No. 10: Weekly Edit

Amazon is coming for luxury

October 24, 2020
Fire Ant

I’m glad to be back after a bit of a break from writing. It’s important to take care of ourselves during these unprecedented times. On the topic of self care, lately I’ve been reading up on how to work towards my goals (both personal and professional) in a sustainable way. If this is a question that has also been on your mind, allow me to suggest the following article by Arthur Brooks for The AtlanticAre We Trading Our Happiness for Modern Comforts?

A lot has happened over the past couple of weeks in the world of commerce. The two events that stick out the most are Amazon’s foray into the luxury retail world (this wouldn’t be their first attempt) and Ulta Beauty’s announcement that they will be delaying their Canadian launch in light of the pandemic. I’ve been tracking some other important developments too, but in the interest of brevity, I’ll save them for next week.

Let’s get started.

🗞️ News

Bloomberg — Amazon Wants to Make Jeff Bezos the New King of Bling [Oct 9, 2020 | Sarah Halzack and Andrea Felsted]

  • Amazon recently launched Luxury Stores. Select Prime members can access a new section of Amazon’s app that showcases designer goods from select luxury fashion houses from handbags to gowns. Although this isn’t Amazon’s first attempt at cracking the luxury goods market, it is certainly timed well given the recent uptick in online shopping for high-end goods due to the pandemic.
  • The look and feel of Luxury Stores acknowledges that in order to sell to the luxury consumer, there needs to be an emphasis on artisanal content in the form of photos and videos, which give a curated vibe to the shopping experience. And as a way to attract luxury brands to the platform, Amazon is allowing them to control pricing and product assortment as the brands see fit.
  • My commentary: Considering Amazon’s recent push into live-stream content (which lends itself well to luxury retail), and the fact that it has opened up its Twitch platform to fashion shows too, the company is clearly doubling down on its efforts to attract the luxury consumer. But for a company whose core competencies entail low prices, speed, and convenience, it’s not a surprise that it has taken them several attempts to attract designer brands and their customers to the platform. As the authors of the article suggest, I suspect that some luxury brands are considering Amazon as a channel to attract customers while they invest in bolstering their own direct-to-consumer capabilities. So many luxury brands were caught off guard due to Covid-19 as they had not invested in their e-commerce capabilities or supply chains to keep up, thus preventing them from catering to customers effectively during the lockdowns. And with luxury department stores also struggling due to reduced foot traffic and financial troubles, diversifying sales channels is key — even if it means working with Amazon.
  • Potential for M&A: I suspect Amazon will eventually acquire an online-only luxury retailer as a way to bolster their credibility in the fashion community, and add human capital to their team that fundamentally understands how to sell to the luxury consumer. The authors of the article suggest acquisition candidates such as Yoox Net-a-Porter and Matchesfashion, but if Amazon really wants to shake things up, I’d be more excited to see them pick up SSENSE, given the company’s strength in content curation, user experience design, and robust supply chain capabilities.

Yahoo! News — Ulta Beauty Suspends Canada Expansion Amid The Current Crisis [Sep 24, 2020 | Ben Mahaney]

  • After some delays earlier in the year, specialty retailer Ulta Beauty has suspended its planned expansion into the Canadian market altogether, given the challenging business environment resulting from the pandemic. The company will instead focus on prioritizing its growth initiatives in the U.S., which includes: expansion of its omni-channel capabilities, improvements to enhance guest experience and discovery, market share growth in key merchandising categories, increased loyalty and personalization efforts, and further expansion of its store network.
  • Ulta Beauty stated, “Investments to support the expansion into Canada have largely been limited to early-stage infrastructure buildout and lease obligations for a small number of stores.”  The company expects to incur costs between $55 million to $65 million due to the suspension of its Canada growth plans.
  • My commentary: Although not a surprising move in light of the circumstances, I do look forward to Ulta’s foray into Canada at some point down the road. The Canadian specialty retailer market for beauty and personal care is ripe for more competitors. Given Ulta’s successes with catering to the Gen Z demographic through its deep ties to the influencer economy, I’m optimistic about how its launch will compel Canadian incumbents to compete more aggressively with fresh ideas.

Modern Retail — E-commerce companies are bracing for more shipping delays over the holidays [Sep 24, 2020 | Anna Hensel]

  • Online holiday orders are projected to be much higher this year, as more people look to complete their purchases online. Deloitte is projecting that holiday e-commerce sales will be up somewhere between 25% to 35% this year, compared to 14.7% last year. With the influx in e-commerce activity, fulfillment supply chains will be susceptible to shocks — brands and retailers need to plan ahead and accordingly.
  • Merchants should plan to do more volume than previous years and at higher costs to avoid potential bottlenecks, and have back-up carriers in the event one fails to meet expectations.

💰 Funding

  • Perch, a platform that acquired direct-to-consumer products selling on Amazon, raised $123.5 million. Spark Capital led.
  • ShopUp, a Bangladesh-based retail digitization startup, raised $22.5 million in Series A funding. Sequoia Capital India and Flourish Ventures co-led.
  • Chiper, a Colombian e-commerce platform for independent merchants, raised $12 million in Series A funding from Wind Ventures, Monashees, and Kaszek Ventures.
  • Wayflyer, an ecommerce revenue analytics platform, raised $10.2 million in seed funding. QED Investors led.
  • Ware, a San Francisco-based developer of autonomous drones for warehouse inventory counting, raised $2.5 million in seed funding. UP Partners led.
  • Elenas, a social commerce platform for Latin America, raised $2 million in seed funding from Alpha4 Ventures, Amador Holdings, Polymath Ventures, and Meesho.
  • Glimpse, a B2B marketplace that lets brands put products in short-term property rentals, raised $1.5 million in seed funding. Origin Ventures led.

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