Topics Covered: February 20, 2023
- Retail media is not a math problem
- Light orders at Amazon
- Retail CEO & digital experience
- Shopify on Buy with Prime
- Regional grocer cuts Instacart
- Direct 1P relationships in EU
- DoorDash up 5x vs. ’19
Retail Media is Not a Math Problem
Brands think retail media is simply a math problem.
Something that can be solved and optimized with the right metric or software or agency.
After all, it’s performance marketing. It’s measurable. It’s closed loop. It’s calculable.
But people aren’t math problems.
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For the Nerds
Amazon’s ordering patterns: While some brands have reported ordering patterns improving of late, Stratably’s recent benchmark indicates a net 14% of brands are still seeing lighter than normal orders.
This is likely to persist throughout 2023, although we expect it to be less disruptive compared to last year as Amazon benefits from the learnings it generated in 4Q22 around what levels are needed to support peak holiday demand.
Retail CEOs with digital experience in short supply: Retailers and brands are finding it difficult to recruit experienced executives that can find growth post-pandemic. The article discusses a failure on the part of boards to execute succession planning and the challenge in finding executives with…eCommerce experience.
“Retail used to be all about the product. Today, it’s more about being tethered to the customer, being able to see around corners and where the future lies. That may not be a merchant…CEOs need to understand the multi-channel environment and how customers’ needs can be served across them in a dynamic way”.
While eCommerce professionals lack the defined career path of a brand manager, for instance, the skills they are learning are rare and important for driving growth. A decade from now, every senior executive at retailers or brands will have significant digital experience.
While not mentioned in the article, boards are not just failing on succession planning. They’re also failing to drive digital excellence as too few board members have digital experience. (Forbes)
Shopify walks fine line on Buy with Prime: Here’s what Shopify’s management had to say: “…any company that’s going to make their infrastructure available to merchants to sell more is a great thing. We like it. We’re in talks with Amazon now to make that work. But it has to be done in a way that we think is important for merchants to have a relationship with their end consumer.”
At the same time Shopify talks about wanting to be supportive of helping its merhcants use Amazon’s fulfillment network, its merchant solutions business is in Amazon’s crosshairs. This has driven significant investment in SFN and Deliverr with the company expecting margin headwinds from this initiative in 2023.
In addition, it has created urgency around building the Shop Promise brand, which, apparently drives “up to a 25% increase in conversion rates” compared to Amazon’s claims that BwP improves conversion rate by 25%, on average. Competition! (Stratably)
Heinen’s leaves Instacart: Heinen’s, a premium grocery chain mostly centered in the Cleveland area, announced it was canceling its contract with Instacart opting instead to bring the capabilities in.
This one is professionally AND personally interesting as I shop at Heinen’s every week. It’s the nicest grocery store chain in the area, comparable to shopping at Wegmans when I lived in NY.
Heinen’s stated reason was that it wanted to deliver a higher quality experience for the end consumer via better picking. This message will resonate with its loyal in-store shoppers as Heinen’s has a reputation for excellent customer service and was possibly seeing its reputation hurt by poor Instacart-led experiences.
The trade-off though is a likely higher cost to serve (Heinen’s typically pays its workers a substantial premium to other grocers in the region), limited customer acquisition, reduced innovation, and the ability to monetize web traffic. (Heinen’s)
1P distributors out in Europe: Amazon 1P announced that it will stop sourcing products from distributors beginning in April. Brands can continue using these distributors by selling on the 3P marketplace or working directly with Amazon.
This comes at an interesting time for Amazon. It wants to improve margins with these brands by cutting out the middleman, but it is also reducing the size of its 1P department. These brands will likely find themselves in an unenviable middle-ground of having to now manage Amazon directly with very limited vendor manager support. (CNBC)
DoorDash results positive for eCommerce market: DoorDash’s 4Q Gross Order Value (GOV) grew 30%, consistent with the prior quarter. The company talked extensively about the positive performance of non-restaurant categories like grocery, convenience, and non-food, and reported that DashPass members grew 50% Y/Y in 2022 to 15mm.
DoorDash’s results are another positive signal on the relevance of online shopping. DoorDash was able to grow in 2022 despite consumers “returning to stores” and the difficult comps. Its GOV is now 5.6x higher than pre-pandemic and it grew GOV by $11B in 2022. (DoorDash)