Memorando: Shopify, Fulfillment e Disrupção

Esta não é uma história sobre a Shopify, mas sim sobre a interrupção da cadeia de suprimentos e a avaliação da tolerância ao risco da empresa. A logística e o atendimento de pedidos são agora uma daquelas disciplinas que exigem toda a atenção e disciplina de uma empresa. A Amazon poderia fazer isso, mas a Shopify não.

A rede de atendimento da Shopify - e sua ambição de competir com a Amazon no jogo de atendimento - sofreu um revés. A Shopify está reduzindo sua rede de armazéns e parceiros de atendimento pela metade. Ficamos sabendo do plano de reduzir a estratégia na semana passada, depois que um parceiro existente notificou a 2PM sobre a mudança iminente. Ele observou: "Os comerciantes que usam embalagens personalizadas, fazem vendas por atacado ou kits não serão atendidos pelas novas ofertas." Um relatório recente da Insider tornou isso oficial.

A mudança é reveladora em termos de onde a Shopify se vê no cenário mais amplo do varejo. O objetivo da Shopify há muito tempo é criar um "exército de rebeldes" que possa competir com a máquina maior da Amazon. Isso funcionou bem como um movimento de varejo e a Shopify teve um ano passado considerável. As marcas o utilizam para lançar e construir seus negócios e a empresa se tornou sinônimo de varejo direto ao consumidor. Ela se posicionou como a anti-Amazônia, uma posição de mercado que lhe serviu muito bem. Mas há algumas áreas em que o fosso da Amazon proporciona uma vantagem inegável.

A logística de varejo é um empreendimento monstruoso na melhor das hipóteses. O ano passado foi um dos piores. As interrupções na cadeia de suprimentos aumentaram 88% em relação a 2020, com 47% das interrupções afetando os EUA, o principal mercado da Shopify. Fornecemos esse detalhamento abaixo:

 

Em 27 de dezembro, escrevemos:

Embora o Shopify tenha a vantagem agora, a rede de sistemas de atendimento da Amazon está rapidamente se tornando essencial. O grande rival do Shopify pode acabar se tornando seu parceiro mais necessário.

A Shopify não consegue absorver a crescente complexidade do setor de remessas, nem mesmo com um software de classe mundial. Por quê? Porque se trata de um negócio de pessoas e veículos. O software pode otimizar a mão de obra, mas não pode substituí-la. Existem regras e forças externas que ditam o estado da remessa, das entregas e das devoluções que nem mesmo o melhor software pode substituir. Quando a interrupção se torna esse ditador, são necessárias as máquinas mais bem equipadas. A Amazon é essa máquina. Ela construiu um negócio e um fosso, projetados para manter o desempenho ideal mesmo nos piores momentos. Também de dezembro:

Com anos de investimentos, a Amazon criou sua própria frota de transporte de carga e está alugando aviões, juntamente com a abertura de um Hub Aéreo em Cincinnati, para evitar problemas de falta de estoque que começaram a atormentar outros varejistas nesta fase da temporada de compras de fim de ano. A Amazon ampliou seus negócios de inúmeras maneiras, mas suas vantagens não são mais apenas orientadas por produtos e pelo digital.

A Shopify Fulfillment Network não está nem perto de ser extinta, de acordo com o relatório da Insider e relatórios internos. A empresa está de olho em aquisições de terceiros. Ela provavelmente será reequipada, com uma pegada de armazenamento menor e um foco maior em um dos maiores pontos problemáticos do comércio eletrônico: devoluções. Agora, para o Shopify, as devoluções podem não ser uma parte de uma rede de atendimento maciça, mas sim o ponto de venda de uma operação mais fina e orientada por software.

As devoluções são um dos problemas modernos do varejo que poderiam ser muito melhorados com um software mais capaz. No mercado pós-devoluçõessugerimos que, com volume suficiente de devoluções, um mercado de produtos devolvidos poderia prosperar. Mas, primeiro, a Shopify ou um parceiro da Shopify como a Loop precisaria se tornar a solução de fato para a administração de devoluções. A seguir, um trecho relevante desse relatório:

Depois de analisar dezenas de operações de armazenamento e entrevistar inúmeros proprietários, uma coisa ficou clara: há uma oportunidade de mercado elegante disfarçada em um setor sem glamour. Em uma conversa recente com um importante CEO de logística terceirizada independente, ele disse:

"Com exceção de nossos dois maiores clientes que usam o Loop, o restante de nossos clientes usa nosso WMS/OMS para facilitar suas devoluções. Somos uma gota no balde, com um GMV de US$ 150 milhões no ano passado. Mas, no momento, ninguém para quem enviamos está usando o sistema interno da Shopify para facilitar o processo."

O revés no atendimento de pedidos da Shopify é um lembrete de por que a Amazon é o raro varejista de pilha completa: marketing, pesquisa, compra, envio, devolução. Essa mudança de estratégia é uma chance para o Shopify navegar melhor em seus próximos passos, não como substituto da Amazon, mas como seu parceiro em potencial. Na reportagem de dezembro da Bloomberg sobre o estilo de liderança de Tobi Lutke, um ex-executivo da Amazon foi a fonte da citação: "A Shopify nos fez parecer idiotas". Essa resposta foi míope. Os varejistas estão comprando contêineres às dúzias, estão construindo novas instalações de atendimento de 500.000 pés quadrados ou alugando navios porta-contêineres inteiros. A logística agora é uma proposta de tudo ou nada, e poucos exemplificaram essa nova realidade mais do que a Amazon, com quem a Shopify deveria fazer uma parceria neste momento. Terminamos nosso memorando sobre esse relatório da Bloomberg com uma conclusão diferente:

Embora o Shopify tenha a vantagem agora, a rede de sistemas de atendimento da Amazon está rapidamente se tornando essencial. O grande rival do Shopify pode acabar se tornando seu parceiro mais necessário.

Todo mundo precisa de um inimigo em sua vida.

Por Web Smith | Editor: Hilary Milnes | Arte de Christina Williams 

Memo: China Strategy Revisited

This is a continuation of the original essay: The China Strategy (2018)

At 8 am on May 10, 2003, Taobao went online on the fourth day of the SARS quarantine. The homepage read: “Think of those who start a business in trying times.” Nineteen years later, and China’s online retail economy is the envy of the world. Currently with a nearly 37% online penetration and growing, analysts estimate that rate will reach 63.9% by 2023. It’s evident that online retailers like Alibaba, which owns Taobao, used the crisis to move China into eCommerce leadership that then belonged to the United States. China owes its eCommerce dominance to Alibaba, but its future may be with JD.com. This as the U.S. Government is becoming increasingly adversarial with Alibaba.

Shopify’s next geographical ploy isn’t in the early-stage metaverse, it’s in the late-stage region that’s been trickiest for America’s modern brands to find success. Context is necessary. In 2017, Alibaba wanted to partner with digitally-native brands, so it thought like Amazon and went on a public relations campaign to attract American retailers to the marketplace. I sat in a Detroit conference center as a guest of Alibaba when a charismatic Jack Ma stood on stage wooing middle America’s small businesses. He’d later say, “Alibaba’s existed for 18 years, and we are so influential in China–but nobody in America knows about us.” And he was right, even after Alibaba’s record-setting IPO in 2014.

The same year, JD tried to appeal to the same country but with a slightly different market: It invested $397 million in Farfetch to bring American luxury to China. It fizzled. In 2020, Farfetch revised its strategy and ended up partnering with Alibaba and Richemont in a deal structure that far exceeded the original JD partnership.

Alibaba CEO Daniel Zhang was quoted saying at the time:

This highly complementary partnership brings together some of the world’s leading luxury retail and technology platforms, representing another milestone in Alibaba’s strategy to meet the rapidly growing demand for luxury products in China. The Chinese luxury market — which is expected to account for half of global luxury sales by 2025 — consists of hundreds of millions of young, digitally native consumers.

Over the past two years, JD and Alibaba retooled their approaches to gain traction with America’s direct-to-consumer brands. Alibaba homed in on the luxury market and poached Farfetch from JD. Now, JD has made its counter move. It is teaming with Shopify, the leader in online merchant services for modern retailers by GMV (and potential). They’ve essentially switched strategies: one traveled from middle America up market and the other traveled down market in its focus on the American middle. It’s rare that JD outmaneuvers its larger Chinese rival; here it has its second chance to try.

This is take two for JD and it’s counting on Shopify’s direct relationship with a growing number of smaller brands. The Chinese mainland is perhaps the most coveted audience for North American retailers today but without a high level of sophistication and relationship development, it’s close to impossible for American merchants to market their products to the largest eCommerce audience in the world. GlobalData estimates that China’s online retail economy is more than double that of the United States:

According to GlobalData’s E-Commerce Analytics, e-commerce sales in China grew at a CAGR of 17.7% between 2017 and 2021 to reach the value of CNY13.8 trillion (US$2.1 trillion) in 2021.

Shopify found a way to help its merchants reach those trillions of CNY. It’s joining Chinese marketplace JD.com, and not Alibaba, in a partnership that portends to help its merchants succeed in a market that will be worth $3.3 trillion by 2025.

The deal is a win for both sides. Shopify’s business soared during the pandemic, and unearthing new areas of growth for its merchants is key to Shopify’s next level-up. Cross-border commerce is a logistical hurdle for many small and medium sized brands as they attempt global expansion. Shopify, which wants to be the internet toolbox for online sellers, will gain a competitive advantage by helping its brands make the jump to new markets.

In 2018, 2PM predicted that China would become the next growth market for DTC brands otherwise facing climbing customer acquisition costs. As believed then, the brands that could successfully go-to-market in China would be the haves; the rest will be the have nots.

Chinese eCommerce is a worthwhile investment for well-prepared DNVBs. McKinsey&Company estimates that by 2025, Chinese shoppers will account for nearly 45% of global luxury spending. This translates to “7.6 million Chinese households will represent RMB 1 trillion in global luxury sales, an amount that is double that of 2016, and equivalent to the size in 2016 of the French, Italian, Japanese, UK, and US markets combined,” according to the consultancy.

The Shopify x JD partnership levels the playing field, to be a part of the “haves” be a part of Shopify, or so the theory goes. It is now a conduit to the largest market and JD is now a pathway to bringing more products from East to West. As part of the partnership, JD.com will set up an accelerated channel for Shopify brands that will narrow the onboarding window from 12 months to three to four weeks. JD will handle logistics including warehousing and deliveries for the US brands.

For JD, Shopify is a coup considering that $SHOP’s current link to China is through Alipay, the financial wallet powered by Alibaba-affiliate Ant Group. That deal will likely go sour.

The Chinese government has set a target to increase national online retail sales by around 44% between 2021 and 2025. JD, Alibaba, and now Shopify will be a key part of that push. There are risks. Even with the support of Shopify and JD.com, business in China needs to be closely managed to tailor marketing, messaging, and even inventory selection to appeal to the region. In this way, there is only so much that a platform can do to facilitate opportunity for its brand partners. Shopify’s global success here will depend on the individual successes of the brands themselves. This is in line with Lütke’s philosophy who doesn’t love to play the king maker.

Por Web Smith | Editado por Hilary Milnes | Arte por Alex Remy e Christina Williams

Memo: Brand Brady

The backdrop of the launch of the Brady Brand is a years-long shift in how Under Armour and its rivals are doing business. Adidas and Nike are expanding their definitions of brand equity while Under Armour is tightening the reigns. In February of 2020, 2PM wrote a deep dive into UA’s lack of focus:

There are a number of technical and financial concerns that Under Armour has ahead. With a new CEO in Patrik Frisk, there is an opportunity to course correct in several categories to include: product development, financial health, and brand management. The company that Kevin Plank launched from his mother’s basement has influenced 25 years of performance wear technologies but it’s no longer synonymous with the category that it established.

The message was a timely one. In October of 2020, UA announced a plan to cut back on wholesale partners (it exited 3,000 stores!), minimize discounts, and reduce its SKU count:

As it overhauls wholesale, the brand is also upping its focus on direct-to-consumer channels, where it plans to offer fewer promotions and discounts to fuel healthier margins.

This left the door open to the NFL’s greatest quarterback to go all-in on his own brand without infringing on his existing partnership with Under Armour, an idea that would not have worked as a Nike or Adidas athlete. After years defining himself as one of the best quarterbacks to ever play, Brady is now trying to lead another new brand to victory away from the gridiron. First, it was achieving notoriety for the TB12 supplement empire and now it is a focus on fashion retail. Tom Brady is redefining the playbook for the athlete-anchored brand with Brady, his new line of athletic and lifestyle apparel that debuts next week.

His launch strategy resembles that of a modern brand playbook: the digitally-native department store partnership of choice, the NIL deals, and the emphasis on direct-to-consumer and online storytelling.

In an interview with WWD, the Tampa Bay quarterback outlines how Brady will be sold at brady-brand.com and through Nordstrom. The collection will debut with 145 pieces in three categories, and will maintain a monthly drop schedule popularized by brands like Parade, Noah, Todd Snyder, and Drake’s. The plan is to steadily expand the brand into more upscale categories but for now, the focus is on athleisure and office casual.

Brady’s effort to build a DTC brand follows the USWMNT athletes and and Jimmy Butler’s BIGFACE brand. It’s important to note that all three brands used Shopify for their product launches. It is certainly a new era for athlete merchandising and brand development, with more control and ownership over his namesake brand. What’s notable is who he chose to partner with to create the brand and who he didn’t. Women’s Wear Daily outlined his partnership with Jens Grede, the brand creator behind Frame, Good American and Skims (the latter two of which have big-name influencer associations with Khloé and Kim Kardashian, respectively), who was introduced to Brady by longtime fashion executive Andrew Rosen. The line is designed by Public School co-founder Dao-Yi Chow, who it’s noted is not just a fashion insider but also a marathon runner. The group, collectively, is one that understands the function of sports apparel, the importance of style and how to build and launch modern consumer brands.

Missing from the project? Under Armour, which sponsors Brady. Now, you may understand why.

It’s a sorely missed opportunity for Under Armour, which had a failed launch into elevated sports and lifestyle attire with UAS and an earlier attempt to knock off brands like Ministry of Supply and Mizzen + Main. It dropped UAS in 2016 and lasted one season before the plug was pulled. Brady could have been UA’s next opportunity – the timing is better, and the face of the brand couldn’t be more influential in the sports world. Instead, UA was sidelined, which WWD addresses:

Brady opted to launch the brand with Grede rather than through his longtime sponsor Under Armour. The Baltimore-based sports company is now focusing nearly exclusively on performance sports apparel and its attempt to move into fashion in 2016 with the UAS collection, designed by Tim Coppens, met with limited success and was discontinued after one year. An Under Armour spokesperson said Brady continues to part of the UA family as an ambassador, as he has for 11 years, but said the Brady brand is his personal, off-the-field endeavor and separate from his partnership with the company.

Brady is setting up new rules for the options athletes have before them as they navigate the world of brand sponsorships, partnerships and merchandising. A macroeconomic shift in how his title sponsor does business (Under Armour is retreating from a fashion opportunity), the door is open for what may become a successful attempt to unseat Michael Jordan as the most astute figure in athlete retail (though it’s clearly too early to say). From the new site:

BRADY™ is the first technical apparel brand to apply two decades of pro sports level innovation and engineering to create a system of clothing that performs across every activity. With over 3 years in development, our fabrics and materials fuse natural elements with cutting-edge technology. Designed with the body in mind. Built to move, breathe, and sweat while you compete, live and recover.

Doesn’t this sound like a conflict of interest with Under Armour?

The renewed focus is working for Under Armour but at a cost of going all-in on the opportunities of the moment (though UA is now dabbling in NFTs). UA has chosen to set aside fashion, casual wear, DTC fitness, web3, and metaverse development – leaving Nike and Adidas as the go-to major retailers in those other areas. In fact, Nike is laying the groundwork for further expansion. The brand is currently going up against Lululemon in a patent spat over Mirror technology – demonstrating it’s fighting for ownership in a bigger Nike universe.

Brady seldom loses, these days. Which is why it’s even more incredible that Under Armour didn’t make an exception to their new strategy rules. It’s a decision that they the forefathers of technical fabrics may come to regret if the brand does what every other Brady pursuit seems to do: win.

Por Web Smith | Editado por Hilary Milnes | Arte por Alex Remy e Christina Williams