All posts in “retail”

Online shopping is about to get more expensive

Image: Getty Images/Westend61

Gird your (digital) wallets!

The Supreme Court has ruled that states can charge online retailers sales tax, even if they don’t have a physical presence in the state. That means that some of the biggest online retailers — including Wayfair, Overstock.com, and Newegg, who were named in the suit against the state of South Dakota — may soon have to pass on that additional cost to consumers.

“Each year, the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States,” Justice Kennedy wrote in his Court Opinion.

How does this affect the gargantuan elephant in the room, Amazon? Amazon actually already charges sales taxes on the goods that it sells directly. But the third party sellers on Amazon do not. So you might have to start paying sales tax alongside those non-Prime shipping charges. Ouch.

The Supreme Court ruled 5-4 in favor of South Dakota. It overturned a 1992 Supreme Court ruling that established that online retailers didn’t have to pay sales tax, which the New York Times says helped fuel the rise of online shopping.

Bloomberg reported that the stocks of Amazon, Wayfair, Etsy, and eBay all fell following the ruling.

It’s clear that the court’s decision will mean extra cash for states. But that money is likely to come out of the pockets of consumers. And may make it harder for shopping startups to break through.

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Microsoft could power Walmart’s Amazon Go rival

The race is on.

Microsoft is building automated, cashier-less, and checkout line-free technology to rival Amazon Go, Reuters reported Thursday. And Microsoft is reportedly in talks about the technology with Walmart, Amazon’s rival for all-out retail domination.

The technology would allow shoppers to buy goods from a store without checking out or exchanging any cash. Upon entering a store with Microsoft technology, shoppers would scan their smart phones. Then sensors would detect when items are removed from the shelves, and cameras could see what items are in shoppers’ carts. Shoppers would then simply walk out of the store, at which point their accounts would be charged.

Microsoft is reportedly meeting with retailers around the world about implementing the technology, including Walmart. An alliance between Microsoft and Walmart for cloud-based shopping tech could help Walmart compete with Amazon, with which it’s been in an arms race in retail and grocery sales.

Indeed, Microsoft’s system, as described by Reuters’ sources, sounds nearly identical to the tech employed in Amazon Go stores. Amazon debuted its first Amazon Go store in Seattle in January 2018. It plans to open more stores, starting with locations in San Francisco and Chicago. And in February, it was rumored that Amazon would open six more Amazon Go locations.

But as we’ve seen in social media, copying isn’t just the most sincere form of flattery — it’s also a pathway to success.

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With new shoppable stories, get ready to spend all your money on Instagram

It was only a matter of time.

On Tuesday, Instagram announced the introduction of shoppable stories. Now, brands can tag their stories with the specific products featured in them. Then, when ‘grammers click on the tag, they can see more information about the product on Instagram, which includes a link to the brand’s website to buy.

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Instagram first introduced in-feed shopping in November 2016. It further rolled out a more robust version of that feature in March 2017, including business analytics. Most recently, in May 2018, Instagram debuted “action buttons,” which allow users to do things like buy tickets or make restaurant reservations directly on businesses’ profiles. Shoppable stories are just the next step in making every piece of delicate jewelry, glass of sparkling rosé, or pair minimalist sneakers that appear on the app available to buy — immediately.

Instagram says these shopping options are all about turning “discovery into action.” And with Instagram’s focus on beautiful photos and aspirational lifestyle,  shopping on Instagram makes a whole lot of sense. It removes almost all the barriers between seeing something enticing that represents the literally picture-perfect life you want to lead, and turning that impulse into cash. 

Clicking on the briefcase reveals the tagged products.

Clicking on the briefcase reveals the tagged products.

Image: instagram

The product details page includes a link to buy.

The product details page includes a link to buy.

Image: instagram

Instagram debuted ephemeral stories in August 2016, a format it outright stole from Snapchat. But now, Instagram story use is crushing Snapchat, and stories have become an increasingly dominant way that people are using the app. Up from 200 million daily active users in April 2017, Instagram now reports reports that 300 million people use Instagram stories every day. Hot damn.

Monetizing those interactions could be huge for businesses. Especially since up to this point, story creation just might not have been worth it. With filters, stickers, tags, and the need for a narrative (and not just a single, ad-like image), Mashable reported in May that story creation is cumbersome for some brands. Making stories shoppable gives brands more incentive to invest that time in the app.

Mashable has asked Instagram whether it takes any commission on in-app purchases, and will update this story if and when we hear back. But either way, getting brands to invest more time and money in the app is good for business.

UPDATE 6/12/2018, 1:15 p.m. ET: When asked about whether Instagram would take a commission on in-app purchases, Instagram said: “Instagram does not charge businesses for Shopping capabilities.”

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Amazon’s next conquest will be apparel

Late last year, after Amazon announced it had acquired the rights to J.R.R. Tolkien’s epic “Lord of the Rings” saga for $250 million, I wrote how the move underscored Amazon’s relentless pursuit to build one platform to “rule them all.” Now that Amazon is investing half a billion dollars into developing a Middle Earth show – making it the most expensive TV series ever made – it won’t be a surprise to see Jeff Bezos front and center at the Emmys soon.

But Hollywood isn’t the only industry Amazon wants to upend. Based on the company’s great ambitions in apparel, it may not be long before we also see Bezos at New York Fashion Week next to Anna Wintour.

The 800-Pound Gorilla in the Fashion World

As traditional retail continues to recede, direct to commerce fashion brands continue to emerge. I’ve previously shared how Stitch Fix, Warby Parker, Everlane and Allbirds are just a few innovative companies proving the success of this model. As the master of D2C commerce, Amazon has been fine-tuning its fashion operation for over 15 years.

Amazon originally got into apparel all the way back in 2002 and acquired online shoe retailer Zappos for $1.2 billion in 2009, marking the largest purchase in its history at the time. But the company’s quest to dominate fashion has faced several historical obstacles, chief among them that people have not trusted buying apparel online out of a desire to try on the items first and that Amazon was not perceived as a “cool” brand.

Headwinds are now tailwinds. Online shopping for apparel took off and is now the highest online-penetration CPG sector; the majority of women have shopped for clothing online. E-commerce accounts for nearly twice as big a proportion of total clothing sales as it does for retail more broadly (17 percent vs. 10 percent). Amazon, meanwhile, has honed its apparel strategy, providing free returns, better photography and greater selection. Today, the company is the largest apparel retailer by gross merchandise volume. Mission accomplished? Not quite.

Building A Private-Label ‘Fashion House’

An actual Amazon fashion shoot

Bonobos CEO Andy Dunn once said, “Selling a bunch of other people’s stuff is a low margin game that requires a lot of capital and, ultimately, it’s hard to beat Jeff Bezos at that.” This is true, but when it comes to apparel, Bezos has greater ambitions than selling other people’s stuff. Currently, though, that’s mostly what Amazon does.

According to analysis from Coresight Research, nearly 14 percent of listings on the U.S. Amazon Fashion site are from Amazon itself, while third-party sellers account for the remaining 86 percent. Amazon is highly incentivized to increase its share of that pie. Apparel is a highly profitable category for the company, with 40 percent peak gross margins in the last 10 years. Additionally, Prime members heavily overindex for buying apparel on Amazon – nearly two-thirds have done so in the past year.

As it ramps up its private-label offerings, Amazon is clearly keen to move beyond selling the apparel equivalent of batteries and diapers through its Amazon Essentials brand. It started selling thigh-high velvet boots in September, and Coresight’s analysis indicates that the company is focusing on higher-value categories.

If its recent Lord of the Rings rights acquisition was an attempt to further capture young affluent consumers’ eyeballs, and Whole Foods an attempt to lock down their stomachs, it follows that Amazon would want to ensnare their wardrobes as well. Acquiring a hot digitally native vertical brand – or brands – would be a speedy way to accomplish that. Walmart has already pursued this strategy by buying Bonobos, Modcloth and others; Amazon could take a similar path and seek to bring buzzy brands like Everlane into the everything store. This could also go a long way in helping Amazon shed its “uncool” label.

Becoming A Fashion (Power)House

The Echo Look is just one sign Amazon is serious about dominating fashion

Last year, Amazon introduced a number of innovations designed to turbocharge its apparel business and make the online shopping experience as frictionless as possible. It launched Prime Wardrobe, a Stitch Fix-style service that allows you to try three or more items on at home before sending back the items you don’t want for free in a resealable box with a prepaid label.

 It also debuted Echo Look, a new Alexa-powered device that the company dubs a “hands-free camera and style assistant.” The addition of a camera enables the device to record and comment on its owner’s clothing choices, using a combination of machine learning and human stylist feedback. This advice also takes the form of recommendations, which can drive revenue to Amazon Fashion, and specifically its private-label brands.

Amazon is iterating on and rolling out more features for the Echo Look, including curated content and even crowdsourced (human!) style feedback. It also created an AI algorithm for designing clothes and patented an AR mirror that lets you virtually try on clothes. The value of such a mirror was validated recently by L’Oreal’s acquisition of ModiFace, a company that produces technology that powers similar applications in beauty AR.

Analyzing all these moves together, Amazon’s apparel strategy begins to crystallize. First it sells tons of clothes to learn how clothes are sold. Then it starts selling its own clothes to generate higher gross margin. And now has it has Prime Wardrobe to increase lock-in and reduce points at which customers can choose not to buy Amazon’s own clothing (all while gathering more data about individual preferences); and Echo Look to be its data collection and voice-commerce portal (and as an added bonus, it can route ambiguous purchase requests to its growing inventory of private-label items). If this strategy is successful, it will give Amazon an enormous data moat to drive high-margin sales – a competitive advantage that will be extremely difficult for fashion retailers and brands to replicate.

Bezos doesn’t need to even ask.

Amazon has become increasingly dominant in several increasingly important arenas: cloud services, voice assistants, self-serving brick-and-mortar stores with Amazon Go, and of course its now-traditional role as the online everything store. The company is poised to add apparel to this growing list as it changes the way people shop for clothing (again) and entices more of its customers to buy Amazon’s own threads. And it bears mentioning that Amazon Fashion will get a helpful hand from Amazon Studios as well. Bezos once shared that, “When we win a Golden Globe, it helps us sell more shoes.” If he has his way, Amazon will be doing a lot more of both in the coming years.

Marketing platform Punchh raises $20M Series B to give brick-and-mortar retailers better data analytics

Founded in 2010 as an online loyalty card service, Punchh has since grown into a marketing platform serving more than 115 restaurant chains, including Pizza Hut and Quiznos. Now it’s raised a $20 million Series B to expand into more retail verticals and increase the use of artificial intelligence and machine learning in its cloud software. The funding was led by Sapphire Ventures, with participation from returning investor Cervin Ventures.

Along with its angel and Series A financing, this brings Punchh’s total funding so far to about $31 million. The startup says its goal is to give brick-and-mortar stores the same level of data analytics as e-commerce giants like Amazon.

Punchh’s platform enables restaurants to digitize their customer loyalty programs and complements that with tools like Punchh Acquire, which is designed to help businesses turn casual customers into regulars by promoting offers through multiple channels, including email, SMS, social media, Apple Pay and eClub.

The company currently has 145 employees and is based in San Mateo, California, with offices in Austin, Texas and Delhi. This is Punchh’s first funding announcement in three years and the startup’s largest round of financing by far (it raised $9.5 million Series A in 2015).

Co-founder and chief executive officer Shyam Rao says the time was right for Punchh to raise again because it already serves many of the biggest restaurant chains, with 34,000 locations between them, and wanted to tap into demand from retailers in other verticals.

Punchh is now focusing on convenience stores, gas stations and health and beauty brands (clients already include Fantastic Sams hair salons and TruFusion, a chain of fitness studios). The company competes with other digital loyalty and marketing platforms like Stamp Me, LoyalZoo and Stocard. Rao says Punchh’s ability to create campaigns that target a very specific audience sets it apart from rivals. Punchh’s algorithms pulls together data from several sources, including event calendars, weather, local demographics and the purchasing history of individual customers, for what it describes as “micro-moment marketing.”

For example, if cold weather is expected over a holiday weekend, it might send offers for a discounted hot soup and tea set to mothers between the ages of 30 to 55. Punchh claims it increases spending at its customers’ restaurants by 10% to 20%.

“Imagine trying to manage that process of using mountains of data to build customer relationships and tailor every experience, at scale across hundreds of locations. That’s what Punchh does,” says Rao.

In a statement, Jai Das, Sapphire Ventures managing director said “Punchh is already a global leader in digital marketing solutions for restaurants, which alone would be a fantastic reason to invest in the company, but the scope of their technology goes far beyond just restaurants and encompasses all brick-and-mortar stores with a POS.”