Topics Covered:
- Shein setting new benchmark in social listening
- The growing relevance of Snap shopping
- Retail media doubling in five years
- Retailer margin pressure rising in 2H21 due to increasing product and labor costs
- Google Shopping - mostly iterations
Case Study on Social Listening & Speed
Shein represents the best modern case study on turning social listening into product development speed. Its honed analytics process means it can create complete product designs in as little as three days after analyzing consumer data.
Source: Shein homepage. July 26, 2021.
The company goes deep into the long-tail, adding more than 1,000 new items daily and offers 5x the assortment as its closest rival ASOS.
Shein is doing $10 billion in annual sales, grew 250% Y/Y in 2020 despite a difficult apparel market, and has 2.1 million TikTok followers.
Interestingly, the company struggles with shipping speed, developing a reputation for taking weeks rather than the standard next day or two day delivery – a reminder that competitive differentiation can move beyond shipping speed. (link)
Snap's AR Social Shopping
Snap, parent company of Snapchat, is perhaps the most focused on social commerce than any of the major social platforms.
The company recently acquired Vertebrae, which helps brands manage 3D versions of their items. The acquisition signals Snap’s belief in the future of consumers engaging with AR content before buying.
Source: Vertebrae homepage. July 26, 2021.
The company’s earnings call last week provided a number of intriguing comments from management around its focus on shopping.
Everything focused on shopping and commerce: Jeremi Ann Gorman, Chief Business Officer, Snap: “We are fully focused on making progress against our revenue and ARPU opportunities, which we believe will be driven by three key priority: first, driving ROI through measurement, ranking and optimization; second, investing in our sales and marketing functions by continuing to train, hire and build for scale; and third, building innovative ad experiences around video and augmented reality with a focus on shopping and commerce.”
Category focus: Evan Spiegel, CEO: “We're super excited about AR shopping. In particular, we're focused on apparel and accessories. It's obviously a huge spending category for young people, but more importantly, it's a real opportunity for us to differentiate. So if you think about the in-store experience in a changing room, that's not particularly pleasant at home trying to shop online and find the right size and scroll through thousands of little tiles of models wearing clothing, none of those feel personal, and none of them really capture the experience of trying something on, which is so important for consideration with apparel and accessories.”
An integrated shopping experience: Jeremi Ann Gorman, Chief Business Officer, Snap: “…we're also looking at commerce and shopping as the type of experience that can be threaded throughout the service. So not like a specific destination, although, of course, that will be available on public profiles as well. But we've experimented with shopping. Your Screen Shop could be a Screen Shop, native commerce for Publishers and Creators and Discover and even Scan to shop with our Amazon partnership that we launched a few years ago.”
The net of it seems to be that social platforms are increasingly moving towards more serious investments into commerce because of privacy concerns, with Snapchat perhaps the most focused on winning in the AR-shopping channel.
All of these dynamics mean social commerce, despite accounting for a small portion of today’s retail revenue is an increasingly important area for brands to win in the future. Of course, this requires merging the goals and teams that handle social with those running eCommerce…something that has yet to really occur for most brands.
Quote of the Week
It begs the question - if retail media doubles in the next five years, how much is driving by digital shares growth vs. shifts from in-store shopper marketing and/or a pull-back in print and TV advertising?
Arthur Sadoun, Chairman & CEO, Publicis Groupe: “In 2023, commerce sales for CPG brands will have doubled from 2019 level, making the retailer website a key marketplace where purchasing decision are taken. In this context, retail media is undergoing exponential growth already reaching €30B annually and is set to further double within five years. Combining CitrusAd expertise with Epsilon CORE IDs and offsite retail media offer, we bring three decisive competitive advantage in commerce to our clients. It will accelerate their growth in this dynamic channel, give them full visibility on the consolidated performance of their media investments, and last but not least, bring unparalleled access to high-qualified first-party data from retailers, equipping them for cookie-less world.”
Retailer Margin Pressure
Salesforce estimates retailers will spend $223 billion more in 2H21 driven by $12 billion more to suppliers, $48 billion more in wage expense and $163 billion in extra logistics costs.
Salesforce’s VP and GM Rob Garf indicated retailers are unlikely to be able to pass along the total cost to the consumer, and will have greater margin pressure as a result.
Interestingly, Salesforce anticipates a tightening in the labor market come this fall, which is counter to what several executives from logistics firms to retailers have stated in recent remarks. (link)
Google Shopping Iterations
Source: Google Shopping Press Release.
Google is now surfacing deals related to your search within the shopping tab. Previously, these items would have been placed in whatever organic result position. The curation of deals into a special section of search is meant to help consumers more easily find promotions.
The company also announced it is working on reducing friction while watching product livestreams, by enabling checkout without leaving YouTube.
All of these iterations are positive developments, but where is the step change in strategy that would drive more serious retail volume through the platform?
Perhaps we’ll see this with its acquisition of Indian start-up Simsim, which enables users to record product reviews and viewers can buy the item directly through the app. (link) (link)
For the Nerds (aka What Else We're Reading)
Netflix stores play a supporting role: Netflix is using its new, small-scale stores to support its membership base and increase the number of conversations around each of the titles. It’s the opposite of Amazon, which uses its streaming video to help grow Prime memberships, to ultimately help grow its consumer business. Reed Hastings, CEO, during its earnings call last week: “…there's a number of supporting elements, consumer products, various shopping, where we're really trying to grow those to support the title brands to get our conversations up around each of the titles, so that the Netflix service becomes must-have. So, they're not a profit pool of any material size on their own, but they are helping. The reason we're doing them is to help the subscription service grow and be more important in people's lives.”
Kimberly-Clark pushing price through: Michael Hsu, Chairman and CEO, during its earnings call last week: “…the retailer conversations, though never easy, I would say, have been largely constructive. And certainly, they understand what's happening in the cost environment and so we're working through that.”.
Single sign-on: Bolt raised $333 million in a Series D at a $4 billion valuation, 5x the value it raised at in December. The software allows a consumer to check out across a number of retailers with a single sign on feature, helping reduce abandoned carts. (link)