acquisition costs are increasing

Speaking of unit economics, DTC players faced increased acquisition costs after the summer of 2021.

People at Common Thread Collective documented a steep increase in online ad pricing.

In a recent blog post, they present a goldmine of data all pointing to the same direction: Facebook ad performance has seriously decreased.

• Facebook ROAS (Return on Ad Spend) went from 2.04 in 2020 to 1.72 in 2021 (-15,7%)

• Blended ROAS went from 5.70 in 2020 to 4.78 in 2021 (-16.3%)

• Facebook CPM (Cost per 1k impressions) went from $9.05 in 2020 to $13.70 in 2021 (+51.5%)

This is consistent with anecdotal data we gathered by talking to DTC brands operating (mainly) in France. While blended acquisition costs as a percentage of sales used to stay in the vicinity of 30-35%, they grew up to 40% after summer 2021.

An obvious reason is the introduction of iOS 14.5 by Apple in May, 2021. All iPhone users received an App Tracking Transparency (ATT) option allowing them to opt-out of data tracking in apps. This has reduced Facebook Ad’s relevancy and reduced users’ Click-Through Rate (CTR).

Other possible reasons are (i) excessive growth expectations from brands anticipating that the covid boost would endure, (ii) inflow of VC money on DTC startups, (iii) impact of Asian supply chains disruption with some players trying too hard to compensate for missed targets, or (iv) arbitrage with the Amazon ecosystem where ad pressure also increased sharply (see below).

👉 Our thoughts

At Spring Invest, we believe higher acquisition costs are here to stay. This comes with numbers of interesting consequences:

• This is bad news for Meta and Google. Mobile is increasingly the default device for users and iPhone has a huge market share in the US and EU.

• This is bad news for Shopify as most of its DTC customers still rely on Facebook/IG or Google for consumer acquisition.

• Many DTC players will realize that they no longer have a business model. High gross margins (75%+), great products and strong differentiation are more than ever necessary.

• Omnichannel is king. Efficient physical retail channels enable stronger growth and reduce dependence on FB/Google.

This also highlights the need for new acquisition channels. Ads are blunt and invasive. At Spring Invest, we’re actively searching for startups helping consumers find the products they don’t know they need.

🔥 Amazon Sellers Aggregators

ASA or Amazon Sellers Aggregators (also called Amazon Aggregators, FBA Aggregators, or Amazon rollups) made a major sensation in 2021. A hundred or so players around the world raised more than $12Bn of joint equity and debt. Even though the largest and earliest player, Thrasio, started in 2017, the model really began to take-off last year as shown by quarterly fundraising :

• Q2, 20: $108m

• Q3, 20: $352m

• Q4, 20: $511m

• Q1, 21: $2,258m

• Q2, 21: $2,824m

• Q3, 21: $3,798m

• Q4, 21: $3,423m

The ASA business consists in acquiring a large number (tens or hundreds) of independent Amazon sellers, integrating them and developing them. 

❓Who are the independent Amazon sellers?

In 2021 consumers purchased an estimate of $610Bn worth of goods (+24% vs 2020). Most of these 610Bn are not actually sold by Amazon but by independent sellers using Amazon's marketplace to reach consumers. Amazon marketplace sales amounted to $390Bn (+30% vs 2020) in 2021 representing 64% of Amazon's total volume. In 2011 it was only 38%.

According to Marketplace Pulse, there are more than 10 million seller accounts on Amazon representing 6 million unique sellers (some sell in several countries). Roughly 800k new sellers join Amazon every year. 50,000 exceed $1m in revenue.

⭐ What makes them desirable for ASAs?

A major reason why Amazon sellers are good acquisition targets is that, unbeknownst to many, they hold actual assets. An Amazon listing with its ranking, reviews and ratings is pretty durable and easy to defend.

Most ASA are looking for the following features:

• #1 or #2 spot in a given category : high number of reviews, good rating.

• Niche category : to avoid face to face competition with major brands.

• Critical mass : at least $1-5m revenue.

• Profitable : at least 15-20% EBITDA.

• Non-cyclical, non-fashion, low returns products : typically home improvement, kitchen, babycare, petcare, sport, beauty, hygiene…

• FBA : logistics Fulfilled by Amazon

Various ASA have specific criteria : some invest all over the place while others focus on a few verticals, some respect strict ESG rules…

💰 How do ASA create value?

A central element of the ASA model, and in our opinion, the main reason the segment drove so much money in 2021, is the "multiple arbitrage". Basically, you buy an asset at 3-5 x EBITDA and integrate it into a company trading at 15-20 x EBITDA. Considering a 3-5 x debt leverage.

Beyond multiple arbitrage, ASA can count on several ways to improve the value of the Amazon sellers they purchase :

• The Amazon flywheel : as mentioned above, an Amazon listing is durable and defensible. If quality and service are high, it can even be strengthened as good reviews attract more buyers who post more good reviews.

• Integration and cost reduction : ASA can reduce variable costs by mutualizing between many sellers transversal processes such as sourcing&supply, content, SEO, review management…

• International expansion : many Amazon sellers only operate on a small number of markets, launching them into every country covered by Amazon is an obvious move.

• Other marketplaces : similarly, if it works on Amazon it might work on other marketplaces such as Walmart or country-specific leaders.

• Better sourcing : this is getting harder. Leveraging size to improve products, costs, deliveries is tempting but not easy.

• FBA->FBM : even harder. It's about internalizing logistics, moving from Fulfilled by Amazon to Fulfilled by Merchant. There may be up to 5 margin points to capture, but it requires strong expertise, high capex and is not devoid of risks.

• Shopify and DTC: still harder. Get beyond marketplaces and sell directly to consumers. Requires a whole lotta new skills (notably ad related) and most Amazon brands/products are not strong or differentiated enough to perform in that space.

• Brick&mortar: offline sales still account for 75% of commerce. But it is very, very different from selling on Amazon.

• Organic growth : Amazon's marketplace naturally grows 30% per year, just surf the wave!

🛑 So why didn't we invest in ASAs?

At Spring Invest, we've looked long and hard at the ASA segment and met a number of teams. For now, even though they were talented and dedicated, we've decided against an investment. The main reasons are:

• Multiple arbitrage is not sustainable: In open markets, arbitrage opportunities only last until the rest of the market catches up. In the case of ASA, the financing stampede of 2021 was just that : the market catching-up. The immediate reaction of a market to a demand shock is a price change, and sure enough, acquisition multiple of Amazon sellers have soared in 2021, going from 3-4xEBITDA in Q4, 2020 to 4-8xEBITDA in Q4, 2021. And we probably haven't witnessed the end of the increase.

• SDE is not EBITDA: Actually ASA don't use EBITDA as a metric but SDE which stands for Seller's Discretionary Earning. It is basically EBITDA before founder's compensation. Using that metric makes a lot of sense since a founder's decision to get paid in salary instead of dividends doesn't change the value of the underlying business. But one shouldn't forget that the founder is contributing work that will have to be paid for after the business is integrated into an ASA. Also ASA incur significant overheads : the M&A team and the whole structure. All in all, we found that the EBITDA margin (in % of sales) of an ASA is 7-15 percentage points below the SDE of the sellers it purchased. In terms of acquisition multiple, the impact is massive: acquiring a seller earning a 20% SDE margin at 6xSDE translates into paying 12x its corresponding 10% EBITDA margin. Not so exciting.

• What to do with the founders: the Amazon marketplace is one of the most ruthlessly competitive business environment and founders of successful Amazon sellers are not here by chance. ASA, as they purchase dozens of Amazon businesses, have to quickly and repeatedly decide whether they want keep the founders, for which task, responsibility or compensation. Then they have to make all those small business founders work as a team. Harder than trying to discipline cats.

• Pressure on margins: in addition to the "normal" pressure of competing against the whole world, Amazon sellers are increasingly forced to pay large advertising fees to Amazon to improve their products' exposure. We’ve already talked about Amazon's ads revenue, it is expected to exceed $30Bn in 2021, representing more than the total profit of the company. For sellers, the average cost per click rose from $0.93 to $1.33 in 2021, while the conversion rate remained flat around 12-13%. Bottom line: advertising costs for a seller rose from 20-25% of sales in 2020 to 30-35% in 2021. A drop of 10 or so margin points in one year is massive. Amazon listings may be sustainable but their maintenance is not costless.

• Don’t dig for gold, sell picks and shovels: as the market heats, both Amazon sellers and ASAs need powerful data analytics tools to get insights on products, SEO, advertising, pricing, niches, market watch, etc. Futhermore, omnichannel e-commerce became more and more complex to manage as the number of distribution channels are multiplying. Last summer, we decided to invest in DataHawk, a fast-growing company providing Amazon (and now Walmart and other shopping places soon) sellers the tools to increase sales, optimize margins and boost productivity.

👉 Our final take on ASA

At Spring Invest, we never really believed in the pure financial play of multiple arbitrage in a long run, and anyway, that ship has sailed. The difference will now be made in operations : sourcing, branding, content, product etc…

Amazon is the biggest marketplace on the planet and represents an untapped treasure trove of market data (niche product discovery, price elasticity…) We firmly believe teams with strong operational expertise can and will extract this data and leverage it through various means beyond acquisition such as bundling, high throughput product development or regional customization, in combination with an omnichannel strategy.

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a European investment fund dedicated to companies that are shaping the future of commerce. We champion doers who build innovative companies making commerce better, from enabling technologies to new commerce models and everything in between. More info about our investment thesis 👉 here.

Hello, it’s Laurent from Spring Invest, a European investment fund that is shaping the future of commerce. Welcome to the latest edition of Retail Chronicles, our newsletter about emerging trends in (e-)retail, brands, and new commerce.

There has been a couple of weeks that you did not hear from us, as we were quite busy working on our portfolio companies, new deals that are coming soon, and our new branding (see the great job made by Pelo Studio just here). We also spent lots of time with retailers, e-merchants, and brands talking about the Future of Commerce and how they are concerned with major trends arising.

For this newsletter called “We are often asked”, we decided to share some of our thoughts on questions that we were often asked. We decided to focus on 3 major trends of the market and to question the sustainability of these transformations:

🔎 Marketplace commoditization

🏪 Is Q-Commerce really the future of grocery ?

🛺 The future of last-mile delivery

Let’s go !

🔎 Marketplace commoditization

We are often asked by retailers, e-merchants, or brands if they should launch their own marketplace.

Of course, there is no obvious answer; it all depends on the market, the player, the ecosystem, the economics of the segment, and the global strategy of the company.

Here is some food for thought to help you form your own opinion.

📈  Marketplace is a huge market

2020 was an exploding year for marketplaces with a 29% increase of GMV reaching $2,7 trillion worldwide. 2/3 of the total e-commerce sales were made by marketplaces. 2021 should also be a great year for marketplaces.

The marketplace is a highly concentrated market as Alibaba, Amazon, and JD.com represent half of the market. 2/3 of the market is made by the 13 biggest players.

It is no surprise that many brands or (e-)retailers already launched or think about launching their own marketplace. But is that a so good idea ?

⚠️ Marketplace is not Retail

Retail means buying and selling products. The business model relies on trade sales. Therefore, (e-)retailers have to be good purchasers and good sellers to generate sufficient gross margin (generally 35-75%) to pay the fixed cost structure. Growth depends on the ability to find the right product to sell to the right customer at the right price. Therefore, (e-)retailers have to be primarily focused on the products.

On the other hand, Marketplace is an audience business that is not limited anymore by the products. The business relies on monetizing the audience with a take rate generally based on 8 to 15% of sales. Availability, quality, or price of the products can’t be easily controlled. Marketplaces need the largest and most appropriate content to satisfy the customer's needs. Therefore, Marketplaces have to be primarily focused on the customer.

💣Marketplace is commoditizing

It has never been so easy to launch and operate a marketplace with all the tools available today. One of the consequences is that most of the marketplaces are now selling the same products, from the same sellers, at the same price.

And that could be a major problem for marketplaces in the coming years if they do not find a way to differentiate. Some players are trying with additional services or subscriptions but will it be enough when everybody is doing the same ?

As Marketplace is an audience business, power balance will clearly be in favor of audience owners like TikTok which is testing its own marketplace with the Magellan XYZ project (more information with this great paper in french from our friend Julien).

🔮The Future of Marketplaces

We do think that successful Marketplaces will evolve in one of these 2 directions :

• Marketplaces that provide a solution to a clear pain of the market like providing transparency of second-hand products such as BackMarket is doing with electronic products or Upway with electrical bikes.

• Marketplaces that provide sellers with a complete infrastructure both logistics, software, and tools to optimize their sales.

Marketplaces which get stuck in the middle relying only on product aggregation may have a hard time.

🧰 Leading Marketplaces already are infrastructure providers

As a logistics and software infrastructure provider, the focus of marketplaces is now moving to the ecosystem. Those platforms provide:

• A complete fulfillment service with multiple logistics facilities to help with geographical expansion;

• A fully functional platform with traffic;

• Advertising solutions;

• A bunch of tools to manage and optimize sales;

This approach allows marketplaces to lock the relation with sellers by preventing them to work with their competitors.

When we look at some of the leading marketplaces, most of them have already moved toward an infrastructure model (see picture below).

💲 Infrastructure model, the solution to a sustainable business model ?

It is important to note that the marketplace business model does not follow the traditional retail cost structure as margins and operations are very different. Therefore, launching a marketplace is a strategy that must be very carefully considered.

The marketplace break-even point can also be hard to reach as take rates are pushed downward by the increasing competition and customer acquisition costs.

However, Amazon previously showed that a sustainable business model is not necessarily coming from the main activity. The infrastructure provider model could be the solution to make the marketplace business model sustainable.

For many years, Amazon marketplace has been operated with losses offset by high profits generated by Amazon Web Services. More recently, a significant new business line called “Other Revenues” has appeared in Amazon P&L. If Amazon is very discreet on it, analysts have deduced the presence of advertising revenue which would be estimated around $ 32 billion on an annual basis, with considerable growth over the recent months!

Retail is not magic and margins are not that easy to reach. The hybrid model could be a way for marketplaces to grab additional margin points, to reduce competitive pressure by locking the sellers, and therefore to make their business profitable.

❓What about Shopify ?

You may have noticed that we mentioned Shopify on the above graph. Shopify is not a marketplace but a CMS for e-commerce direct sales. Shopify always said that they wouldn’t build a marketplace.

However, in 2020, they launch an app called Shop that recently evolved with search and transactional functions that allow customers to buy products directly from the app (more information here). Shopify has never been closer to the marketplace world, and it could be a game-changer !

🏪 Is Q-Commerce really the future of grocery ?

We are often asked why, as a VC fund investing in companies that are shaping the Future of Commerce, we did not invest in Quick-Commerce, also known as Q-Commerce or Dark Stores.

While many players quickly emerged in a couple of months, all targeting high-density cities, it reminds us of the food delivery madness a few years ago.

Here is a summary of our thoughts.

🤔 What kind of business is Q-Commerce ?

Is Q-Commerce a retail or a logistics business ? Is it a new model of distribution ? of consumption ?

Q-commerce is essentially e-commerce selling grocery products including food and beverage with generally 1.500 to 2.500 available SKUs. Q-commerce is also a logistics company as infrastructure, processes and software must be well-tuned and efficient enough to fulfill a promise of delivery in less than 15 to 30 minutes.

In our opinion, Q-Commerce can not really be considered as a new model of distribution or a new model of consumption, as grocery e-commerce already exists and quick delivery from grocery stores has already been performed in high-density cities for a long time.

🔢 Q-Commerce economics

But the biggest question is about the sustainability of this business. Let’s dive into the economics.

Q-commerce average basket is around 25€ and gross margin around 30-35%. With a delivery cost of 4€ per order, there is only 4€ left to pay for the operations (picking, packing), the customer acquisition, and all the fixed costs. In other words, each order is a cost for the operator which is amplified today with crazy acquisition costs.

It means that, even with a very high frequency of orders, reaching profitability could be a very long shot. What are the options for the players ?

Increasing basket ?

• Price: most of the consumers are price sensitive with commodities and competition with all the players does not allow price flexibility.

• Volume: Not that easy as the number of articles is limited for each order to allow a quick delivery with a bicycle.

Increasing gross margin ?

• Higher volumes will help to get better COGS from suppliers for sure but will it be enough ?

• Product mix could also be a solution but will not be that easy as Q-Commerce is a destination platform where the consumer goes when he knows exactly what he needs.

These numbers lead us to 2 additional questions:

1. How to efficiently operate an e-commerce business with small basket, 35% gross margin and high operating costs and capex ?

2. How to succeed where food delivery platforms have difficulties to find a path toward profitability with similar basket size but enormous volume, higher frequency of buying and lower cost structure and capex ?

🪶 Q-Commerce, a step towards an asset light business ?

The answer to question 1 may come from Michael Moritz, the famous VC of Sequoia Capital.

Veteran VCs remember how the US company Webvan providing grocery delivery in less than 30 minutes became one of the biggest fails in the 2000s with $800 million lost in nearly 3 years of time (+2000 people lost their jobs).

Its founder Louis Borders explained a couple of years later the difficulties they were facing of:

• operational issues that were much harder than anticipated,

• a highly price-sensitive market preventing them to adjust the price,

• a competition with traditional players that uses external delivery services to deliver from their stores.

Michael Moritz was in charge of Webvan investment for Sequoia in the 1990s. More than 10 years later, he invested in Instacart. He was then asked by a journalist what was the learnings of Webvan investment and why Instacart is not Webvan. He answered that businesses are completely different as Instacart is a “crowdsource model for home delivery of groceries” that “offers a way to escape the enormous capital infrastructure burden that was one of the things that were so tricky and complicated about Webvan”. He added:

“Webvan was a company that was, in computer parlance, trying to design the underlying computer architecture, the operating system then a whole bunch of applications on top of it.”

For sure, times have changed, 2021 is not 2000, but have the issues encountered in the 2000s now been solved? Low margin, high capex, many hard jobs to manage at the same time (logistics, warehouse multiple locations, customer acquisition…) remains key factors of the business.

Therefore, as Michael Moritz suggested, an asset-light version of Q-Commerce may be the clue of this business and could be the strategy that main players will embrace tomorrow. Q-Commerce would finally become a logistics business, especially a last-mile delivery business.

Why did large retail players make partnerships with Q-Commerce players over the last months ? We can guess that it could be a way for them to learn how this market is working and then decide to use their own high-density network of stores instead of these dark stores.

🍴 Q-Commerce may finally be considered as a segment of the food delivery market

But the 2nd question is remaining. Why this model should perform better than food delivery as operated by UberEats or Deliveroo regarding the economics of both businesses?

The answer may be the purchase frequency. Groceries are recurring and necessary orders. Therefore, Q-Commerce could be considered as an alternative to other daily food providers. We made the exercise with Spring classifying the different solutions that exist on the French market (see the graph below).

We are just at the beginning of the Q-Commerce battle that will probably last for a while, considering the amount of money poured into the market over the last months. If we can’t guess who will be the winner at the end, we know for sure that customers are the winner for now.

🛺 The future of last-mile delivery

We are often asked by omnichannel retailers which company they should contract with to provide a last-mile delivery service as the number of players exploded over the last months.

Maddyness recently reported that the number of last-mile delivery companies increased by 46% in 2020 compared to 2019 with 87.900 new companies, most of them being as a freelance status. This does not come as a surprise as e-commerce logistics needs boomed during and after the pandemia.

This comes with increased traffic flows in cities but also environmental issues that politics are starting to monitor closely. How will last-mile players adapt to the market in a near future ?

The transformation already began with the multiplication of (micro) urban hubs that bring logistics closer and closer to the customer, one of the consequences being the inflating price of real estate as stated this week in a Wall Street Journal paper. With the Neighborhood Delivery Hub, Seattle has been experimenting with the massification of logistics flows through shared urban hubs for all the last-mile logistics services (e-commerce, food delivery…)

Mobile hubs are also developing. They rely on electrical trucks parked in dedicated parking slots that bring the products to the last meter. These mobile hubs can also be used as pick-up points which open up the possibility of creating new services such as a return logistics service that could be operated with a lower cost.

Finally, last-mile delivery by drones is coming to reality. Last june, Walmart announced an investment in the delivery drone company DroneUp after a trial of hundreds of drone deliveries from Walmart stores over a year period.

“The trial demonstrated we could offer customers delivery in minutes versus hours.”

Last week, Walmart and DroneUp announced the launch of their first multi-site commercial drone delivery operations from drone hubs with a promise of delivery in less than 30 minutes from 8am to 8pm, 7 days a week, for eligible Walmart customers.

What would be the next step for last-mile delivery ? Autonomous delivery could be the next one as Walmart invested in Cruise, the all-electric self-driving company, at the beginning of the year.

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a European investment fund dedicated to companies that are shaping the future of commerce. We champion doers who build innovative companies making commerce better, from enabling technologies to new commerce models and everything in between. More info about our investment thesis 👉 here.

More details here on FrenchWeb

Hello, it’s Alexandre from Spring Invest, a French investment fund that is shaping the future of commerce. Welcome to the latest edition of Retail Chronicles, our bi-monthly newsletter about emerging trends in (e-)retail, brands, and new commerce.

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🔥 RetailTech funding at an all-time high

The CB Insight report shows that retail tech funding tripled in Q1 21 (vs. Q1 20) to 28.9 Bn$, mostly driven by mega-rounds and delivery. Indeed, Q1 21 had 73 mega-rounds (deals worth 100m$+), up from 33 in Q4 20, leading to 14 newly born unicorns. The 5 biggest are Weee (grocery delivery - 2.8Bn$), Getir (grocery delivery - 2.6Bn$), Dutchie (marijuana marketplace - 1.7Bn$), Yotpo (customer review management - 1.4Bn$) and Paidy (buy now pay later - 1.3Bn$).

As for the business trends, here is what retailers and brands are focusing on :

• Personalizing the checkout-free experience with smart shopping carts (Veeve) and scan-and-go apps (Supersmart).

• Making store communication more efficient with communication platforms (Foko retail, Zipline).

• Personalizing e-commerce experiences with personalized search results (Bloomreach), personalized merchandising (Compat.io), virtual try-on (for makeup with Perfect or fashion with 3DLook), live streaming platforms (Kuaishou, Hero, Livescale).

• Boosting loyalty with transferable rewards such as crypto tools (Lolli), cross-brand wallets (Swapi), and convertible reward programs (Bakkt).

• Strengthening cybersecurity with fraudulent behavior tracking tools (Arkose Labs) and data privacy management platforms (Wirewheel).

• Optimizing the supply chain with visibility tools (Fourkites) and on-demand warehousing solutions (Flowspace).

• Upgrading to on-demand delivery with platforms connecting brands and retailers to local delivery carriers (Bringly, Ohi).

Last but not least, one item is flagged by most brands and retailers as the number one strategic priority: OMNICHANNEL. See below the number of earnings calls mentioning the word “omnichannel” for the past 5 years.

🏭 Manufacturing + 📱 Influence = 🛍️ Product Brands ?

You probably have already heard of brands being built by celebrities. There are hundreds of them: Ivy Park (Beyoncé), Victoria (Victoria Beckham), CR7 (Cristiano Ronaldo), FORVR (Jackie Aina), Skims (Kim Kardashian), …

In most cases, these brands are simply “powered by celebrities”, meaning that agencies are designing the products, sourcing the manufacturers, creating the brand identity, managing the distribution channels, while the celebrity posts on Instagram.

It seems unfair, right? Well, having an audience is what pays out these days.

From an influence perspective, this brand-building methodology has worked for years but only for mega influencers (actors, athletes, singers, etc.) so far.

Now, the question is: Could you make it work for smaller influencers ?

Interestingly, Pietra has recently launched its new marketplace to “democratize” influence-led retail, by allowing any influencers (from 1 to millions, being the mid to long-tail) to create their own product lines.

The platform connects creators with pre-vetted product designers, suppliers, manufacturers, photographers, and warehouse companies. That way, influencers can use the solution to make branded items in various categories such as coffee, clothing, fragrances, and makeup. So yes, now all creators need to launch a brand is a phone and an audience.

“Anyone with the drive and motivation to bring their idea to life can get access to the same infrastructure that the top creators historically have gotten. You no longer need to fly around the world, find a factory, beg them to work with you, plead for low minimums. We're trying to build a world where a creator, a single creator, can create the next best-selling brand.” Ronak Trivedi, CEO of Pietra

How does it work and how much does it cost ?

Designing products before it goes into production is free. The influencers cover the costs of manufacturing any items they design. Pietra charges a handling fee (0-4$) for any samples ordered, and a flat production fee to create up to 500 units of an item. It charges incremental fees for any product assembly, quality assurance, or warehouse work after the first 500 units are made (99$+ 0.25$ per additional unit). Finally, they charge a fee for services such as shipping and fulfillment (1$ in addition to the costs).

In return, Pietra helps with negotiations around issues like minimum order volume, deposits, and cross-border logistics. On the supply side, Pietra’s suppliers are audited, used by top retail brands, and offer the option to produce fair-trade, kosher, vegan, or cruelty-free products.

Once the creators have the products ready, they can either build their own e-commerce on Shopify (starting at 29$/month + 2% transaction fee) or sell their products directly through the company’s creator marketplace (5% transaction fee + 1$ per unit sold),

Is it really working ?

The concept is not entirely new (Moteefe, Spri.ng, Icon) but creators seem to love the one-stop-shop approach: 300 product lines were created during the beta period and 15,000 creators are on the waiting list to launch a product line. According to Pietra, most of these users are women, at about 80%, and their followings range from tens of thousands to millions (going back to the chart above we are talking about Macro & Mid Tier influencers).

Even though the value proposition seems very compelling for creators, it is quite unlikely that these influencers will be able to build successful tier-1 brands, especially with such commoditized products. Also, competition is fierce as there have never been so many brands on the market. By further lowering the barriers to entry it will simply intensify. On the other hand, and that is the beauty of the model, all creators do not need or want to build a tier-1 brand as selling branded products is also a way of diversifying their monetization options (even on a small scale) while strengthening the relationship with their audience.

🎙️ Ok Google, “Are you a retailer or a marketplace ?”

In this very interesting podcast, Google’s commerce president Bill Ready is talking about the growing shopping ecosystem. Key takeaways of the discussion :

➡️ Opening up the shopping ecosystem

For years, if a merchant wanted to list a product for sale on Google, they needed to buy an ad to do that, basically buying a customer from Google. In other words, it was an ad-driven product. Last year, Google made it free for any merchant to list all their products for sale. By doing that, the company saw 80% more listings in 2020 compared to 2019. The problem is that still very few customers actually want to buy directly from Google Shopping.

➡️ Is Google a retailer or a marketplace ?

We’re not a retailer, we’re not a marketplace. Google is about helping shoppers discover products, and sometimes letting them transact with in the platform. While the site looks and feels like a marketplace, Google’s utility provides something markedly different : we want to make sure users can discover the best products, the best values, the best sellers, and then seamlessly connect to those to those sellers.

The problem is that most of the time, helping the users actually means clicking out to the seller’s own website, which was fine as long as it could fuel the ad business but does not work for ad-free products (that were supposed to be bought directly on Google Shopping). That is why Google remains first and foremost an ads business as most of its decisions come down to maintaining its relevance in the ad world.

As in many businesses, the greatest threat comes from Amazon as they are continuously improving their own advertising infrastructure for merchants while optimizing the search engine for users, now generating 20$Bn in revenues as a lot of CPG brands have recently moved their budgets into the platform (read more here What Amazon is Turning Into? and here Amazon advertising business).

➡️ More shoppable video features

Google thinks there is a big opportunity for shoppable videos and bringing more shopping into video consumption, especially on Youtube. From their perspective, there is a tremendous amount of commercial intent on YouTube already with how-to videos, unboxing, and product testing. Google is therefore trying to bridge the gap between the discovery phase and the transaction phase.

📖 AAA+ reading list

➡️ It’s time to unbundle Instagram

➡️ Distribution and conversion models for consumer startups

➡️ Shopify for creators?

➡️ Lessons launching and scaling a D2C startup

➡️ The startup guide to building successful OKRs

➡️ There’s only a few ways to scale user growth

🐦 Tweet of the week: harder, better, faster, stronger

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a French investment fund dedicated to companies that are shaping the future of commerce. We invest both in Enablers, B2B companies providing innovative solutions to (e)retailers and brands, and Disrupters creating new models of distribution. Our investment approach relies on strong relationships with 50+ European Retailers and Brands in order to provide sales acceleration to our portfolio. We also provide operational support with a dedicated team of Venture Partners working with our portfolio on sales, communication, HR, and internationalization.

Hello, it’s Xavier from Spring Invest, a French investment fund that is shaping the future of commerce. Welcome to the latest edition of Retail Chronicles, our bi-monthly newsletter about emerging trends in (e-)retail, brands, and new commerce.

Subscribe now

❓ What is Amazon Turning Into?

Amazon has always been about insane consumer focus. In this 1999 interview, Jeff Bezos is crystal clear about that : “Selection, ease of use, low prices, more information to make purchase decisions with… plus great customer service”, “in the long term there is never any misalignment between customer interest and shareholder interest”…

But there are signs that this consumer focus is eroding. It would be an exaggeration to say, as some critics do, that Amazon is turning into Wish. Still, we can’t ignore the accumulation of forces pushing Amazon away from the consumer.

☁️ AWS

Obviously, Amazon Web Services is an astounding success. One of Bezos’ strokes of management genius has been to make sure internal services would stay under pressure by forcing them to compete with the outer world. In 2020, AWS generated $45.4Bn revenue for $13.5Bn operating income. Yet, AWS is not a consumer business, it’s an enterprise infrastructure play. This huge part of Amazon is just not consumer-facing.

📣 Amazon ads

Much has been said about Amazon’s advertising business. It’s hard to pinpoint the exact numbers as Amazon reports ads revenue merged with “others” and ads profitability merged with North America and International non-AWS business. Most analysts estimate that in 2020, ads represented roughly $20Bn in revenue and $10Bn in operating income. Of course, Amazon is not the first retailer to generate ads revenue, retail media has been a business for decades (and is currently seeing exciting developments). Still, incumbent retailers are being disrupted by Amazon, and emulating them is not necessarily the right move. Also, while AWS is neutral for consumers, Amazon Ads is arguably harmful to them as it directly prevents from improving product discovery.

At the end of the day, AWS and Ads, two non-consumer-facing businesses, together represent 100%+ of Amazon’s $23Bn operating income. This is no longer just a distraction. Consumers have gone from being Amazon’s customers to being Amazon’s product, ie. what Amazon is selling to its real customers.

🚫 Preventing consumer-seller interactions

This perception is reinforced by Amazon’s recent decision to sever all links between third-party vendors on FBA (Fulfilled by Amazon) and consumers. Once again, all marketplaces struggle against attempts to bypass them, and Amazon is perfectly in its right when it wants to prevent that. Still, this move has no obvious benefit for consumers and has some obvious downsides for them such as a reduced opportunity to get product information or no feedback loop for vendors.

⭐ Reviews and counterfeits

While we’re talking about product information, Amazon has been struggling with the issue of fake reviews. In October 2019, they allowed shoppers to leave a star review without any written review, in an attempt to dilute fake reviews under sheer numbers. It’s unclear if the move was a success, more like an admission of failure. On another front, 75% of new Amazon merchants come from China (and they’re doing everything in their power to increase that share). Those are harder to control and police. This also translates into increased counterfeiting issues, which are very hard to solve. To address those complaints, Amazon has set up a service similar to social media harassment reports. But it’s being gamed by malicious sellers preemptively reporting the legitimate trademark holders in much the same way trolls on Twitter preemptively report their victims.

🔗 Is Amazon Prime a double-edged sword?

Amazon Prime is a tremendously successful program. It gives customers free delivery plus an array of services against a monthly or yearly subscription. In December 2020, Amazon Prime had 142m subscribers in the US (more than the number of US households) of which 52% had an annual membership. In most ecommerce, shipping costs between $5 and $10. Having shipping de facto taken care of by an annual subscription is a huge cost advantage for Amazon.

Amazon Prime is the mother of all moats. It has entrenched Amazon as the default ecommerce vendor for 142m Americans. In our view, Prime gives Amazon such a powerful competing advantage that paradoxically it could become a major issue for them.

First, it allows them to take the consumers for granted, which is never a good thing in the long term. How many of the issues we mentioned above would have been solved if Amazon still had to fight for consumers?

Second, it’s a major invitation for regulatory intervention.

🚀 Will Amazon’s 2020s be like Microsoft’s 2000s?

Amazon today presents eery parallels with Microsoft in the early 2000s.

Jeff Bezos is being replaced as CEO by Andy Jassy, the current head of AWS. Steve Ballmer took the CEO seat from Bill Gates in January 2000.

Amazon has an inescapable grip on ecommerce with Prime. Microsoft had an inescapable grip on personal computing with Windows.

Amazon is aggressively leveraging its competitive advantage and has started to take customers for granted. As did Microsoft in the 2000s.

If history repeats itself, this decade could see Amazon’s profits increase tremendously while it becomes complacent, gets entangled in countless antitrust lawsuits, and turns into just another incumbent.

💨 The Quick-Commerce Battle Royale in Paris

Quick-commerce is a promise of delivery times under 10 or 20 mn. The market is blazingly hot these days in Paris. Not a week passes without someone announcing a new initiative.

Startups:

After Frichti and Kol, Cajoo launched in February 21 after a €6m fundraising; market rumors say they are in the process of raising another €20-30m.

Those Frenchies have been joined by European players, Flink, Gorillas and Glovo, which raised a whopping €450m in April 2021. And it’s not over : Dija, Zapp, Weezy, Getir are currently hiring!

Incumbent retailers:

Since they could start with their existing stores instead of having to invest in new dark stores, incumbents launched early, generally by finding a partner for the last-mile delivery : Monoprix works with Amazon Prime Now, Carrefour with Ubereats and Deliveroo, Casino with Ubereats…

Besides, they found another way to leverage their local footprint. Leclerc, Monoprix or Auchan have launched “pedestrian drives” which, beyond the oxymoron, render the same service : your groceries, in minutes.

We’re closely monitoring this space but haven’t made a move yet. Our takes so far:

• Even more so than other delivery plays, quick-commerce is essentially about logistics;

• Quick-commerce logistics is very specific, being optimized for speed; mutualizing capex across other logistics models is difficult;

• Density is central to performance, this explains why Paris, Europe’s densest capital city is attractive; it also means that the biggest player will earn an economic advantage;

• The market might not be as large as expected, as speed often ranks below reliability or accuracy in customers’ polls.

In a Battle Royale, there can only be one survivor. Or zero.

Before the name of the lucky winner is known, we might experience a massive transfer of purchasing power from VCs to consumers.

🍸 Cocktail Ecommerce

Our friend Julien Fontaine founder of OpenString writes a fascinating case study (in French) about Sourced Craft Cocktails, a US startup that had been selling cocktails online since 2015. Prior to the Covid crisis, Sourced Craft essentially worked for corporate events. Like most companies in that field, they saw their business disappear overnight when covid shut down most events.

In just 3 days, Tim Angelillo, the CEO, pivoted to B2C. He identified both the demand of locked-down consumers and the opportunity of thousands of unemployed baristas. He ended up growing 800% during the pandemic and delivering cocktails to 2000 customers a week.

Sourced Craft Cocktails is the archetypal startup success story, with all the ingredients

• Drama: nothing beats losing all your business overnight

• Resilience: if life gives you lemons, make margaritas

• Insane reactivity: yes, you can launch a new offer in 72h

• Tech stack: it’s no magic, it runs on SaaS tools

• Dancing with regulators: selling alcohol in the US is VERY constrained

• Opening new markets : DTC omnichannel is the new normal

Well worth a read.

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a French investment fund dedicated to companies that are shaping the future of commerce. We invest both in Enablers, B2B companies providing innovative solutions to (e)retailers and brands, and Disrupters creating new models of distribution. Our investment approach relies on strong relationships with 50+ European Retailers and Brands in order to provide sales acceleration to our portfolio. We also provide operational support with a dedicated team of Venture Partners working with our portfolio on sales, communication, HR, and internationalization.

Hello, it’s Alexandre from Spring Invest, a French investment fund that is shaping the future of commerce. Welcome to the latest edition of Retail Chronicles, our bi-monthly newsletter about emerging trends in (e-)retail, brands, and new commerce.

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♻️ ThredUp: a deep dive into second-hand

As you know, we are closely following what is happening in the second-hand market (see this previous edition). Last week, ThredUp, the online consignment store for second-hand products, went public on the NASDAQ (TDUP), raising 168m$ at a 1.3bn$ valuation. Like almost all recent IPOs, the market warmly welcomed this new entrant as ThredUp closed the day up 42% from its listing price.

Who is ThredUp?

You are probably familiar with companies like Vinted, Poshmark, or Depop but ThredUp has a very different model than these companies as users do not transact directly with each other.

As a seller, you ship your items directly to ThredUp, they handle inspection, photography, pricing, listing, and then sell the product on your behalf. For each item sold, ThredUp takes a commission that varies from 20% to 97% (yes, 9-7) mostly depending on the price of the item sold.

ThredUp in numbers

In 2020, the company made 186m$ of revenues (still in the red zone with 47.9m$ of net loss - questionable but that is not a problem for an IPO these days), has 1.24 million active buyers (+24% from 2019) who visit the site an average of 6 times a month and place 3.2 orders a year and 428,000 active sellers (-4% from 2019). In 2020, ThredUp processed a total of 4 million orders.

What is so special about ThredUp?

There are 3 things that essentially made ThredUp so special :

1. 📦 A logistic-first business

2. 📊 Distribution-like unit economics

3. 💰 Cracking the working-capital issue

Now, let’s dig in…

1. 📦 A logistic-first business

Even though the company is marketed as a second-hand marketplace, we believe this is first and foremost a logistic business.

Indeed, to win the game ThredUp has no other choice than to reach excellence at opening operation centers that collect, process, store, pack, and ship items, as well as handle returns. Not to say that there are no marketplace challenges like balancing supply and demand but what they are doing on the logistic front is way more challenging as it is unprecedented.

To be very concrete, ThredUp has to solve two main logistic problems :

▶️ The entire flow is composed of single-SKU products

That is why ThredUp has to re-build an entire logistic business that works well with single-SKU products, meaning that every item processed is unique, came from, or belongs to an individual seller and is individually tracked using its own SKU. Therefore, each facility runs on a suite of custom-built applications specifically designed for that purpose.

▶️ There are no barcodes on clothing.

ThredUp is working on a real-time database to identify, categorize and value each secondhand clothing item that they receive. Their data set spans over 100 million unique items processed across 35,000 brands. By doing that ThredUp is optimizing its logistic process while leveraging data to optimize economic decisions, such as pricing, seller payouts, item acceptance, merchandising, and sell-through.

Last but not least, just look at this number: out of the 1,862 employees, 1,570 are production and operating workers located in one of the 4 warehouses.

Logistics is what they do but most importantly logistics is WHAT THEY SELL. Not only this is the value propostion to individual sellers but they are also starting to work on enabling brands and retailers (21 so far) to plug into their own operating platform to unlock the resale value in the closets of their customers.

2. 📊 Distribution-like unit economics

The second element that makes ThredUp so special is unit economics.

Now that we have seen that ThredUp does not operate as a traditional marketplace, let’s look at the numbers. While the marketplace’s commission rates typically range from 5% to 30%, ThredUp takes a 68% cut (FY 2020), taking from 20 to 97% on transaction values. It sounds surprisingly high, right? Well, again, this is because ThredUp is no traditional marketplace.

A quick note on marketing, this is interesting how ThredUp completely reversed the message from a marketplace mindset as “WE TAKE X% of commission on the transaction” to a true proposition of sharing the profits with the sellers as “YOU GET an X% cut on the transaction”. This is coherent as they are trying to move away from marketplace comparison to be more of a business partner to sellers.

Going back to our number, is 68% enough to reach sound unit economics?

That is a fair question as the main recurring problem of the second-hand market is that the value of each item is very low by design (as products are sold at a fraction of their initial value). During the past 10 years, startups have followed two paths to address this economic issue by being either :

▶️ a “don’t-touch-the-product” marketplace like Vinted, or

▶️ a “high value-added-product” marketplace like Vestiaire Collective.

We believe ThredUp is opening a third economic path…

Indeed, while the average item value listed on ThredUp is very low (35% are priced below 10$, 36% are between 10$ and 20$, 21% are between 20$ and 50$, and only 8% are above 50$), the average order value (AOV) is very decent at 68.95$ as composed of 4 items on average, leaving ThredUp 46.92$ of revenues per order (the 68% commission-like) after deducting what they owe to the sellers.

Further deducting permanent pricing discounts made by ThredUp to display promotions, the company is still generating 32,32$ gross profit per order. Finally, when deducting the entire distribution center operating expenses and payment processing expenses, it leaves ThredUp 12.74$ per order.

ThredUp has therefore solved the paradox of selling mass-market second-hand products at a very low price (15-20$ on average) while still having unit economics consistent with an operated business.

3. 💰 Cracking the working-capital issue

As with any distribution-like model, one of the main critical issues of building physical product inventory is… CASH.

That is why ThredUp operates a “consignment model”. It means that they do not pay sellers for inventory until it has successfully been sold and the two-week return window has passed. Even more interesting, when ThredUp credits sellers’ accounts with their payout, sellers then take an average of 60 days to use their funds.

To conclude…

ThredUp is a great mix between old commerce basics (consignment model, owned-logistics, profitability that is highly correlated on how efficiently goods are moved) together with innovative ingredients (sourcing supply to individuals, favorable working capital dynamics, tech-enabled logistic flows, data-optimized decisions).

This story illustrates precisely what we mean by “future of commerce” at Spring: a model that has proven fundamentals, that can be operated more efficiently with the help of technology, data and the courage of doing hard things, so that it results in unlocking a significant value on large markets.

🏆 The a16z Marketplace 100 is out

Andreessen Horowitz has just released its ranking of the 100 largest consumer-facing marketplaces (the full PDF report is available here). Few takeaways below :

▶️ Instacart (grocery delivery) accounts for 70% of the total GMV

▶️ Second-hand fashion is booming: ThredUp is up from #17 to #7, Vinted is up from #94 to #82, and Depop is entering the ranking as #46.

▶️ COVID losers are childcare, ticketing, and office space marketplaces

▶️ COVID winners are celebrity engagement, grocery delivery, and wholesale

▶️ The 5 fastest-growing startups are growing at more than 10x YoY (!). Two of them (Mercato and Dumpling) are connecting consumers with local grocery providers.

🐦 Tweet of the week: scale to a 9-figure acquisition

📷 Picture of the week: the Suez canal

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a French investment fund dedicated to companies that are shaping the future of commerce. We invest both in Enablers, B2B companies providing innovative solutions to (e)retailers and brands, and Disrupters creating new models of distribution. Our investment approach relies on strong relationships with 50+ European Retailers and Brands in order to provide sales acceleration to our portfolio. We also provide operational support with a dedicated team of Venture Partners working with our portfolio on sales, communication, HR, and internationalization.

Hello, it’s Laurent from Spring Invest, a French investment fund that is shaping the future of commerce. Welcome to the latest edition of Retail Chronicles, our bi-monthly newsletter about emerging trends in (e-)retail, brands, and new commerce.

💬 Social Commerce is leading the future of commerce

Médiamétrie recently published some data regarding current internet usage in France:

• 8 out of 10 French people consult at least one social network;

• Under-25s spend 2h12 each day on social networks (50% of surfing time), the rest of the population spend 45' on average;

• French people are visiting 2.7 social networks on average every day (3.9 for 15-24 yo);

• 27% are using social networks to discover new products.

It will come as no surprise that social networks are becoming a new playground for brands and distributors. New initiatives have been gaining traction over the latest few months.

➡️ WhatsApp.

WhatsApp now is a new channel for customer relationship management, allowing to engage in conversation with the customer in a familiar environment. LSA recently published a review of use cases experimented by a few brands and retailers such as Carrefour, Lidl, Go Sport, Nespresso, or Fnac.

➡️ Instagram.

Instagram is a popular social network for brands working on their image. This channel is particularly adapted to decoration or cosmetics such as Clarins, whose weekly revenues have increased by more than 40% through social networks.

➡️ Pinterest.

With 459 million monthly active users worldwide watching a billion videos per day, Pinterest recently announced that it was building a place to shop with the launch of several services dedicated to retailers and brands:

• Pinterest Première, a new video ad offer for retailers to push their products at the right moment on the right audience;

• Pinterest Conversion Insights, a new measurement tool to better understand their impact and performance on the platform;

• Pinterest’s Try on, a feature allowing to virtually try on some products by users;

• Pinterest Pins and Lens features to help users find more easily the product they love and click to buy it.

➡️ Twitch.

This video social network has been popular with gamers and related brands for a long time. Twitch (acquired by Amazon in 2014) is now used by all kinds of brands, especially in the beauty industry like Burberry or luxury industry like Lexus. Modern Retail dedicated a paper to explain why brands are investing in this new channel which brings together 7 million people each month (Why So many brands are testing out Twitch). The main lessons are:

• The audience is no longer limited to the gaming community;

• Twitch allows for Amazon affiliate links which makes a great channel for ANVB (buying directly from the channel is not allowed yet);

• Brands can launch their own channel or sponsor an influencer;

• Twitch allows brands to reach night owls customers;

• Twitch is a social network that works on an intuitu personae basis, therefore it really depends on the streamers chosen by the brands that must be authentic;

• The format relying on many hours streams make it difficult for brands to control the content.

➡️ TikTok.

TikTok is another trendy video social network that many players have been using for a couple of months now. After a successful pilot last December, Walmart made a second livestream shopping experiment on TikTok last week. La Redoute also experimented the platform with La Redoute Challenge. Even Amazon, which owns Twitch, is using the TikTok social network to reach new customers. The new Abd Al Malik series, Cité, that is produced by Amazon Prime Video will thus be exclusively published on TikTok!

Tiktokification became a common word as more and more people are now looking for products that have been seen on the platform on the different marketplaces. As an example, “TikTok leggings” is one of the most-searched terms on Amazon since February. As announced earlier this year, TikTok will adapt its strategy and will aggressively expand into the e-commerce space in 2021 allowing users to share referral links to products and automatically earn commissions on it.

Social networks are clearly offering brands and retailers new ways to sell products. Social commerce is expected to reach 315 billion dollars in the US in 2021. However, brands must be careful as influencers may finally become the new retailers owning the customer relationship.

To go further and better understand the characteristics of each of the networks, we invite you to read the well-detailed guide of E-commerce Nation available in French here.

🚚 Micro Fulfillment Centers

E-merchants know how much the delivery is as important as the shopping experience. The explosion of e-commerce has a direct impact on last-mile logistics. Havas recently released some data highlighting market trends :

• The growth of the last-mile delivery market is expected to reach +78% by 2030;

• Number of delivery vehicles in cities to reach +36%.

In addition to these challenges, there are consumer expectations:

• For 72% of consumers, delivery is the most important criterion when making an online purchase;

• 85% are ready to switch to another e-merchant if they can have more delivery options;

• 50% expect 24h-free delivery;

• 55% say that a 2-hour delivery option would increase their loyalty to e-merchants.

Rethinking the ways of delivering parcels to individuals has become essential. And this can only be done today in consultation with all stakeholders, e-merchants, logisticians as well as cities whose political decisions will directly impact the market.

Will urban micro fulfillment centers be the solution to both meet the demands of consumers and the new challenges of e-commerce ? They could be a solution to several issues :

• Bring logistics closer to the end consumer to optimize the last mile;

• Massify logistic flows to limit the number of delivery vehicles ;

• Allow the use of more ecological means of ecological travel.

Initiatives are multiplying like Altarea-Cogedim, a mall operator which announced last week its project to help optimize the delivery of goods to the heart of city centers by transforming existing real estate assets into assets dedicated to urban and last-mile logistics. A first logistics center is planned in Paris in the coming months.

Another interesting initiative is taking place in the United States. After a first trial realized 2 years ago, Walmart is now opening mini-warehouses in a hundred supermarkets. These automated in-store fulfillment centers can operate 1.000 orders a day in a space as small as 1.000 m² while manual picking is limited to 100 orders a day. Other US retailers are considering launching similar initiatives. This is just the beginning of the transformation of last-mile logistics.

🔗 Marketplaces vs Brands : who owns the customer?

As we regularly cover in our newsletters, most of the brands are now working to recover the direct customer relationship by shrinking the retailer. The latest example is Adidas which announced last week that they plan to achieve 50% direct-to-consumer revenues by 2025 (80% of its growth). As marketing technology becomes more and more accurate, customer data is like gold for brands.

Starting on April 8, 2021, Amazon will no longer share customer data (name and addresses) with third-party sellers who use the Amazon fulfillment service in the US, unless they explicitly need it, especially for tax purposes or customer support.

Amazon has never been very generous with third party-sellers as complete data such as email addresses or demographics data are not shared. But worse, as explained by Michael Waters in “The growing customer data war”, customer data has become an especially touchy subject in the third-party seller universe because of accusations that Amazon has used data from the marketplace in order to build competing products then sold as Amazon Basics products.

This situation raises the question of the ownership of the customer and its data.

• Marketplaces provide an infrastructure tool, value-added services (product promotion, logistics, etc.), and access to a considerable volume of customers.

• Third-party sellers are in charge of product sourcing and sometimes design, production, and branding. But they mainly are responsible for the quality and have to ensure the quality, therefore the guarantee and after-sales service.

Beyond the contractual subject, who really is the most legitimate as both players need each other to operate ? The question will not be that easy to answer.

📰 Bye Bye print catalogs ?

Print catalogs have been a key promotional tool for retailers for a long time. Its replacement by digital marketing has been predicted several times, but paper is still resisting.

However, print catalogs could finally be closer to the end than ever under the pressure of environmental, economic, and regulatory factors:

• Harmonization of European laws which already prohibit the print catalog in some European countries;

• Especially in France, the “Stop Pub” system should switch to an opt-in "Oui Pub" approach. Each consumer would have to explicitly indicate that he or she wants to receive a print catalog in his letterbox;

• The foreseeable disappearance of the cash register receipt and paper reduction coupons;

• The Covid-19 pandemic has given brands and retailers a taste of digital marketing allowing better reach and more reliable measurement of ROI.

As an example, Ikea announced that they will stop printing their catalog in 2021. On the supermarket side, initiatives are more timid. After Auchan, which experimented with zero paper marketing last year in one of its stores, Leclerc is following the trends this year, with a single store as well.

If we welcome the initiative, we can only note the timidity of the supermarket players to embark on such an adventure. To fully understand the challenges at the societal level, our friend Laurent Landel (CEO of Bonial) and Olivier Dauvers who is no longer presented, published a very interesting study to understand how French consumers are considering the print catalog. The main lessons are :

• 69% of respondents did not apply a Stop Pub sticker to their mailbox but 49% consider it;

• 75% are in favor of Oui Pub system;

• The younger the respondents, the more their sensitivity to print advertising increases. 40% of people under 34yo have applied a Stop Pub sticker ;

• 55% of respondents find the paper catalog nevertheless useful, especially among the youngest (over 60% of those under 35yo);

• 80% of respondents consider that the marketing approach relying on print catalogs is harmful to the environment;

• However, the convenience of paper versus digital media is highlighted by all groups of respondents, even if 72% of them are ready to switch to digital.

The market is finally slowly moving forward; new retail media solutions will certainly be major drivers to help change habits.

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a French investment fund dedicated to companies that are shaping the future of commerce. We invest both in Enablers, B2B companies providing innovative solutions to (e)retailers and brands, and Disrupters creating new models of distribution. Our investment approach relies on strong relationships with 50+ European Retailers and Brands in order to provide sales acceleration to our portfolio. We also provide operational support with a dedicated team of Venture Partners working with our portfolio on sales, communication, HR, and internationalization.

Hello, it’s Xavier from Spring Invest, a French investment fund that is shaping the future of commerce. Welcome to the latest edition of Retail Chronicles, our bi-monthly newsletter about emerging trends in (e-)retail, brands, and new commerce.

Subscribe now

🎆 The Shopify Moment

The 2020 numbers have been released, Shopify has processed $120Bn of GMV, doubling its performance from 2019. As a comparison, Amazon’s 3rd party merchants drove $300Bn GMV in 2020, up from $200Bn in 2019.

Of course, these numbers are not directly comparable since Amazon Marketplace actually sells products while Shopify is “just” a tool helping merchants to create and operate their e-shops.

Still:

• Shopify is surfing the DTC wave. Everybody buys on Amazon but no one shops there. Established brands and newcomers see that they are commoditized on Amazon. Only one in five amazon searches includes a brand name. They need an ecommerce channel allowing them to differentiate their products and to offer a compelling shopping experience. Many are choosing direct as one of their channels.

• Shopify is adding customer acquisition. They have partnered with the main social media (first Facebook and Instagram, then TikTok) to allow Shopify customers to seamlessly create and deploy ad campaigns on those networks.

• Shopify is adding payment integration. They have integrated their payment processor, Shop Pay, into Facebook, allowing consumers to buy without leaving Facebook or Instagram. No doubt, their next step is to extend this integration to other social media.

• Shopify is scaling fulfillment. This week they raised $1.5Bn capital and they’ve been pretty explicit that a good chunk of that money will go toward building-up Shopify Fulfilment Network.

All in all, Shopify is growing to be a major member, if not the cornerstone, of what Ben Thompson calls the “Anti-Amazon Alliance”. Granted, they capture a far smaller bit of each purchase than Amazon, but they are very aggressively adding value and stickiness to their offer.

Now, lest you believe that we’ve turned into blind Shopify cheerleaders, I’ll end with an assertive take by China ecommerce expert Tanya Van Gastel on why she thinks Shopify’s partnership with Alipay will ultimately fail in China. Tanya’s main points:

• Shopify’s merchants mainly reach consumers through social media, but Chinese social media don’t do targeted ads, and untargeted ads are horribly expensive

• China’s main social media is WeChat and it will be hard for Shopify to draw traffic away from their own WeChat shops

• The Chinese consumers shop through apps, not a web browser

💥 Amazon at a crossroads

🏝️ Jeff Bezos is stepping down

After founding Amazon and heading the company for 27 years, Jeff Bezos just announced that he’ll take some distance and cede the CEO position to Andy Jassy, the current head of AWS.

This is a big deal. Jeff Bezos is a giant. He grew Amazon to 1.3 million employees and half a trillion GMV. He’s also a management genius. He kept the whole company fit by forcing each major division (Amazon Marketplace, Amazon Web Services, Fulfillment By Amazon, …) to competitively sell its services to the outside world.

Amazon is more powerful than ever but is facing increasing pressure from all sides: regulators, foreign competition (in Asia), or domestic competition whether from incumbents who’ve raised their game (Walmart…) or the “Anti-Amazon alliance” of Facebook and Shopify.

❓ Is Amazon targeting direct-to-consumer businesses ?

Speaking (again) of Shopify, Amazon just confirmed they have acquired Selz, a Shopify competitor. Selz is tiny, the Australian company has 50 employees and only raised $11m. Interestingly, Amazon used to have an in-house Shopify-like product called Amazon Webstore, which they closed in 2015.

It’s unclear why Amazon did purchase Selz, its customer base is insignificant, and there’s no hint that they hold a particularly outstanding technology.

Many doubt that Amazon is seriously considering launching a direct competitor to Shopify. Most ecommerce players already have a strong dependency on Amazon (unless it’s their biggest competitor) and they’ll think twice before giving them a strategic part of their infrastructure (this has been a major argument of Azure salespeople in ecommerce). Besides, as Amazon seller Molson Hart said on Twitter, “Tobi [Lutke, Shopify’s CEO]’s 1st priority will prevail over Jassy [Amazon’s new CEO]’s 49th.”

Our take is that Amazon mainly wants to better understand Shopify. As Benedict Evans says, entrenched players are seldom displaced by head-on competition but more frequently by a newcomer addressing “an underlying customer need in another way”

At the most basic level, Amazon and Shopify don’t serve the same customers. Amazon’s customers are the consumers while Shopify’s are the merchants. This translates into fundamental differences: Shopify, for instance, will never increase competition between its merchants by aggregating product listings for consumers. Amazon wants to better understand Shopify’s strengths and weaknesses.

📢 Amazon’s advertising business

Juozas Kaziukénas at Marketplace Pulse talks about Amazon’s ad business. Amazon’s pages used to recommend products based on algorithms designed to optimize customer interest. But these recommendations have recently been replaced by ads.

Over the past year, “Sponsored products related to this item,” “Four stars and above” and “Brands related to this category on Amazon” advertising sections have all but replaced organic “Customers who bought this item also bought” and “Customers who viewed this item also viewed” suggestions. 

Amazon’s ad business has grown to $20Bn in 2020 and it’s probably insanely profitable, at least $10Bn. But ads breach Amazon’s commitment to the consumer. As Juozas puts it :

Advertising clouds the retailer’s ability to innovate on discovery, personalization, and any form of interactive shopping. At a certain point, every decision to improve the experience competes with lost revenue from advertising it would replace.

One possible reaction by Amazon to Shopify’s growth would be to double down on its commitment to consumers. But will they forfeit $20Bn in revenue?

🧱 Amazon’s latest investments

Back to Amazon’s acquisitions, Modern Retail has combed through their recent takeovers and investments and inferred some strategic priorities:

• Fulfillment services: One Vim, SpartanNash, Aurora, Deliveroo, Rivian, Zoox and France’s Colis Privé…

• Customer Service: Twilio, Qdigi…

• Sleep: Endel, Hatch Baby…

• Connected Home: Ring, Scout Alarm, HouseJoy, Garageio, August, SmartRent, Prefab…

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a French investment fund dedicated to companies that are shaping the future of retail. We invest both in Enablers, B2B companies providing innovative solutions to (e)retailers and brands, and Disrupters creating new models of distribution. Our investment approach relies on strong relationships with 50+ European Retailers and Brands in order to provide sales acceleration to our portfolio. We also provide operational support with a dedicated team of Venture Partners working with our portfolio on sales, communication, HR, and internationalization.

Hello, it’s Alexandre from Spring Invest, a French investment fund that is shaping the future of commerce. Welcome to the latest edition of Retail Chronicles, our bi-monthly newsletter about emerging trends in (e-)retail, brands, and new commerce.

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🎙️ Clubhouse, what’s in it for consumer brands?

As a reminder, Clubhouse is a new type of social network based on voice - where people around the world come together to talk, listen and learn from each other in real-time. The app was released in early 2020, available on invitation and iOS only. Since then, the phenomenon has grown exponentially, now attracting millions of users each month, and regularly described as “the next big thing” in social networks. In January 2021, the startup raised $100 million at a $1 billion valuation, led by Andreessen Horowitz (read the investment story here).

There are still many questions around Clubhouse’s future, like the business model, the moderation, the privacy, etc. but there is something unprecedented here that deserves our attention. Like many other social networks, there will probably be a place to take for brands. We are still in the early days but here is a list of a few ideas on how consumer brands could benefit from a presence on Clubhouse :

➡️ Acquire new customers: we see more and more sponsored rooms where brands showcase their products, their benefits, tell the back story, how products are being used, etc. and eventually share a discount code (from 5 to 50%), available for the duration of the event to create scarcity. Surprisingly in a world that is moving towards video-shopping, brands say it drives traffic to their Instagram accounts and e-commerce websites as potential customers are desperate to see pictures while listening to a new way of presenting a product based on audio. This new format is highly interactive for customers as they can ask questions but also for young brands that can test value proposition and see how customers react and what is important to them.

➡️ Boost e-commerce conversion: some brands are starting to think about opening a 24/7 room for “last-minute questions” from customers who are about to buy a product online but do not find the answers to their questions (size, return policy, warranty). Customers can therefore join the room and simply ask the question. It can be very difficult to moderate but also promising for brands, since understanding non-conversion is one of the major blindspots of e-commerce merchants. Indeed, it is now fairly easy to track and understand how and why a customer makes an e-action, but it is still very hard to understand why they DON’T do something. Clubhouse could open a new conversation channel, therefore challenging the aging customer support chatbots with a more interactive and human touch. Some brands are even talking about building a « Peer2Peer customer support » where existing customers could enter a room as a speaker and answer questions from other potential customers.

➡️ Gather feedback from customers: most modern brands are already using different mediums to gather customer feedback (private events, Typeform, texting, direct calls, etc.) and empower customers. The best brands even manage to leverage the relationship with customers to co-create the next products to launch. However, Clubhouse offers a very convenient alternative for customers to speak up while interacting with each other as a community. On the medium itself, early adopters say it’s much more fun to engage with a brand in Clubhouse than filling up a Typeform.

➡️ Improve brand awareness: we see more and more brand founders using Clubhouse to speak up about several highly engaging matters like diversity, inclusion, gender equality, salary transparency, explaining how they take them into consideration while managing their startups. Of course, this could also be done with articles and podcasts but again, this live format sounds very much « authentic ». Indeed, founders can’t hide behind a well-articulated article written by a top PR agency. They are here, now, live, with their strengths but also weaknesses and doubts. That way, brand story-telling sounds very much authentic, a true revolution in a world of everything-washing.

In addition, companies are also leveraging clubhouse for other corporate matters like finding smart money and advisors by pitching VC and business angels or recruiting talents by launching « Ask-me-anything » rooms about their culture while sharing open positions.

CONCLUSION: These mechanics may sound relatively long-shot for most brands but Clubhouse is spreading very fast, and media positions on social networks are easier to take in the early days when the audience is eager to participate, engage in rooms and join brand’s clubs than later down the road when the media will be too crowded. Bottom line, there is room to test things and very few downsides trying.

🛍️ E-commerce 2020 in 6 numbers

The FEVAD has just released its annual report about French e-commerce :

• Volumes have increased from 103,4 to 112.2 billion € (+8.5%)

• E-commerce market share is now at 13,4% (we've been gaining roughly up to one point of market share per year, so in 2020 we have gained 3-4 years of growth)

• 41,6 million e-commerce buyers (+1,5 million vs. 2019)

• Product sales have jumped + 29% (with or without marketplace) and + 42% for FMCG alone (food), and + 25% for non-food (best categories being beauty, health, furnishing and decoration)

• Omnichannel business have made the most progress with gains of 53% (and peaks of + 100% during lockdowns) against 11% for pure-players

• Click and collect has exploded with more than 41% of users (vs. 28% in 2019)

Read more on LSA here.

📊 Facebook : winning over e-commerce advertisers

For years, major social media companies like Facebook have been fighting to win over retailers’ and brands’ advertising budgets by pitching themselves as the new go-to place that people go to discover and find new products.

That’s why they’re constantly looking for new advertising formats and features that they can say gives them an edge over the other platforms. And that’s also why they are all copying each other to fight against these hedges, the most recent example being the “stories”, initiated as a core format by Snapchat, then copied by Instagram, Facebook. and Twitter.

➡️ Checkout: the feature allows people to buy products directly from retailers and brands’ Instagram accounts without having to leave the app. Interestingly, the launch of Checkout shows that Facebook started to take on more responsibility for other parts of the buying process. For example, Facebook sends order and shipping confirmation emails to the customer. Problem: brands have to give up some control over the customer’s relationship, which may explain why only “hundreds” of retailers are using it.

➡️ Shops: working closely with the big CMS providers (Shopify, BigCommerce, and WooCommerce), companies on Facebook Shops can direct customers to purchase either through their own websites or through Facebook’s own Checkout (if the company has that enabled).

➡️ Live: In addition to the Facebook Live test that enables Pages to showcase products in their stream, Facebook recently acquired a video commerce startup Packagd, which is focused on enabling users to make direct purchases of products via live-stream, unboxing-type videos.

➡️ Support: Facebook recently made the acquisition of Kustomer, a startup focused on customer service technology and chatbots. As a reminder, Kustomer's platform provides a single-screen view of conversations between businesses and consumers among different channels (phone, email, webchat, and messaging) to help customer service agents minimize repetitive tasks.

More here from Anna Hensel about other players (Google, Snapchat, Pinterest, and TikTok)

🎧 Podcast : Spring x Le Café de l’E-commerce

Laurent has been invited by Le Café de l’E-commerce on its podcast 100% focus on e-commerce, digital and social media for the #069 episode. We are discussing many things like DNVB, ONVB, consumer brands, e-commerce tools, the growth of Shopify, what KPIs we are expecting as investors, etc.

Other topics on the menu: Alma 49 million € fundraising, Jules clothing repair service, Maison Verte product subscription, Barilla Group playlist for pasta al dente, Amazon in Poland, and Céline X TikTok.

➡️ Link to listen to the podcast : here.

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a French investment fund dedicated to companies that are shaping the future of retail. We invest both in Enablers, B2B companies providing innovative solutions to (e)retailers and brands, and Disrupters creating new models of distribution. Our investment approach relies on strong relationships with 50+ European Retailers and Brands in order to provide sales acceleration to our portfolio. We also provide operational support with a dedicated team of Venture Partners working with our portfolio on sales, communication, HR, and internationalization.

Hello, it’s Laurent from Spring Invest, a French investment fund that is shaping the future of commerce. Welcome to the latest edition of Retail Chronicles, our bi-monthly newsletter about emerging trends in (e-)retail, brands, and new commerce.

🔮 2021 trends

January is a traditional time for predictions for the year to come. Even if the COVID-19 context does not make it easy, current deal flow and our interactions with retailers and e-merchants can shed light on some 2021 trends:

• Omnichannel as a new normal: omnichannel businesses have shown great resilience in 2020; from small stores to large retailers, from small brands to large e-commerce players, omnichannel is a strategic issue that will mobilize important operational and technical resources (unification of information system - CRM, ERP, WMS, standardization of data, full digitization of stocks, the transformation of supply chains…).

• Direct-to-consumer strategy: brands should probably accelerate their direct-to-consumer distribution strategy.

• Logistics is booming as we said in a previous newsletter. The sector should face many issues :

  • Maintaining efficiency while sales volume are drastically increasing;

  • Optimizing delivery strategy, especially for large cities (last-mile fulfillment centers, dark stores, local pick-up…);

  • Revers logistics;

  • Value-added services to e-merchants logisticians ;

  • Digitalization of processes (upstream and downstream supply chains);

  • Mechanization or automation of warehouses.

• Retail Digital Media: trends began in 2020 with an increasing budget in digital media, driven by regulatory and environmental issues, and growing interest for drive-to-store solutions; new habits of retailers and brands using more and more digital media providing better reach and KPIs will probably remain in 2021;

• Customer acquisition and retention strategy:

  • Influence marketing and how to create and manage a community to establish elements of trust ;

  • Social network-related commerce: Instagram, TikTok…;

  • Live/video shopping;

  • Customer engagement (as people are less visiting physical stores, are chatbot or AI the right solution ?).

• Circular economy:

  • Second-hand products : Because of the Covid Crisis, consumers should pay more and more attention to their budget which should accelerate the second-hand market;

  • Reconditioning: e-commerce is growing fast increasing return logistics issues and the need for dedicated channels to sell those products.

• Make or buy : environmental (sustainable approach), business (reducing the time of production or repair) and technological issues (technologies such as 3D printing are now more mature) may enhance the maker trends.

• Cybersecurity issue: (e-)retailers are still facing many threats (payment fraud, e-commerce tag hacking,…).

At Spring Invest, we are used to differentiating structural innovation (for solid foundations) from cyclical innovation depending on market trends. The following Heatmap tries to summarize some of the topics we are currently looking at:

🚚 Return logistics is the new challenge for e-merchants

Driven by the e-commerce growth, logistics is another market segment that performed particularly well in this period. Return logistics is becoming a real operational issue for logisticians and a great opportunity for liquidators and resellers.

In this paper from Michael Waters, we learn that (i) 15% to 40% of goods bought online are returned (vs 5-10% for in-store purchase and (ii) 25% of returns are thrown out on average, products being damaged or unusable.

E-merchants are adapting by providing easy ways for customers to send back their products: drop off unwanted products in physical stores or directly at home through partnerships with shippers (Colissimo, FedEx…).  

75% of products are relisted on an e-commerce website or sold through resellers and liquidators. Many companies are growing in that space in the US, such as the leading auction site liquidation.com, or players like Quicklotz, Optoro or B-Stock that operates online marketplaces for retailers to sell their return or unsold products. Small physical stores are also increasing.

As the buy now, pay later model may be democratized in the next few years, return logistics and resale channels will certainly be new challenges leading to new great market opportunities.

🚀 E-commerce is (still) booming

If 2020 has been a complicated year for lots of businesses, E-commerce has benefited from the crisis. In France, digital sales should reach 110 million euros in 2020 (+6% YoY). This figure actually hides important disparities as home equipment, cultural and leisure products, or sport equipment has shown strong 2-digit growth.

While the pandemic may have affected its activities (supply chain under tension and limitation of activities in certain countries), 2020 should also be a great year for Amazon that realized USD 145 billion dollars of net product sales over the first 9 months of 2020 (+32% YoY).

Regarding Shopify, same cause, same effect, with tremendous growth. Shopify realized 1,9 billion dollars of revenue over the first 9 months of 2020 (+82% YoY), Shopify e-merchants realized 5.1 billion dollars of sales (+76% compared to 2019) during the 3 days Black Friday and Cyber Monday. Beyond the growth of the e-commerce market and the signing of new e-merchants, this overall performance has also been allowed by (i) the rapid adaptation of the offer to retailers as soon as the COVID pandemic began (dedicated template, specific service offering like click&collect, retailers mentoring…), (ii) the expansion of the offer to very large brands (Heinz for example) and (iii) the expansion of the fulfillment network with the acquisition of new logistics sites.

Through our portfolio companies, we are also observing very strong growth rates in 2020 compared to 2019. Early January is traditionally a slow period (after Christmas and before the January sales). Nevertheless, growth is still there, which is probably a sign that some of the consumers who were afraid to buy online have definitely switched.

🆕 What’s next for new digital brands ?

DNVBs has been hype over the last few years. As the cost of customer acquisition has been increasing, and growth more difficult to address, new digital brands are adapting to their market and are progressively transforming their model. The recent interview of the CEO of Thinx, the DNVB of feminine hygiene products, perfectly illustrates the strategy of new brands that we are working on at Spring.

• Market: from a niche market targeting a very specific subset of customers, brands are embracing mass-market strategy;

• Product: from a vertical approach relying on a single product, news brands are expanding their product lines to leverage their customer base. In the case of Thinx, activewear is now completing the initial product line;

• Sales channels:  from a pure digital strategy, brands are moving to an omnichannel strategy; an increasing number of new brands are now natively omnichannel as we previously described as the ONVB model (in FR, in ENG); In the case of Thinx, distribution is not only direct e-commerce anymore but also wholesale distribution (through department stores, Amazon…);

• Production: DNVBs are well known for their very short production cycle allowed by small series, and a small number of highly selected manufacturers. Like Thinx, most of them are now adding new manufacturers to diversify their production and to increase their volume. Maintaining quality is the new issue ;

• Acquisition strategy: paying ads on social networks being highly competitive as big traditional brands are pouring huge amount of money into it, new brands are looking at traditional media (press, radio, TV) as a new way to target a larger base of potential customers ;

• Loyalty strategy: social networks are now mostly used by digital brands to engage the community (especially in the COVID period as many people are spending most of their time at home).

DNVBs entered a mature phase where competitive advantage relies on brand awareness more than their initial strengths (digital, vertical, production, disintermediation…). If DNVBs are not Digitally-Native Vertical anymore, they remain Brands and will have to act like it.

❓ Did we enter into the marketplace era ?

Marketplace publishers have multiplied over the last years like Mirakl, the leading platform that raised USD 300 million last September. After competing with Amazon, Cdiscount announced this week that it will launch a Mirakl-like solution for e-merchants. This solution allows merchants to create and operate their own marketplace. But Cdiscount also offers additional services like access to all products sold on cdiscount.com, a complete fulfillment service, and operational support to operate marketplaces. On the B2B side, Wizaplace is doing a great job at its own pace.

In just a few years, marketplaces became the new must-have for distributors that want to extend their e-commerce activity. Is this trend sustainable ?

One of the rules of physical retail says that you need full shelves to make people buy your products. Another rule says that the more products you have in stock, the more you will sell. Marketplaces finally provided a solution to address these points for digital sales by extending product lists to infinity and helping distributors to leverage their community of suppliers.

However, if we try to look forward to this booming market, we may wonder how all these marketplaces will differentiate as customer experience, products and suppliers tend to be the same. On the customer acquisition side, with an increasing dependence on platforms such as Google or Facebook that actually own the customer, differentiation is not that easy. Verticalisation, additional services completing the product offer, or ecosystem animation, could be part of the solution. If nobody knows how this market will evolve, we can be sure that if an e-merchant fails to operate a profitable e-commerce business because of the increasing cost of customer acquisition, the marketplace will not help but will probably make the situation worse.

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a French investment fund dedicated to companies that are shaping the future of retail. We invest both in Enablers, B2B companies providing innovative solutions to (e)retailers and brands, and Disrupters creating new models of distribution. Our investment approach relies on strong relationships with 50+ European Retailers and Brands in order to provide sales acceleration to our portfolio. We also provide operational support with a dedicated team of Venture Partners working with our portfolio on sales, communication, HR, and internationalization.

Hello, it’s Spring Invest, a French investment fund dedicated to RetailTech. Welcome to the latest edition of Retail Chronicles, our bi-monthly newsletter about emerging trends in retail, brands, and new commerce.

In this special Best of 2020 edition, you will find a compilation of what has been written for the past months, summarized in 4 chapters :

🔮 Emerging Trends in Retail and New Commerce

🔥 Consumer Brands and Distribution Models

🦍 The A-players : AMZ, FB, SHOP, WMT, BABA,…

🦠 The Implications derived from Covid-19

In 2021, we will continue to share bi-monthly insights, click here to subscribe :

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🔮 Emerging Trends in Retail and New Commerce

Influence Marketing : Influencers are the retailers of the 2020’s

Supply Chain : Why Supply Chain is at the top of C-level’s agenda

Fashion : The fashion market is reconfiguring + our takeaways here

E-commerce : The browsing e-commerce opportunity

Marketplace : Data about marketplaces in 2020 + our takeaways here

Logistics : Urban logistics is on fire (micro fulfillment centers, dark stores, etc.)

Second hand : The market is hot hot hot

Top Q1’20 trends : CBInsights Consumer Products Q1’20 + our takeaways here

Top H1’20 trends : CBInsights Retail tech trends H1’2020 + our takeaways here

🔥 Consumer Brands and Distribution Models

ONVB : ONVB (Omnichannel Native Vertical Brand), a new distribution model

The “Total Commerce” : 2020 will be the year of Total Commerce + our takeaways here

From Wholesale to DtC : Nike’s strategy as an example+ our summary here

For brands, profitability is back as the #1 priority : How consumer brands are evolving?

CPG : How CPG brands are embracing the direct-to-consumer strategy

Direct-to-Consumer : The DTC party is over, what happens next? + our review here

DNVB : The saturation by market segment from Digital Native Group

Consumer brand : Brand differentiation + our analysis here

Consumer brand : Bundling or unbundling ? + our view here

🦍 The A-players : AMZ, FB, SHOP, WMT, BABA,…

Shopify vs. Amazon : Platform in an aggregator world + our key takeaways here

Shopify vs. Amazon : A dive into the merchant’s side + our key takeaways here

Shopify : Bessemer Venture Partners investment memo for a $5m investment in 2010

Shopify : Shopify’s future of commerce 2021

Amazon : Ben Evans about Amazon's profits, AWS, and advertising

Amazon : M&A with Amazon seller companies is booming + our takeaways here

Facebook : A dive into its commerce ambition

Walmart vs. Amazon : A look at the US – Amazon is not inevitable!

Alibaba : Singles Day 2020’s numbers

🦠 The Implications derived from Covid-19

A podcast on Why COVID-19 Could Reshape DTC Retail + our key takeaways here

Article on How the Covid-19 has changed the relationship between Founders & Investors

McKinsey’s essay on Reimagining stores for retail’s next normal

Retail Apocalypse: The numbers behind the scene

Who will emerge as the winner of the Covid crisis ? by Web Smith

🥂 … and HAPPY NEW YEAR from the Spring team !

If you have ever wondered who is the team behind this newsletter, here it goes ☝️

We are often being asked, “What is so special about you ?”. As a specialized investment fund, we are able to provide our portfolio companies with our knowledge of the market, its players and their needs. More specifically, we bring to the table :

➡️ FINANCING - We invest tickets ranging from 500k€ to 3m€, with the ability to follow up on successive financing rounds. Our process is fast, light, and transparent.

➡️ SALES ACCELERATION - We bring qualified leads to our startups by connecting them with executives among 50+ European retailers who have expressed short-term needs for operational deployment.

➡️ OPERATIONAL SUPPORT - We give our startups access to 9 Venture Partners, all seasoned entrepreneurs with deep experience and expertise in sales management, communication, human resources, or internationalization.

➡️ NETWORK - We give our startups access to a network of 100+ entrepreneurs and C-level managers who can help on specific issues and assist in the business.

Read more in Maddyness.

👍 If you like Retail Chronicles and want to help it grow, please share this newsletter with your colleagues, followers, and friends. If you hate it, then send it to your enemies. Have a great day, and see you soon!

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About us

Spring Invest is a French investment fund dedicated to companies that are shaping the future of retail. We invest both in Enablers, B2B companies providing innovative solutions to (e)retailers and brands, and Disrupters creating new models of distribution. Our investment approach relies on strong relationships with 50+ European Retailers and Brands in order to provide sales acceleration to our portfolio. We also provide operational support with a dedicated team of Venture Partners working with our portfolio on sales, communication, HR, and internationalization.