Rick Watson’s Post

How Did You Get Into eCommerce? And Why Reputation Travels It's interesting to me that this is one of the most common questions I hear bandied about as an intro, but I don't here it much talked about here. My background is in software development, I happened to finish college around the time the Internet was starting to be commercialized, and the search engine wars were still in effect, and eBay and Meg Whitman were king of the world. I joined AuctionRover.com in 1999 - amazingly at a time there were hundreds of auction sites to choose from when buying merchandise as everyone was trying to copy eBay. It didn't have to be eCommerce. I just wanted to be in an industry that was growing, changes regularly, and had complex problems to solve. Check, check, check. I almost joined Microsoft, instead -- but I'm glad I chose 🐧 Scot Wingo Aris Buinevicius and an eCommerce company. If you're new to eCommerce, here are a few facts: * You aren't at conferences for the leads, you are there for the relationships. * The important referral you get may not be now, it could be 10 or (as in one my cases) 20 years from now. Sorry marketing spend allocators -- figure out the last touch of that attribution strategy! * If you don't like the software vendors out there right now, wait 5 years. There will be another batch soon enough. Incumbents beware -- you rely on reputation, but those paying attention know the deal. Especially if you are new to eCommerce in the last 5-6 years years, you may not yet fully appreciate this fact. * If you don't think people will reference-check you literally WHILE you are in the middle of your sales pitch, you haven't been in the industry long enough. Everybody knows everyone else -- the eCommerce industry is an echo chamber. Reputation travels.

Personalization is not a Business Goal and other Key Takeaways from The Lead This week at The Lead event I had the good fortune to speak with Bennett Fox-Glassman about his journey at Macy's and his wisdom about incorporating personalization. Here are my top takeaways: 1 - Personalization is not a business goal. It's barely even a strategy. It's an approach or tactic in service of relevancy to your customers. That relevancy needs to be measured by things that do matter -- engagement on your customer journeys, and ultimately improving your customer lifetime value. 2 - If you are new to personalization, start with high-value journeys Bennett suggested one place to start might be the customer's first to second purchase journey as one place that could be a high-value journey for the business, which is easily measurable. Wins in this area could give your program more funding to broaden its scope. 3 - Develop a cross-functional team to collaborate Macy's has built a cross-functional Customer Journey team built from Customer, Marketing, and Digital team members which all look at the same set of data and are focused on the same customer goals in their experimentation. 4 - Don't expect tech to solve all the problems Your data has to be right first. In other words, all the non-sexy work to ensure your data is in one place, attributed, and accurate. Furthermore, Bennett suggested that in the discussion of people, process, and technology -- people are the most impactful. New tech will not save you, alone. 5 - Sometimes personalization is not the play Consistent messaging can be important because it creates familiarity and can help drive word of mouth. Think about Walmart's "Everyday Low Prices" as an example. Imagine if everyone heard a slightly different message? Thanks to Noah G. and Sonal Gandhi at The Lead for putting us together for this needed discussion!

CEO commercetools Hands Baton to Andrew Burton For sprint to IPO This week, Dirk Hoerig and commercetools announced that Dirk would be stepping down from the CEO role and into an Innovation Officer role. This is the second major eCommerce platform (the first was BigCommerce) to make major leadership changes in the last year. Now, Andrew Burton is the new CEO of commercetools. But who is Andrew Burton? * He is a first-time CEO, so this is an expansion/step-up role. * Interesting to note he has a Product Management background, for the PMs in the room. * Served as President and COO of Rapid7 in a significant growth period from 2015 to 2024. * Andrew is based in Boston, MA -- not in Europe like previous CEO. What does this mean to me? * Rapid7 completed and integrated several acquistions during Andrew’s time there, and I expect this was a gap in commercetool's skillset, despite its acquisition of frontastic a couple years back. * While commercetools can continue growing organically, inorganic growth is likely a key part of the strategy going forward. And having another set of product-oriented eyes in the room, combined with the operational experience to integrate those acquisitions was considered important. * Rapid7 has a reasonable history as a public company - not fantastic (it is no Amazon or Shopify), not terrible (BigC started at an $6-8B market cap and is now ~560m). It's current market cap of $2.4B is above its IPO market cap of ~$900M in July 2015, but clearly off its COVID high (like many) of ~$7B. * The United States is the clear priority market for the company. * Given that commercetools has been expanding into other verticals like Telco, Automotive, Healthcare, I would expect this kind of expansion to continue given the choice of a non-retail eCommerce oriented leader. This continues to be a smart and comparatively blue ocean direction for commercetools, in comparison to the other 10 (and growing it seems) eCommerce platforms chasing the same deals at a perceived up-market position of Shopify. But the risks, always the risks. * Changing a CEO is fraught with challenges. You can just as easily pick a Steve Ballmer or John Sculley as a Satya Nadella (or dare I say too early - Andy Jassy?). It's hard. Usually you know within 60 days if it's going to work out. (hello Flexport, Dave Clark's education tour) * Blending European and American cultures is famously difficult (while moving swifly in the American direction), but commercetools is not new to this and has been navigating this transition for several years. * Acquiring the right company is hard, integrating any company is harder, and delivering value from any acquisition is nigh impossible. The company needs to place significant needle-moving bets to move from $150M ARR today to the next major milestone of $500M ARR. I do expect commercetools to use its investors to place some bets. All in, I wish commercetools the best on the next journey chapter!

About to take the stage at The Lead with Bennett Fox-Glassman Personalization!

Questions Raised by HBC / Saks Global Acquisition of Neiman Marcus Group In the last week, Saks PE-backed owner HBC decided to acquire the assets of Neiman Marcus Group for $2.65B. This is a rollup strategy if I ever saw one. If HBC is true to its strategy, the next step is to divest Neiman Marcus real estate assets (hello Macy's) in a similar way to Saks 2021 split into Saks (dot) 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 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 ABG and WHP Global that separate brand, eCommerce, and operator into separate operating companies. This raises a few questions, I thought I would pose here: * What is the significance of Amazon and Salesforce in the deal? I wouldn't read too much into this, but I do have a few interesting theories. I expect that the new company Saks Global will be a big customer of both AWS and Salesforce. Neiman Marcus as far as I know is a custom website. Saks is a big SFCC customer. It's possible that optionality into Amazon Logistics is built into this deal. Everyone wants to read Amazon going back into retail into this deal and I simply do not. Amazon's retail forays have been mostly failures. The retail component is not even controlled by Saks Global - which is just the former eCommerce arm. If I ever see an Amazon Fashion "Shop in Shop" in a Neimans or Saks it will be a huge surprise to me -- although Amazon doesn't mind experimenting, I can't imagine this would be good for the Saks brand. On the other hand, Amazon eCommerce might weasel its way into getting Neimans and Saks onto Amazon Fashion. In the eCommerce platform wars: The industry saw what just happened at Overstock. On the eCommerce front, Salesforce is keen to keep a long-term customer (it's exceedingly difficult to get deals this size back) and grow share of wallet of new products like the new Salesforce Data Studio, etc. * Does this 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 a 2024 that is somewhere in the middle I'm sure. With IPO levels still not recovering (yet), private equity could still be the savior that investors need.

Did You Choose The Right Vendor at the Wrong Time In Its History? Evaluating vendors is a tricky proposition. Even if your technical evaluation is perfect, your business evaluation can be wrong for the same reason that picking an individual stock is nearly impossible. There are often pivot points in the company's history, both for the vendor you choose and the vendor you don't choose. For the vendor you choose, the following could happen in the next few years after choosing them: * Product End of Life: Your chosen vendor could stop development unexpectedly. * Acquisition: Your chosen vendor could get acquired and ignored. * Dead Vendor: Your chosen vendor could shut down. If you choose the "right vendor at the wrong time" it's not really your fault but it doesn't make your situation any less dire. In many of these cases you have a burning platform, it's more a matter of when, not if you move. On the other side, there are often vendors you eliminate for valid reasons, but turn out to be the wrong ones 4 years later: * Vendor Didn't Want You: A vendor enters a new market that previously they were not focusing on. * Not Customizable Enough: A vendor starts allowing more flexibility in an area where previously that part of the system was closed to customization. * Early Adopter Skittishness: A vendor had no reference accounts you felt comfortable with. If you were making your decision 3 years later, you might see that vendor differently - but your timing did not match the vendor's timing. In this case, you are sometimes on a solution which may have been optimal for a time, but is now no longer optimal. If you were to make the same decision again, you would make a different one. These are difficult decisions because they are expensive and complex. No one replatforms every 3 years, and perhaps the vendor you are on is not dead, it's just not ideal. In this case, the solution is often not a big bang - it's more about your roadmap and sequencing. There is not a single approach that works for every company, but safe to say the decision is based on a combination of: * Board and Investor priorities * Financial priorities * Technology priorities * Brand and Customer priorities * A clear picture of your end state. One of my favorite phrases from Lewis Caroll in Alice in Wonderland also applies to eCommerce: "If you don't know where you're going, any road will take you there."

Are You a Tech Company? HELLO Nike It’s ashame we need to relearn the same lessons over and over. When John Donahoe was selected as CEO Nike it was hard to believe how it could 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 of the tactics are new adventures. DTC! Apps! Fun drops! Reading about strategy in an HBR article is enough reason for a direction. The first thing any new CEO needs to do is determine the answers to these questions: - who are our customers? - what is our product? - what is our offer? - 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 someone from outside your industry, remember they are making mistakes on your time. In this case the DTC whipsaw. But even that is not the #1 mistake. Nike forgot its customer. Nike’s pinnacle was Air and Jordan and the simple notion that if you have a body, you are an athlete. Innovative changing product at the core with an aspirational message. It’s truly sad to hear the Nike - of all companies - missed the surge in running. Literally it should not be possible. But here we are playing catch-up. 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 / Mars Blackmon said: “THE SHOES. It’s gotta be the shoes.”

Amazon Direct from China Just Means Amazon Can Do Math It's no accident in the last Amazon earnings call, Andy Jassy was speaking about "cost to serve", which was mentioned 11 times. Broadcasting what was coming in the Chinese seller meeting that has been widely reported this week. In short, Amazon cannot afford to offer ultra-cheap low-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 in the middle of the country. And some items you don't want to move until they are ordered. Finally, some items are not created until demand is generated: custom, hyper-personalized, or build-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 -- mostly without their knowledge, and, yes, often ripped-off designs ;-) There is no optimization of Amazon's current supply chain setup which can out-compete thousands of cheap items - that consumers crave (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 with this new announcement. Instead, Amazon is doing something different -- not giving up on all the Earth's selection with this announcement. And is working to cut off another rapidly scaled competitor before Amazon gets disrupted in a segment that might be long-term important to its divinely discontent consumers. Amazon's marketplace journey is complex. V1: Amazon copied eBay by launching Amazon Auctions in March 1999, seeing third-party sellers as interesting and disruptive to retail. V2: Amazon launched zShops to allow fixed price items to be sold on its site in September 1999. Amazon struggled to get traffic to these items when not on its own PDPs. Another lesson. V3: Amazon launched a 3P marketplace in Books, DVDs in allowing sellers to put products on its own product page. Marketplace would never have scaled without the next innovation. V4: Fulfilled by Amazon was announced in 2006 to allow sellers to participate in Prime. Amazon can control 3P service levels. V5: Seller Fulfilled Prime (SFP) was introduced in 2015, as Amazon realized everything wasn't a fit for FBA. Amazon struggled with SFP, paused it, and reintroduced it again last year. I would argue this is V6: Direct from China Marketplace. The principle is simple: don't move the inventory until you create demand. But not just China. Remember, this is only Day 1. First China ... next the World Direct to Consumer. All on Amazon. Manufacture anywhere, sell anywhere.