Delivery Premiums of Uber Eats and DoorDash

“Uber Eats’ orders in Seattle fell 45% last quarter from the same period a year earlier after the company imposed a $4.99 fee on each order to cover the city’s new pay requirements.”

“DoorDash said Seattle drivers have to wait between orders three times longer than before. Uber said 30% of its active delivery drivers in the city have quit its app.”

Wages needed increases and the apps needed higher fees to the point of some massive demand drops. There were also drops in demand when the ride hailing apps increased rates and legislation added various fees…but never this dramatic. Would expect these changes to spread to other cities over time and have that same dramatic impact to Uber and DoorDash growth rates.

Pay TV Losing The Battle

“The trend is only accelerating: The first three months of 2024 were the worst the pay-TV business has ever seen, according to analysts at MoffettNathanson. They estimated that the industry lost a record 2.37 million subscribers — a drop of 6.9%.”

The YouTube TV drop is likely due to the NFL season ending but clearly the number of streaming subscription services is taking a toll on Pay TV. As the streaming services earn a greater percentage of the sports rights, we should see this abate yet accelerate for traditional TV providers.

Kohls Understands The Value of Brick & Mortar Foot Traffic

“The department store retailer is partnering with Inmar Post-Purchase Solutions and Narvar to introduce The Return Drop @ Kohl’s, an in-store offering expanding on its existing service that allows shoppers to make packageless and label-free returns from select retailers and brands, most notably Amazon, at its more than 1,100 store locations nationwide. ”

Although Kohl’s continues to post negative store comps each quarter, I can’t help but wonder how much faster the decline would have happened if they didn’t start accepting Amazon returns back in 2019. The industry clearly frowned upon the news of tying up with an “enemy,” I still believe Kohl’s understands the value of just having potential customers walk through the door.

Thankless Service: United States Postal Service

The U.S. Postal Service has been hemorrhaging money for years, due in part to declining mail volumes, limits on what it can charge customers and a costly mandate to deliver to every address. The agency is fighting for a larger share of the package business to turn itself around.

It is overhauling its vast network of sorting centers and truck routes that had long been focused on moving flat letters. The $40 billion plan includes outfitting sorting centers with new equipment, purchasing electric vehicles to replace aging trucks, and consolidating processes and facilities. The efforts haven’t gone smoothly.

It is clear that the USPS on-time delivery rates have declined and improvement is needed. It is also clear that the USPS will always struggle to earn a profit. Lastly, the volume of mail and packages combined is down 45% over the last two decades. However, keep in mind the USPS is required to deliver to EVERY single address in the United States. Keep in mind that the USPS must provide a first class letter delivery for the low price of $0.68 to EVERY single address in the United States. UPS and FedEx have the luxury of not delivering to certain addresses and their lowest price service for an item as small as a letter is >$5. Yes the USPS should seek to improve operations and earn or profit or breakeven. However, being a biased eCommerce operator, we would struggle without the USPS even at these service levels.

What Happened to Ad-Free TV?

Just a few years ago, an episode of a prestige basic cable drama like Ryan Murphy’s “American Crime Story” was interrupted by 21 minutes of commercials. But ads take up far less time on streaming services. For instance, on Disney+, the average amount of time for commercials is four minutes per hour. On Hulu, it’s just over six minutes.

Any way you cut it…it is remarkably better.

UPS vs Amazon Round 2

Disclaimer: We have two UPS Store franchise stores and run 100+ accounts on Amazon as part of the agency Commerce Canal.

One of the more interesting relationships in eCommerce is UPS and Amazon. UPS recognizes Amazon’s dominance of >40% of eCommerce share. Amazon recognizes UPS’ willingness to deliver to addresses that Amazon has yet to have the scale to profitably deliver to. Amazon also realizes that the more than 5,500 UPS Stores (which operate independently from UPS) are perfect for return drop-offs. However, Amazon clearly has the upper hand. Amazon already delivers more packages and accounts for nearly 12% of UPS’ annual revenue.

Amaozn has yet to open dropoff stores that also provide shipping services but it seems that Amazon is now coming after return pickups.

““We’ve been conducting a limited pilot in recent months of having Amazon pick up heavy/bulky returns and other items to provide more return choices for customers,” Amazon spokesperson Branden Baribeau said in a statement. Asked what the pickup test means for Amazon’s relationship with UPS, Baribeau said: “We’re always testing new features like this to provide more choices for our customers. UPS remains a valued business partner.” Baribeau added that customers in the test markets will be able to choose between UPS and Amazon to pick up their returns.”

While this sounds as an offensive move on Amazon’s part, customer return pickups are somewhat infrequent due to the cost of $7.99 per pickup. A pickup does make sense for larger items but the vast majority of returns come via dropoffs to Amazon Lockers, UPS Stores, Staples, Kohls or customers printing labels from home and shipping back directly to Amazon. Now if Amazon were to make those return pickups complementary as part of the customer deliveries, this would become a worry for UPS. However, the logistics make that quite difficult. As the returns are picked up from customers, they would need to be tagged and/or consolidated en route back to Amazon.

Bottom line: I just can’t see how this is a major impact to UPS at this time. If Amazon were to waive the $7.99 fee…it would be another story. I still however marvel at the size of Amazon Logistics in sheer volume which will soon surpass the USPS.

Freight Rate Increases Are Back

Nowhere near the pandemic highs but Baltic Dry Index and Drewry showing a return to highs not seen since November for 40 foot containers worldwide.

Publishers Fear Google Traffic and Ad Declines From Google AI Results

Publishers and advertisers worldwide are slowly waking up to dramatic drops in organic traffic. The launch of AI Overview last week which was first tested via Search Generative Experience (SGE) by some estimates will lead to a drop of 25% or more in organic traffic.

“Raptive, which helps sell digital ads for 5,000 independent creators’ websites, initially estimated AI Overviews could cut visits by as much as 25% and cause the industry to lose $2 billion in annual ad revenue. However, Raptive chief innovation officer Marc McCollum now thinks that is “maybe [on the] very low end.” ”

With nearly 1/3 of all traffic for top 100 publishers coming from Google, publishers will gradually then suddenly experience a dramatic impact.

“For the New York Times — where 32.5% of organic traffic in April came from Google — that adds up to around 250 million visits. However, other U.S. publishers are even more reliant on the search engine. Google accounted for 72% of organic traffic to Forbes and 60% of traffic for the websites of USA Today, Business Insider and Newsweek.”

Whilst other industry experts aren’t fearing the worst, major publishers aren’t waiting around for the impact and have been signing deals to have their content indexed with rival services such Reddit and OpenAI.

““It will have an impact, but I don’t expect it to be as substantial as many fear,” said Kyle Byers, director of growth marketing at Semrush. “It may even have a positive impact on average since AI Overviews link back to source web pages. An improved experience for Google users could also result in more searches being made, which is another way it could lead to increased traffic for publishers and content creators.””

I can already hear the questions and speculation as to why traffic is down in boardrooms across the country over the coming months.

Online Reviews: Present Tense vs. Past Tense

Reviews on product detail pages of eCommerce products are critical. It seems those reviews that are written in present tense for an audience within close distance are most relevant.

““A 50-word review only using verbs in the present tense is about 5.5% more likely to be ‘liked’ than a 50-word review using no present-tense verbs at all,” says David Fang, a doctoral student at Stanford University and one of the paper’s authors. ”

“There was one twist to the authors’ finding. Their results showed that when people read reviews written by people living far away, verb tense matters a lot less. That was the case when the researchers asked a group of U.S. participants to read reviews they said originated in Australia.”

PDD aka Temu EXPLODES $PDD

PDD Holdings $PDD released their earnings yesterday and they were mind blowing. You may remember PDD’s US offering in the form of Temu. How could you miss the 4 separate commercials they ran before/during/after Super Bowl.

Recently Temu has been in the news for scaling back in the US. After reviewing the earnings (largely China based results) and seeing the quotes from the PDD leadership, I don’t believe that to be the case.

“Rather than focusing on short-term results, we prioritize long-term value creation and remain committed to further deepening our
investments in the future.”

Unfortunately PDD doesn’t break out Temu from rest of results but I thought the below quote from the Co-founder and Chairman to be quite interesting.

“Global business is still in a exploration stage, and there’s plenty of room for improvement.”

Apple iOS Attachment

The Apple attachment that comes with their iOS software continues to build new businesses. Just a simple update of the software to provide a new service and boom…captive publishers. The user won’t switch since the ease is there.

“A spokesperson for Time said that Apple News has become “one of our most important partners and delivers 7-figures of revenue for TIME annually,” adding that the publication garnered 5 million unique visitors from Apple News last month.”

“And the impact for a mid-sized news site was immediate, putting the Beast on track to make between $3-4 million in revenue this year from Apple News alone — more than its own standalone subscription program, and without much additional cost.”

Netflix Scale Akin To Facebook/Meta

In the latest Netflix earnings, the company reported nearly 270 million global streaming paid memberships. The ad supported tier grew from 23 million in January to 40 million today. Though nowhere near the scale of Meta who now reports “Family daily active people (DAP)” of 3.24 billion, you can’t be astonished at these Netflix numbers. The platform of global access, global content development and then global sharing of that content now ad supported? Can’t be beat.

Amazon Inbound & Outbound Traffic $AMZN

Chart via Semrush is quite interesting. Inbound direct to Amazon remains the same but sizable increases from Google organic and YouTube. Also looks as though outbound traffic driving back to Google and YouTube is interesting. One could surmise this is to continue research, look for reviews or shop for other options but why the dramatic increase?

Amazon Earnings Takeaways: Services, International, Sellers and Advertising $AMZN

Although the Amazon streak of new highs did end, they are back to starting new highs on the back of their Q1 earnings. A couple of points stuck out in the client letter I distributed a few weeks back:

1. Product sales slow, SERVICES SERVICES SERVICES - Product sales grew 7% versus service sales growing 17% and now accounting for nearly 58% (vs. 55% in Q1 2023) of total net sales.

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2. International back to growth - US remained flat with last year’s growth rate but International is back with several consecutive of quarters of positive growth. Interestingly, AWS now nearly half the size of Online Stores, the business was only a 1/4 the size 3 short years ago.

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3. Amazon reliant on 3rd party sellers and advertising - Continued strong growth from both 3rd party seller services (aka Seller Central) and advertising. Those two businesses now account for 33% of total sales vs 26% a few short years ago. Recent fee changes likely will mainly be seen in the next quarterly earnings report.

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None of these trends are new. Amazon continues to become the “toll booth” of eCommerce and now own nearly 40% of eCommerce. Nothing here to suggest they aren’t continue to build the moat.

Groupon Turnaround Remains Intact $GRPN

I have been quite vocal on the belief that Groupon is returning to glory. Latest results were posted this evening and I believe the return is intact. First consolidated growth since 2016. Yes, 2016.

Management tends to beat their high end guidance that is clearly achievable. Last quarter the high end was $118 in revenue and $12 in EBITDA. Results were $123 in revenue and $20 in EBITDA. Cash flow also feeling that positive trend.

This one is not for the faint of heart given the declining customer base (see below) but one might take a bet this turn will result in a bottoming that then allows the marketing engine to turn back on. Disclosure: I continue to own a long position in Groupon $GRPN.

OpenAI Search Engine

One can’t help but be excited to see what comes of this:

“OpenAI may make one of the biggest tech announcements of the year in less than a week. Recent rumors suggest that the AI giant could announce a search engine to compete with Google on May 9, 2024.”

““Google shows you 10 blue links, well, 13 ads and then 10 blue links, and that’s one way to find information. But the thing that’s exciting to me is not that we can go build a better copy of Google search, but that maybe there’s just some much better way to help people find and act on and synthesize information,” said Altman”

What should be even more interesting is the Google response. They must be preparing for this announcement.

Alternative App Stores Vs Apple/Google Duopoly

The first alternative app store has launched in the EU. The appropriately named altstore is focused on iOS only.

“AltStore is an app store designed for sideloading. Every app in AltStore gets a beautifully generated store page with detailed information to make sideloading fun and easy. Browse apps from trusted developers, or add additional “sources” to further increase your options.

Anyone can distribute their apps with AltStore. All you need is to make a “source”, which you can do by hosting a text file with basic information about your apps. Users can then enter your source URL in AltStore and your apps will automatically appear.”

Words like “anyone” can distribute their apps conflicts with everything Apple states they stand for with terms like protection. Interestingly, the store is charging 1.5 Euros per year to cover “Apple's Core Technology Fee, payment processing, and server costs.”

Will we see uptake in the near future? Unlikely until the alt stores have enough apps and the user is given an option when they initially setup their phone or asked periodically. We have seen some uptake on the browser choices but we are years from traction here.

Another Amazon Book

Seems Dana Mattioli’s book that covers Amazon has some juicy stories:

“After stumbling upon the secret Trader Joe’s room at Amazon’s Seattle headquarters, things only became more stressful for the former Trader Joe’s employee. For six months, her manager hounded her for information about the grocer’s bestselling products. She tried to deflect, but the pressure kept ratcheting up. Finally, the manager demanded that the employee email any documents she had kept from her time at Trader Joe’s to another colleague on the team. She emailed over an Excel spreadsheet that detailed Trader Joe’s top-​selling items nationally over the course of a week. It contained the number of units sold per item over that time period.

Her manager didn’t stop with the sales data. He also demanded that she share Trader Joe’s margins for each product. When she refused, her manager angrily screamed at her, “You just have to give us the data!” a person who witnessed the exchange recalled. The employee, who had been pressured for months, burst into tears. But she declined to share the margins data.”

eBay Turnaround? $EBAY

We are 3rd party sellers on the eBay platform for a number of our client’s brands but I personally haven’t been a shareholder of eBay in quite some time. With that said, I believe eBay is making some crafty moves to solidify their niche and potentially see stronger margins. In the latest quarter, the growth was anemic with GMV essentially down to flat year over year as you can see below.

However, the eBay advertising revenue should accelerate as eBay has launched greater functionality for bidding. As long as the active user count doesn’t drop dramatically, there should be an acceleration in the adoption of advertising which flows right to the bottom line.

Additionally, eBay continues to exploit their drive to be the choice for authentic merchandise with further partnerships and acquisitions in collectibles space. These programs clearly differentiate eBay from larger competitors like Amazon.

Could this be a turnaround? Quite a bit of work to do but can’t say I have seen eBay positioned this well in quite some time.

Amazon Streak Ends

From Bespokeinvest.com on Amazon’s stock price:

“The new all-time closing high today ended a streak of 693 trading days without a new all-time high for AMZN shares. As shown below, that was actually the 2nd longest streak of days without a new high for AMZN in its history. And now it’s over...”