It's July 15, 2024. And this is the Watson Weekly, your essential e-commerce digest. Today on our show, SACS acquires Lehman Markets Group. Speaking about personalization at the lead event in New York City, Nike is struggling trying to be a tech company. Amazon previews direct from China program. And finally, the investor minute, which contains five items this week from the world of venture capital acquisitions in IPOs. But first, at our shopping cart full of news, SACS acquires Lehman Markets Group. In the last week, SACS PE backed owner, HBC, decided to acquire the assets of Lehman Markets Group for $2.65 billion. This is a roll-up strategy if I ever saw one. If HBC is true to its strategy, the next step is to divest Lehman Markets real estate assets, hello Macy's, in a similar way to what SACS 2021 split into SACS.com and stores business units with one servicing the other. While we are in a period of consumer market share consolidation into bigger players, that doesn't mean that these large vertically integrated behemoths are operating them. Actually, we appear to be in an extended period of licensing and financial engineering brought about by the success of business models like APG and WHP Global that separate brand, e-commerce and operator into separate companies. This raises a few questions I thought I would share here. What is the significance of Amazon and Salesforce investing in this deal? Personally, I wouldn't read too much into this and I have a few interesting theories. I do expect that the new company SACS Global is a big customer of both AWS and Salesforce. Neiman Markets as far as I know is a custom website and SACS is a big Salesforce commerce cloud customer. It is possible that optionality into Amazon logistics is also built into this deal. Everyone wants to read Amazon going back into retail into this deal and I simply do not. Amazon retail forays have mostly been failures and the retail component is not even controlled by SACS Global, which is just the former e-commerce arm. If I ever see an Amazon fashion shop and shop in Neiman's or SACS, it will be a huge surprise to me. Although Amazon doesn't mind experimenting, I can't imagine it will be good for the SACS brand. On the other hand, Amazon e-commerce might weasel its way into getting Neiman's and SACS onto Amazon fashion itself. In other news, in the e-commerce platform wars, the industry saw just what happened at Overstock. On the e-commerce front, Salesforce is keen to keep a long-term customer like SACS as it's exceedingly difficult to get deals this size back and grow share of wallet of new products like Salesforce Data Studio. Does it signal that private equity backed exits are returning to 2021 levels? After a serious climb in 2021, private equity exits fell off a cliff in 2022 and 2023 was flat to those levels. The industry would be happy with the 2024 being somewhere in the middle of those, I'm sure. With IPO levels still not recovering yet, private equity could still be the savior that investors need. Our second story, speaking about personalization at the lead event. On Wednesday, July 10, I spoke at the lead event in New York City about the topic of personalizing the customer journey from awareness through to loyalty. Recession was an interview with industry executive Bennett Fox Glassman, SVP of customer journey at Macy's, who's been there for 11 years. Kind of a wide-ranging topic, but let me cut to the chase for you. Personalization itself, it's not a business goal. And hyper-personalization, despite what you've seen on LinkedIn, is not a business strategy, except if you're a major marketplace, no matter what a tech vendor might lead you to believe. Business goals are things like, how do I get from first-purchase customers to make their second purchase? How can I increase conversion weight of my top landing pages? How can I drive more profit in my repurchase emails? Tactics are things like A/B testing, improved product placement, better messaging, and yes, personalization. Bennett was quick to point out that despite all the emphasis on digital, the best form of personalization is actually in stores, and Macy's has thousands of stores associates which can remember customers and their preferences. I don't know about you, but last time I walked to a store at Macy's, I barely saw these store associates, but I'll take his word for it. The best digital techniques are really trying to replace the intimacy of the customer relationship at the end of the day. A few key takeaways from the talk include, if you're a smaller brand, start small. Understand your high value customer flows and use personalization as a tool to drive more conversion and ultimately profit dollars through your digital experiences. Finally, measure the things that are important to the CFO so you can continue to receive more funding to grow your program. Our third story, Nike is struggling trying to be a tech company. It's a shame we need to relearn the same lessons over and over. When John Donahoe was selected as a CEO of Nike, it was hard to believe it would end well. The latest lawsuit tells you how it's going. Bringing in a technology-oriented leader to help modernize a non-tech-oriented company is a recipe for boondoggle. All the tactics are new adventures, DTC, apps, the fun drops. Reading about strategy in an HBR article is enough reason for a direction. The first thing any new CEO needs to determine is the answers to these questions. Who are our customers? What is our product? What is our offer? And how do we make money? If your primary innovation is not related to your product or offer, no amount of distractions or side projects will save you. If you bring in for someone from outside your industry, remember they are making mistakes on your own time. In this case, the DTC whipsaw that happened at Nike. But even then, that's not the number one mistake. Nike forgot its customer. Nike's pinnacle was Air and Jordan, in the simple notion that if you have a body, you're an athlete, innovative, changing product at the core with an aspirational message. It's truly sad to hear that Nike, of all companies, missed the surge in running. Literally, it should not be possible, but here we are playing catch up to brands like On and Hoka. The two primary lessons are simple. It matters who the leader is, and it matters where you apply your innovation dollars. If you're a shoe company, remember what Spike Lee or Mars Blackman said back in the day. It's the shoes. It's got to be the shoes. And our last story, Amazon previews direct from China program. It's no accident in the Amazon last earnings call Andy Jassy was speaking about costs to serve, which was mentioned 11 times, broadcasting what was coming in the Chinese seller meeting that was radically reported in the last two weeks. In short, Amazon cannot afford to offer ultra cheap, no-cost selection in its current setup. In supply chain, math dictates what items are stored where to optimize turn, service, and profit. Some items you want around the corner. Some items you want in the region. Some items are too heavy to be in the region, and you prefer it in the middle of the country. In some items, you don't want to move until they're ordered. Finally, some items are not even created until demand is generated, hyper personalized, or built to order. Many still do not realize that direct from China is a new model, which serves a unique set of inventory, but this alone is not the model. It is also a learning model designed to test and predict demand iteratively. The world's consumers and influencers on social media are quite literally co-creating with thousands of manufacturers in real time, many times without their knowledge, and yes, often with ripped off designs. There is no optimization of Amazon's current supply chain which can out-compete thousands of cheap items that consumers crave, which is the key, created in small batches each week, it's an order of magnitude problem. I have seen notes that Amazon is giving up on fast shipping by some with this new announcement. I would disagree with this. Instead, I think Amazon is doing something much different, not giving up on its goal of all of Earth's selection with this announcement, and it is working to cut off another rapidly scale competitor before Amazon gets disrupted in a segment that might be long-term important to its divinely discontent customers. Amazon marketplace journey has been complex. Version one of the marketplace copied eBay by launching Amazon auctions in March '99, seeing third-party sellers as an interesting model and disruptive to retail. Version two, Amazon launched Z-shops to allow fixed-price items to be sold on its site in September '99, but in another tab. In these models, Amazon struggled to drive traffic to get these items when not on its own product detail pages. Another huge lesson, drive items to the traffic, not traffic to the items. Version three of marketplace was really the formula that nailed it. They launched a 3P marketplace in books and DVDs and allowed sellers to put products on its own product page, a revolutionary concept at the time. And despite that, marketplace still would not have scaled without the next innovation. Version four, fulfilled by Amazon was announced in 2006 to allow sellers to participate in prime. Amazon can now control third-party service levels. Version five of the marketplace was seller-fulfilled prime, which was introduced in 2015, and Amazon realized everything was not a fit for FBA. But Amazon struggled with SFP. They paused it and reintroduced it again last year. And this final version, if you kind of put by with Prime to the side, which is not on Amazon's website, I would argue that this is version six direct from China marketplace. The principle is simple, don't move inventory until you create demand, and not just China. Remember, this is only day one. First China, next the world, direct to consumer, all on Amazon. Manufacture anywhere, sell anywhere. It's that time, friends, for our investor minute. We have five items on the menu today. First, luxury goods marketplace swerve, secures 200K and seed funding. Barcelona-based marketplace SWER has raised 200K, which we use to onboard retailers. The company claims its first to offer live video sales calls between shoppers and sales people. Really? The first? Second, Hudson Bay Company took by Neiman Marcus Group with help from Amazon and Salesforce. Hudson Bay Company has acquired Neiman Marcus Group, which will merge with SAC's fifth avenue to form SAC's global. Salesforce and Amazon will hold minority shares in SAC's global. The luxury sector is seeking consolidation for survival. Third, above food uses SPAC to become listed. Above food, a vertically integrated food company has merged with BITE acquisition corp through a special purpose acquisition company to become publicly listed. Are SPAC still a thing? Asking for a friend. Fourth, Commerce Agency e-house acquires VL Omni. Commerce Agency and Shopify Plus partner e-house has acquired integration platform and services group VL Omni for an undisclosed amount. This is e-house's second acquisition after receiving investment from Periscope Equity. Roll-ups and agencies, they seem to go together. And finally, e-commerce enablement platform pair commerce raises 10 million in Series A funding. E-commerce enablement company pair commerce raised 10 million, which will be used to hire talent and invest in its technology. Does this move the needle for CPG brands? And today's final word of the week for July 15, 2024 is Hades. As in, hottest Hades at the lead conference in New York City. But still, despite the heat of the New York summer, it's great to see so many great friends here. This is an event on Tuesday night with friends from Vtechs and my Fagin Digital, and on Wednesday night with friends of ARMW Commerce and Bluecorps. My next big event is at the Big Commerce Summit in Austin at the end of August where I'll be the keynote speaker. Watch for me there. Did you know that ARMW Commerce is a brand new podcast? Check out the Watson Weekend for an unfiltered and lively e-commerce chat each week with me, Rick Watson, my co-host, Jess Lasecki, and an array of interesting guests and topics, all focused on e-commerce. You can find the Watson Weekend by searching for it on iTunes, Spotify, or YouTube. That's all for this week. Until next time, Watsonians. Hi, I'm Rick Watson, CEO and founder of RMW Commerce Consulting and host of the Watson Weekly Podcast, your essential e-commerce digest. Our production partner for the series is Citizen Racecar. The show is produced by Jose Baez, production manager Gabrielle Montakeem. To hear new episodes of the show every Monday morning, subscribe now at rmwcommerce.com/watsonweekly and wherever you get your podcasts. [MUSIC]
